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Customer retention strategies to win repeat business

Business owner shaking hands with customer

Key takeaways

  • Personalized communication and a relatable brand persona help build lasting customer relationships
  • Collecting customer feedback allows you to understand your customers and provide the best experience
  • Loyalty programs and service packages actively encourage repeat purchases

Existing customers are a small business’s biggest asset. According to research by OneSignal, the success rate of selling to an existing customer is 60–70%, while trying to sell to a new customer has a success rate of just 5–20%.

For any business owner looking to improve their bottom line, turning first-time customers into repeat customers should be a top priority. Your business can encourage customer loyalty with a high-quality product, exceptional customer support, and retention-focused marketing strategies.

Here are eight customer retention strategies to help you build customer relationships and win repeat business.

8 customer retention strategies for small business owners

To win repeat business, you need to consistently meet or go above and beyond customer expectations. That could mean providing the lowest price, highest-quality product, best customer service—or a combination of the three. Ultimately, the best strategy for your business will depend on your customer base, but these strategies will help you get started.

Below, you’ll find eight cost-effective customer retention strategies to provide an exceptional customer experience and encourage repeat purchases. As a small business owner or solopreneur, you can find and implement the approach that resonates with you most, even if you have limited money, time, or human resources.

1. Use customer relationship management (CRM) software

If you plan to have long-term relationships with customers, you must keep track of those relationships. CRM software allows you to document your interactions with each customer and track the products they’ve purchased, as well as their interests and pain points.

This ensures your customers don’t have to tell you the same information over and over again. It also allows you to provide better customer outreach because you can tailor your messaging to your individual customer’s needs.

2. Provide a personalized experience

A customer holding her dog in a pet store

Treating your customers like individuals will help when you have face-to-face or phone interactions with a customer. It also enables you to provide a better experience across every part of your customer’s journey.

Research by Segment found that over half of consumers say their customer satisfaction improves as their digital experience with a brand becomes more personalized. Try sending surveys to your current customers about their interests or why they chose your brand. Then add their answers to your CRM.

This will allow you to send them emails and notifications that are more relevant to them. For example, let’s say you run a local pet store and grooming business. If you know a customer owns a poodle, you’ll want to tell them about new products and grooming packages for dogs, but not about a new cat food you’ve started carrying.

3. Send nurture email campaigns

Nurture email is an email marketing campaign aimed at retaining existing customers and turning first-time customers into repeat customers. For example, after a customer makes their first purchase at your business and signs up for your email list, you might send out an onboarding email series—a few emails spaced days to weeks apart that address common first-time customer needs.

For example, the series might start with a welcome email. The following email might ask how they’re enjoying their purchase and provide the number to your customer success team if they need help getting started. Then, the third follow-up email might ask them to complete a survey to get feedback about their experience.

You can also send reminder emails to long-term customers. For example, if you run an auto shop, you might remind customers who haven’t had an oil change in the past six months to come back in. Email automation can help you streamline this process by automatically sending out nurture emails on a regular schedule.

4. Build a brand persona

In your personal relationships, you likely prefer to spend time with people you relate to, and customer relationships are very similar. Customers like to shop with brands they connect with, so it helps to share your brand’s values and give your brand a personality.

For example, local businesses can show how they help support the local community, whether that’s through employing locals, participating in local events, or sponsoring local initiatives.

Maybe your company donates to a charity, strives to be carbon neutral, or is a leader in providing fair wages and working conditions. These efforts can help you connect with customers, build trust, and create brand loyalty.

Use your social media channels, content marketing efforts, and email campaigns to showcase your company’s values. This will help build brand awareness and create more meaningful customer relationships.

5. Ask for testimonials

Businesses often consider testimonials part of their customer acquisition strategy. But asking for testimonials can also be part of your customer retention efforts.

When you ask an existing customer to provide a testimonial or participate in a case study, the customer will feel like a VIP because they’ve been specially selected. This process can turn them into promoters for your business—now they feel connected to your company and more emotionally invested in it.

That investment can lead to better customer engagement and encourage them to promote your brand in other ways, whether through their social media accounts or word-of-mouth recommendations to friends and family.

6. Respond to customer feedback

Not all customer feedback will be positive, but all of it has the potential to help you understand your customers’ behavior and improve your customers’ experience. Ensure you provide plenty of spaces where you can collect customer feedback and reviews. Unlike testimonials, reviews are unsolicited and can be either positive or critical.

In addition to sending out surveys as part of your email nurture campaigns, you can conduct surveys through social media. Moreover, Yelp is one of the best places to collect customer feedback.

When you claim your business on Yelp, you can start collecting and responding to customer reviews. Make sure to respond to both positive and critical reviews—88% of consumers say they would use a business that responds to all its reviews, according to a consumer survey by BrightLocal.

Addressing customer complaints is a good way to turn a problem into an opportunity. You can potentially win that customer’s repeat business while building trust with other potential customers. Responding to positive reviews shows you appreciate your most loyal customers.

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7. Create a customer loyalty program

Customer loyalty programs that offer perks after a certain number of purchases are an excellent way to promote repeat purchases. For example, your local ice cream company might offer a punch card that allows customers to get their 10th ice cream cone for free.

A hair salon could provide a similar experience by offering a free blowout with a customer’s 10th haircut. This also allows them to cross-sell. If the customer has never paid for a blowout before, they might realize how much they like the additional service when they try it as a loyalty perk.

A package discount—like a yoga studio that offers individual classes for $20 each but has a 10-class package for $150 (a discounted rate of $15 each)—is a similar way to provide loyalty perks.

8. Start a referral program

This may seem more like a customer acquisition than a customer retention program, but it can work as both. A referral program encourages your current customers to provide word-of-mouth marketing, recommending your business to other potential customers.

In exchange, you would typically provide an incentive to both new and existing customers. For example, you might offer a new customer 10% off their first service and an existing customer 10% off their next service.

This encourages the customer who referred you to make a repeat purchase. Much like asking for a testimonial, it turns your existing customers into your best promoters, making them feel more emotionally connected to your business.

Measuring the success of your customer retention strategy

Hairstylists doing customer´s hair in salon

As with all your business efforts, it’s helpful to measure the success of your customer retention strategy to ensure you’re spending your time and energy on initiatives that resonate with your customer base.

If your retention strategy isn’t improving your retention rates, you can try new approaches until you find one that works for your business.

The key performance indicators (KPIs) for measuring customer retention are your:

  • Customer retention rate
  • Customer churn rate
  • Customer lifetime value

With a CRM, you can find the customer data you need to calculate these numbers in that system. Here’s how to calculate each metric.

Customer retention rate

This is the most important metric for measuring the success of your customer retention strategy. It will tell you the number of customers that stay with your company over a given period of time. You can choose any period of time you want—whether that’s a quarter, six months, or a year. Then run this calculation:

Customer retention rate = [(the number of customers you have at the end of the period – the number of new customers acquired during that period) ÷ the number of customers you started the period with] × 100

So if you started the period with 95 customers, you have 100 customers at the end of the period, and you got 20 new customers during the period, then your customer retention rate is [(100 – 20) ÷ 95] × 100 = 84.21. You have a customer retention rate of roughly 84%.

Customer churn rate

Your customer churn rate is the opposite of your customer retention rate. It measures the number of customers you lost during a specific time period. Here’s how to calculate it:

Customer churn rate = (the number of customers you lost during the period ÷ the number of customers you had at the start of the period) × 100

Using that same example above, you had 95 customers at the start of the period and lost 15 of those customers. Your churn rate is (15 ÷ 95) × 100 = 15.79, or roughly 16%.

Customer lifetime value

The customer lifetime value shows how much money the average customer spends at your company throughout the time they remain customers (or their entire customer lifecycle).

This number can help you see the value of your loyal customers and understand how focusing on retention can increase your profits. If your customer lifetime value goes up each time you measure it, then you’re doing a good job of improving your existing customers’ purchase frequency, retention rates, or both.

This number can be slightly easier to calculate for businesses that have been open for a few years and have a few years’ worth of customer data. Here’s how to calculate your customer lifetime value:

Customer lifetime value = your customers’ average order amount × their average number of orders per year × the average number of years your customer remains loyal

Suppose your typical customer spends an average of $60 during each purchase and makes four purchases per year. Repeat customers typically stay with your business for around five years. That means your customer lifetime value will be $60 × 4 × 5 = $1,200.

Increase customer loyalty to increase profitability

Customer using tap to pay method in store

A loyal customer is significantly more valuable than a one-time customer. Acquiring a new customer can take a major marketing investment, and customer acquisition costs much more than customer retention. Repeat customers require less time and money to acquire, and they’re easier to sell to. But less investment doesn’t mean zero investment.

Small businesses that want to build a loyal customer base should invest time and effort into a customer retention strategy. Building relationships with your existing customers and offering incentives for repeat purchases can keep customers coming back to your business over and over again.

To win more repeat business, learn how a targeted lead strategy can help you attract clients who fit your ideal customer profile and are more likely to become repeat customers.

The information above is provided for educational and informational purposes only. It is not intended to be a substitute for professional advice and may not be suitable for your circumstances. Unless stated otherwise, references to third-party links, services, or products do not constitute endorsement by Yelp.