Small business owners know that loyal customers are the best customers. They will continue to purchase from you and even refer friends and colleagues. You can improve your business by identifying the factors that may be affecting your customer base.
Happy customer – illustrative photo. Image credit: Brooke Cagle via Unsplash, free license
What is customer retention?
Customer retention is the ability of a business to retain customers over time. It is a metric that measures how many customers remain at the end of any given period. Customer retention is when your customers remain loyal to your brand and its offerings. It can also contribute to your growth. Instead of a constant influx of new customers to your business, returning customers speak to their satisfaction with the brand.
If you’ve noticed this isn’t the case for your company, here are possible reasons why your business is losing customers.
1. Providing poor customer service
Good service can increase customer satisfaction. Apple and Amazon are examples of organisations that have high standards when it comes to customer service. These companies have shown that placing customer service at your core business model leads to greater success and customer retention. Small and large companies can learn a lot from these leading companies to remain competitive and retain their customers.
What does good customer care look like? Consistency, reliability, and responsiveness are key to every customer interaction. One bad experience can cause you to lose a customer for good. Each interaction with your company should encourage customers to return. A friendly smile and a positive attitude are important, but there is more. For example, aim to answer questions and resolve problems as quickly as you can. Set goals for response times and successful resolutions. Train your staff to be able to correct any mistakes, and empower them.
2. Failing value proposition
Failing to provide the value you’ve promised goes hand in hand with a poor customer experience. If you fail to accurately deliver the product or service you provide, your clients may assume that you don’t care about them. This is not good for business.
Send your clients regular updates that show the progress you are making for them. When you have good or bad news to report, make sure to communicate it promptly, which is important for all businesses, but especially those who foster close one-on-one relationships with their clients.
3. Outdated technology
Technology is an important factor in today’s brand loyalty equation. Consumers today are not only demanding, but have little patience for inefficiencies, since they can find a similar if not better service elsewhere. Slow checkout processes or a lack of convenient payment methods – online and offline – may cause some customers to look for businesses with better operations.
Simple, intuitive technology will help you retain customers. Your websites should load quickly and be easy to navigate on all devices. This includes computers, tablets, and smartphones. Make sure your business is active on social media and that you are keeping up with it. Use technology to enhance your products and services. Consider listing your restaurant on a delivery application to retain customers who may prefer to order takeout online.
4. Failure to reward customer loyalty
When it comes to establishing customer relationships, recognising the long-standing customers you do have is equally as important as improving on those that need a little more work. It can be very effective to reward customers for their loyalty. Encourage customer loyalty by rewarding those who choose your business over competitors. Customer loyalty programs can be used to offer discounts and special promotions. You can make it less likely that your customers will take advantage of a competitor’s offer by providing them great value without having to make any changes.
Money-back incentives are one way of rewarding customer loyalty. Create a feeling of community and belonging. You can show your appreciation to customers in many ways, such as by featuring them in newsletters and sending them birthday and holiday cards, or by asking them for feedback and including them in the creation of new products and services.
5. Pricing does not match value
Focusing on price instead of value is not a great idea for small businesses. As a low-cost supplier, you will find it difficult to raise prices if you are forced to. A larger competitor can also more easily undercut your prices to steal your clientele.
Focusing on value is the best way to increase customer loyalty in small businesses. Customers are not only interested in price, but also service, consistency and accessibility. Especially when larger competitors are involved – if a customer is choosing your product or service, it’s likely because they want a more personalised experience.
6. Incentivising employees poorly
Employee satisfaction is an indicator of customer satisfaction. If you cannot keep your employees, then don’t expect your customers to stay either. Consider how you can motivate and engage your sales team with sales incentives. This will keep them focused on the behaviours that serve both your customers and your business.
From a longer term perspective, ensure your salary packages are competitive, including insurance, holiday and sick payments that cover what it costs to be an Australian in today’s society.
Why is customer retention important?
Customer retention is a measure of a company’s ability to acquire new customers, as well as how satisfied they are with their existing customers. It also boosts ROI, increases loyalty and attracts new customers.
Returning customers are more likely to spend more, buy more, and recommend friends and family. Research shows that a 5% increase in retention can boost revenue by 25 to 95%.
Smart customer retention strategies ensure that customers are educated about your brand, products and service, and they’re satisfied with the customer experience. They also encourage them to come back to your brand to purchase additional products or receive updates.
Increase customer lifetime value
Lifetime value (LTV) can be defined as the total amount a client is expected to pay for your products over the course of their lifetime. The better your retention strategies, the higher your customer LTV. When you have a solid customer retention strategy, your LTV will soar. It is important to spend as little money as possible on acquisition, and then gain as much as you can from LTV.
Retention and acquisition best practices
Increased customer loyalty requires a targeted, focused approach. You should follow the actionable and achievable approaches to maintain a strong customer base, even though every business will lose some customers.
You can reduce customer churn by taking the time to engage, educate and empower your customers.
Inspire customer loyalty
Keeping existing customers is more profitable and cost-effective than attracting new ones. It’s only the beginning to avoid these common mistakes that lead customers away. It takes time to build customer loyalty. The payoff will be well worth the effort.
Bonus tip: Business insurance can also show your professionalism. It’s vital to keep the most valuable relationships you have in your small business. Maintaining the right insurance is a part of this to build trust with customers and show a commitment to your integrity.
Clients often see insurance as a sign of a financially responsible business owner, which can help protect reputation.
Use AI to create proactive experiences
Proactiveness is another important retention strategy. It’s not enough to respond to customer needs. Customers expect more than ever. They want you to give them what they need even before they ask.
Technology can help. According to Forbes, 48% of customers will be more loyal to a brand that uses the latest technology. Instead of reacting to issues that arise in real time, AI algorithms can identify and solve potential problems before they become a problem, such as through live chatbots on your website.
Personalise customer experience using data
To reap the benefits of personalisation you will need to connect all the data across the customer journey. You can combine customer data from various sources such as your marketing automation system, customer support software or order management tools.
Building an ecosystem of connected customer data allows for possibilities such as sending personalised offers to customers who have recently closed tickets. You can ensure that you don’t duplicate promotions offered by another team.
Adapt to changing customer needs and expectations
Businesses are constantly changing their products and services to meet the needs of customers. Companies who are able to improve customer retention usually have processes that allow them to quickly act on feedback from customers and optimise their operations.
Data transparency is driving agility. Agile organisations can stay ahead of the market’s rapid changes by paying attention to their customers’ data.
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Think about these tips, and ask yourself whether there are any other areas where you can show your customers that you care. Work with your employees to make sure every interaction is positive. By reviewing your files whenever you receive a service request,you can train your team (and use AI) to go beyond what customers expect.