Small business owners shift attention from acquisition to retention
More than half of small businesses get more than half of their annual revenue from repeat customers. So while it’s true that all businesses need to continuously find new customers, keeping the ones you have is becoming even more important.
According to a new report by Manta and BIA/Kelsey called “Achieving Big Customer Loyalty in a Small Business World“, a large number of small businesses are now spending half of their time and budget on their current customers. This represents a big shift in thinking but it’s a logical step in this tightfisted economy.
It can cost ten times more to find a new customer than keep a current one engaged. It’s also easier. . . if you make good use of available tools. Simply communicating with customers on a regular basis by email or through social media is a good start.
Loyalty programs are the next step but only 34% of the small businesses in this survey have one. Of those, less than half are digital which means they’re working harder than they have to. 31% of loyalty programs are paper based – punchcards and printable coupons. That was fine in 1999 but these days there’s an app for that.
Even stranger to me, 17% said their small business loyalty program was verbal or “other”. What does that mean? Tell me you’ve shopped here before and I’ll give you 10% off? As for “other”, I found one of those this week. At the Salvation Army store, if you pay .79 for a fabric shopping back, then use that bag on your next trip, they’ll give you 10% off your order.
That’s a smart idea for a brick and mortar store. Not only does it save the store owner money on bags but the fabric bag acts as a daily reminder to visit the store again.
The fabric bag is the physical manifestation of a loyalty app. After two visits to my local Smoothie King, I realized I was missing out on an opportunity for free smoothies because I didn’t have their app. I downloaded it and use it every time I visit to claim my points. What’s the big deal? Before I had the app, I might have visited the store twice a year. Now that I have it, I’ve been there four times in the past 30 days. I went from being a random variable to a loyal customer thanks to mobile.
The Manta – BIA/Kelsey report has two pages of good tips on how to set up a loyalty program so I won’t bother with that here. But I do want to make two points.
1. What ever incentive you use, make it obtainable. I’ve joined programs that would require me to spend an inordinately large amount of money just to get a 10% off coupon at the end of the year. Think about how much your top tier customers spend in what period of time then lower the barrier for entry just a little bit.
2. Remember that loyalty bonus doesn’t have to mean a percentage off. Think VIP experience, free upgrades, items with purchase, etc. And don’t be afraid to get creative. Authors have offered to name a character in a book after a loyal reader. A cafe might create a new sandwich based on a customer’s wishes. There are a lot of ways to reward people for their business.