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Every business owner knows that new customers will contribute to their business growth, but while they are busy marketing and chasing new prospects, they fail to realize that it's far easier and less costly to hang on to their existing customers.
Customer retention is incredibly important for growing a sustainable business. Because there is always a cost for acquiring them, you typically don’t even start making money until they’ve bought from you an average of two times. Creating a customer loyalty strategy to encourage repeat business can be both fun and rewarding.
Is it right for my business?
Customer loyalty strategies aren’t right for every business. If you have a business that sells frequently purchased products such as a sandwich shop, nail salon or ice cream parlor then it makes sense to remind them to come back to you. A real estate agent or car dealer on the other hand, doesn’t expect repeat business to occur for many years.
You also need to be able to offer something worthwhile. If you are in a low-cost, commodity business with no margins to play with, it’s difficult to create a loyalty system that anyone would find significant enough to care about. If your customers are already loyal, you’re better off sending them a thank you card every so often.
What can I offer them?
Figuring out what you can afford to offer them is the No. 1 consideration. You have to know your margins and how many times it would take for a customer to buy from you before it would warrant you providing them with a free offer.
Understanding your target market is also critical. If you’re selling to an older demographic on a fixed income, any type of discount will likely be most appreciated. A wealthier clientele might appreciate extra service perks such as free valet parking, complimentary coffee or free alterations.
You could also provide something extra at every sale, such as chocolate. Or work out a reciprocating arrangement with a non-competing business to offer a free service to each other’s customers. Using a lucky draw system is an example of an entertaining way to keep customers coming back.
Loyalty clubs
People have to see the benefit to belong to a loyalty club. They have to feel they’re working toward something or getting special treatment. There are basically two types of systems you can use: customers get a benefit after spending a certain amount of money, or visiting a certain number times. Or they get a benefit every time.
The simplest method is to give a customer a card and stamp it every time they’ve visited. Figure out your profit margin, make it as generous as possible and you’ll be the most popular business in town.
You could instead choose to use a credit system. For instance, for every $10 spent, the customer earns a dollar credit to be used on a future purchase. A points system can be similarly effective. $10 may equal 100 points that can then be used to buy something you sell.
Get the word out
Simply putting a sign in your window or a notice on your website that says “ask about our loyalty program” doesn’t work. You have to embark on an active campaign to get the word out. Mention it to every customer. Send them an email or a direct mail flyer.
To encourage your existing customers to return, creating a customer loyalty strategy can make an impact. A successful campaign only has to bring you in more money than you’ve invested in it to make it worthwhile. Even so, it’s vital to test and measure as you go so that you know your strategy is producing results.
Remember, keeping an existing customer is far cheaper than finding a new one.
Sheila Kloefkorn is CEO of KEO Marketing Inc and Firm Owner/Business Coach with ActionCOACH. She was recently recognized as one of the Top 25 Dynamic Women in Business by the Phoenix Business Journal. Sheila can be reached atsheila@businesscoachingaz.com.
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