Five Reasons Why Customer Retention Is Essential

by Thom Tracy

2 min read

Customer retention helps increase the profitability of your small business. Build lasting customer relationships by providing personalized quality service, communicating effectively, rewarding loyal customers, and offering innovative products and services. It may be beneficial for your business to use data analytics software to help understand your customers more thoroughly. Customers who are satisfied with your business are easier to retain.

Repeat Purchases

Loyal customers purchase more regularly and in greater quantities. They know your small business can provide products and services they want. As a valued customer, they feel your business is more likely to listen to their requests and provide superior service than other businesses that offer similar offerings. Retained customers are more likely to make additional purchases if you pay attention to what brands or types of products they like. Offer discounts for loyal customers to encourage repeat business, such as a 10 percent discount after a certain number of purchases.

Reduced Marketing Costs

Customers your small business retain are familiar with your products and services, which reduces your marketing expenses, such as creating brand awareness and advertising your product range. For example, if you own a small bookkeeping business that provides services and sells accounting software, retained customers are likely to be aware of both offerings without the need for additional marketing. Familiarization with your products and services also reduces the support retained customers require.

Word-of-mouth Advertising

Repeat customers are more likely to tell their friends and family about your small business. Customers feel good telling people about quality service they received or a product that makes their life easier.

Word-of-mouth advertising also gives your small business credibility. Customers respect the opinion of people close to them. For example, if you own a small accounting business that performed a complex tax return for a loyal customer, a word-of-mouth referral gives prospective customers confidence that your small business has the skills to perform their complex tax returns also.

Less Price-Sensitive

Retained customers are not as price-conscious; they are aware your small business provides solutions to their problems and are often prepared to pay a premium. For example, if you are an independent contractor and provided advice that has resulted in significant savings, a retained customer is likely to support your business again, even if your fees are more expensive than your competitors’. Customers often associate higher prices with quality service.

Provide Valuable Feedback

Customers that your small business retains provide valuable feedback. As they make frequent purchases from your business, they are aware of areas that could be improved. For example, if you own a small equipment company, a repeat customer could suggest using an alternative supplier to improve the quality of the products you sell.

Be proactive by asking your repeat customers how your business can service them more effectively. This can lead to new opportunities that you may have overlooked, such as a recommendation to introduce a complementary product to enhance an existing one.

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