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  • 6 Cost-Effective Customer Retention Strategies That Work for Small Businesses

The cost of customer acquisition is steep. Research shows that it’s anywhere from five to 25 times more expensive to acquire a new customer than it is to hang onto an existing one. That’s why developing a robust customer retention strategy is critical for businesses of all sizes.

Sometimes small businesses feel they’re at a disadvantage in competing with the big guys. But when it comes to keeping customers around, many areas where small businesses naturally excel align with solid customer retention strategies.

customer retetention strategies - localiq feature

Customer retention ultimately boils down to living by the golden rule: Treat your customers as you want to be treated. When your business can provide personalized, thoughtful attention, you stand to develop lifelong relationships with your customers.

Want to learn how to tap into your small business superpowers and build lasting customer relationships? We’re sharing six customer retention strategies to ensure long-term success for your brand:

  1. Make it personal
  2. Create community
  3. Give back
  4. Be responsive
  5. Ask for feedback
  6. Show your appreciation

Now, let’s dive deeper into each of these customer retention strategies so you can see how they can make a big impact for your small business.


1. Make it personal

Personalization has become the gold standard in marketing today, and customers expect it. A recent Statista survey found that 90% of consumers were annoyed by irrelevant messaging from brands.

customer retention strategies - make it personal

Personalization is a trend that plays right into small businesses’ strengths. Many consumers turn to local brands seeking that personalized touch. People love being greeted by name by the barista at their coffee shop or receiving a hand-written thank you with their online order.

Lucky for you, modern marketing tools also make it easier than ever for brands to understand individual customers. CRMs (customer relationship management tools) allow you to track customer behavior across platforms. You can see what an individual customer purchases on your website, emails your sales team about, and calls your customer success team to ask—all in one centralized database.

Even if you don’t have a proper CRM tool, keep it old-school. Place a little notebook by the register where you can jot down a returning customer’s name and go-to order. Or use the notes app on your phone to write down facts like the name of your new client’s dog. When you remember little details on a customer’s next visit, it goes a long way to building rapport and loyalty.

Related: Create a more personalized content marketing strategy with content mapping.


2. Create community

Another strength that small businesses have over big corporations is their role within a community. Think of Luke Danes in Gilmore Girls or Sam Malone in Cheers. A small business isn’t a nameless, faceless brand. It can become a neighborhood staple, part of the fabric of the community, a place where everybody knows your name. And that’s a significant benefit when it comes to building long-term relationships.

customer retention strategies - create community

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Brainstorm ways to offer something beyond your product or service. What opportunities do you have to build a community around your offerings or area of expertise? Even if you run a small online business, gather your best customers in one place online.

Create a private Facebook group or Slack channel where customers can congregate. Let’s say you own a pet wellness brand. Perhaps invite a veterinarian to host a webinar where they share tips about pet nutrition.

Ensure this online community provides your best customers with access to something above and beyond what they get elsewhere online. That may be knowledge and expertise, early access to products, or special giveaways or swag.

Whatever you settle on, treat your community members like the VIPs they are! When you go above and beyond to make them feel they’re part of the family, they become loyal to your brand on a deeper level. It doesn’t matter if the bigger guys offer the same products or services at a lower price; they can’t compete on the personal connection you’ve nurtured.


3. Give back

Part of being embedded in a community is the ability to give back. Here is yet another way small businesses can compete with the big brands. As a member of a specific community, you understand the needs of that group better than a corporation ever could.

customer retention strategies - give back to your community

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Find opportunities to contribute to your community, whatever that means to your brand. If you run a local business in a specific geographic area, consider organizing a day of service for your team at your neighborhood food bank. If your community is virtual, volunteer with an organization that aligns with your shared values. That pet wellness brand, for example, might give to the ASPCA or another organization focused on animal welfare issues.

Not only is giving back a nice thing to do, but it also has tangible business benefits, from strengthening ties within the community to building respect and reputation. When you become a force for good in your community, customers feel good about supporting your business again and again.


4. Be responsive

Another critical piece of any customer retention strategy is a speedy response time. There’s nothing more frustrating for customers than feeling like they’ve been left hanging. And with the ease of virtual communications, there’s no excuse for slow responses.

Keep in mind that our fast-paced world has changed how customers define “slow.” No carrier pigeons or snail mail responses here! When it comes to customer service expectations, most customers expect an answer in 10 minutes or less.

customer retention strategies - be responsive

That’s a lot of pressure, especially when you receive a challenging query or your business lacks a dedicated customer support team. But don’t let it overwhelm you!

Even if you can’t provide an answer right away, send a message acknowledging your customer’s question or complaint. Automation can help you—create a canned email response confirming receipt of incoming messages and setting expectations for the turnaround time on a personalized reply.

If you do get a negative comment, it’s essential to respond sincerely. Take the time to listen and offer a real solution. If you handle a complaint with poise and work to make things right, you can transform an angry customer into a loyal one.

Related: Get client retention strategies for agencies here.


5. Ask for feedback

If you want to create long-term customer relationships, invite your customers to tell you what they think of you.

Send out regular surveys to your best customers to gather feedback on current offerings and the customer support experience. When it comes time to develop new products or services, invite your VIPs to be part of the process.

Get feedback about why they turn to your business, what problems they need help solving, and what the ideal product or service to solve that problem would be. Not only does this input help you create a new offering tailored to customers’ actual needs, but it also makes your customers feel seen, heard, and valued.

customer retention strategies - ask for feedback

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Microsoft’s State of Global Customer Service survey found that 90% of consumers thought brands should offer the opportunity to provide feedback. Still, the majority of people say they aren’t often asked for their opinion. Even worse, 51% of respondents said they don’t think brands actually take action on customer input!

Businesses that ask for feedback and use it to implement changes are at a considerable advantage. When you show your customers through your actions that you value what they have to say, you establish yourself as a trusted and loved brand.


6. Show your appreciation

Finally, thank your customers for doing business with you! The most important part of customer appreciation is offering your loyal customers something they can’t get anywhere else and something no other customers get access to from you.

Consider REI’s popular Co-op membership program. The program is about so much more than rewards points. Members also get exclusive access to insider tips and discounts on programs and events for outdoor enthusiasts. Membership also unlocks access to REI’s garage sales—events with a cult-like following where folks can buy returned gear at a steep discount.

customer retention strategies - show your appreciation

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Even if you don’t have the fortitude or financial means to start a robust membership program right now, there are other ways to show your fans love. Shout them out on social media. Invite them to participate in naming your new product. Display photos of regular customers on a wall in your shop. Run a customer loyalty program. Make people feel like they’re part of the family. They’re an essential element in your success. Demonstrate that you understand the role they play and are grateful for their support!


Get started with customer retention strategies that work

When it comes to customer retention, it’s crucial you get things right. That can make establishing customer retention strategies feel daunting, but it doesn’t need to be a scary task.

Take the time to get to know your customers on a personal level. Listen and respond to what they’re saying. Treat them with respect and show thanks for their continued support.

Yes, it’s easier said than done. Still, if you’re intentional about establishing customer retention strategies, you stand to capitalize on the strengths of small businesses and remain the first choice among your community of consumers.

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