Customer Service

How to retain customers for your small business

Titilola Shittu
April 21, 2024

You've poured your heart and soul into your small business. You've crafted your product, designed a captivating website, and launched yourself into the exciting world of entrepreneurship. Customers trickle in, intrigued by your unique offerings. 

But then, a sinking feeling starts to creep in. 

Those initial sales are fantastic, but how do you turn those first-time buyers into lifelong fans?  

In this article, we'll delve into how to retain current customers, pushing those repeat purchases into loyal customers that fuel your small business for years. Let’s get in on how to turn "hello customer"  into "welcome back, valued friend!"

Why is customer retention important for businesses?

One major reason why customer retention is crucial for businesses is that it's significantly cheaper to retain existing customers than acquire new customers. Studies suggest the success rate of selling to a customer base you already have is 60-70%, while the success rate of selling to a new customer is 5-20%.

Retained customers tend to spend more over time, especially as their trust and loyalty grow with the brand. They're also more likely to try new products and services offered by the business. Customer retention refers to the way businesses work to attract customers and build loyalty which can lead to positive word of mouth marketing and referrals.  Most loyal customers are more likely to recommend a business to their friends and family, bringing in new customers at no additional cost.

Customer lifetime value (CLTV) is the total revenue a customer generates over their relationship with the business. Businesses can maximize customer lifetime value, by increasing customer retention. Retained customers can provide valuable feedback and insights that can help improve products, services, and overall customer experience.

How do you calculate your customer retention rate?

The customer retention rate (CRR) measures the percentage of customers a company keeps over a specific time frame. It's a key metric for understanding customer loyalty and the effectiveness of your customer retention strategies.

Here's how to measure customer retention:

1. Choose a time frame.

This could be in the daily, weekly, quarterly, or yearly, all depending on the type of business you operate. You should also consider a specific time set for getting feedback from valued customers. Whether it is in the morning, afternoon or night. Make sure you have a time frame and stick to it so you capture first time customers too.

2. Identify the following.

  • Starting number of customers (S): The total number of new customers you had at the beginning of the chosen time.
  • Ending number of customers (E): The total number of customers you had at the end of the period.
  • Number of customers acquired (N): The total number of new customers you acquired during the period.

Use the formula to calculate why customer retention matters.

CRR = ((E - N) / S) x 100

3. Interpret the result.

The customer retention rate will be a percentage. A higher percentage indicates better customer retention.

Here's an example to illustrate the high customer retention rate:

You have 100 customers at the start and 120 at the end of the month. In that month, you acquired 30 customers

CRR = ((120 - 30) / 100) x 100

CRR = (90 / 100) x 100

CRR = 90%

In this example, the customer retention rate is 90%, which means the business retained 90% of its customers over the chosen time frame.

Be consistent with the time frame you use to calculate CRR so you can track trends over time. Consider segmenting your customer base (e.g., by product, demographics) to calculate CRR for specific customer groups. Also, analyze the reasons for customer churn (customer turnover) to identify areas for improvement in your customer retention strategy. Remember to set realistic customer retention goals.

Retained customers feel that a company's product, service, or brand is pleasing enough for them to stay stick with the company. When you increase customer retention, you don't have to expend nearly as much revenue on marketing, sales, and other customer acquisition costs. 

8 ways you can retain customers acquired.

To retain customers is a balancing act. There are many customer strategies on how to retain customer, but there are no shortcuts. You can't hack a personal relationship, so why should we assume business relationships are any different? 

1. Focus on the customer experience.

With these aspects of customer experience, you can build trust, and customer loyalty, and encourage repeat business from your acquired customers.

  • Make the onboarding process smooth and informative.

Set customer expectations upfront for your product or service. Provide clear instructions, tutorials, or FAQs to help them get started. Offer tiered onboarding based on customer needs.  Use the information you gathered during the customer acquisition to tailor the experience. Anticipate potential pain points and proactively offer solutions.

This could be through in-app guidance, automated messages, or personalized outreach from your customer support team.  A good onboarding process is a key customer retention strategy that can set you up for success for years to come.

  • Personalize interactions throughout the customer journey.

Use customer data to recommend products or services that complement their recent purchase or interests. Segment your email marketing and tailor content based on customer demographics, purchase history, and behaviour.

Use technology to remember customer preferences across different touchpoints (website, app, phone support) to avoid repetitive questions and provide a more streamlined experience.

  • Prioritize the customer feedback loop and act on it.

Provide various ways for customers to share feedback, such as surveys, email addresses, in-app feedback buttons, and social media. Acknowledge and respond to feedback promptly,  demonstrating that you value their input.

Collect customer feedback to identify areas for improvement and iterate on your product, service, or overall customer experience. It's important to note – not only is gathering feedback beneficial to your customer retention strategies, but closing the loop with your customers is just as crucial.

Customer feedback
  • Make customer service exceptional.

One of the most basic customer retention strategy examples is meeting customer expectations. Train your customer service team to be knowledgeable, empathetic, and solution-oriented.

Make it easy for customers to get help through their preferred channels (phone, email, chat). Surprise and delight customers by exceeding customer expectations when they reach out for support.

2. Provide value and offer incentives.

Another customer retention strategy is to provide value that goes beyond just the initial purchase.  Focus on helping your customers succeed and get the most out of your offerings through customer retention programs.  Incentives should complement this value proposition and encourage them to stay engaged with your brand over the long term.

  • Value-based incentives.

Offer educational content, tutorials, webinars, or reports that go beyond the basic product or service functionality. This demonstrates expertise and helps customers get the most out of what they purchase. Also provide early access to new product features, upgrades, or betas.  This shows you value customer loyalty and their influence on future development. 

Allow them to explore additional products or services within your brand portfolio that complement their current purchase. Free trials or consultations can also serve as customer retention tactics.

  • Tiered loyalty programs.

Increase customer retention by designing a customer retention program with different levels based on purchase history or engagement.  Offer increasing rewards like points, discounts, or exclusive benefits to encourage customers.  This incentivizes repeat customers and continued engagement. 

Rewards should be tailored to individual customer preferences.  This could be discounts on specific products they're interested in, early access to relevant features, or exclusive experiences. Surprise and delight customers with occasional bonus points, gifts with purchases, or upgrades. This shows appreciation and reinforces the value of their continued business.

3. Leverage technology.

Technology can be a powerful tool to enhance customer experience, provide value, and retain acquired customers. Here's how you can leverage technology to provide value beyond the initial purchase and build stronger customer relationships that lead to higher customer retention rates.

  • Utilize customer data to personalize interactions across touchpoints.  Recommendation engines can suggest relevant products,  marketing automation platforms can deliver targeted email campaigns, and chatbots can offer personalized support conversations.
  • Use analytics tools to track customer behaviour, identify churn risks, and understand customer preferences.  This data can inform product development, marketing strategies, and targeted outreach to at-risk customers.
  • Streamline communication with automated emails, triggered messages, or appointment reminders. This keeps customers informed and reduces the burden on your support team.
  • Empower customers with self-service options like knowledge bases, FAQs, or video tutorials. This allows them to find answers and troubleshoot issues independently, improving convenience and satisfaction.
  • Offer seamless support across various channels (phone, email, chat, social media). This allows customers to reach you on their preferred platform and ensures a consistent experience.
  • To create an engaging customer loyalty program – integrate points systems, badges, leaderboards, or challenges to encourage repeat customers and desired customer behaviours.
  • Utilize AI-powered chatbots for 24/7 customer support,  product recommendations, or sentiment analysis to understand customer feedback and identify areas for improvement. Reducing call centre volume is generally considered to be a reliable way of boosting customer satisfaction.
  • Use advanced analytics to predict customer needs and proactively address potential issues.  This could involve sending reminders for expiring subscriptions or suggesting complementary products before a customer runs out of their current one.

4. Get feedback and adapt.

You can establish a feedback loop that continuously gathers valuable insights from your customers.  Adapting your offerings and processes based on this feedback demonstrates that you value their voice and encourage them to stay engaged with your brand in the long run.

  • Multiple feedback channels.

Use surveys at different touchpoints in the customer journey (post-purchase, after support interaction) to gather feedback on specific experiences. Integrate in-app feedback buttons or website pop-up surveys to capture immediate feedback on user experience. Send targeted email requests for feedback based on interactions or purchase history. Monitor customer behavior, brand mentions and customer sentiment on social media platforms.

  • Making feedback actionable.

Use a centralized system to collect, categorize, and analyze all customer feedback from various channels. Look for recurring issues, areas of praise, and overall sentiment within the feedback data. Focus on addressing customer complaints that will have the most significant positive impact on customer retention and experience. Inform customers about the actions you're taking based on their feedback.   Adapt your product, service, or customer experience processes based on the insights you gather.

  • Technology for gathering and analyzing feedback.

Utilize online survey tools to create and distribute targeted surveys with various question formats (multiple choice, open-ended) to gather rich data. CRMs can help centralize customer data and feedback from interactions across different channels. Use analytics tools to track customer behaviour and sentiment within your app, website, or social media presence.

5. Community involvement.

Community involvement can be a powerful tool to improve customer retention and build loyalty, leading to higher retention rates. Using community involvement, you can create a deeper connection with your customers.

Start by aligning your brand with causes your customers care about.  Support local charities, sponsor online community events, or volunteer alongside your customers. This creates a sense of shared purpose and strengthens brand affinity.

Encourage customer involvement in your community efforts. Also, develop marketing campaigns highlighting your community involvement and how customer purchases contribute to a positive cause. This positions your brand as socially responsible and resonates with customers who value similar principles.

Authenticity is key, you should ensure your community involvement is genuine and aligns with your brand values.  Customers can easily spot inauthentic efforts, which can damage trust. Remember to always rack the impact of your online brand community involvement to boost customer retention and keep your customers loyal. 

The data from this customer retention strategy can be used to refine your approach and ensure your efforts are delivering the desired results.

6. Offer flexibility and convenience.

Offering flexibility and convenience is a customer retention strategy for retaining customers. Here's how you can implement it across different aspects of your business:

  • Product and service flexibility.

Allow customers to personalize your product or service to fit their specific needs.  This could involve offering different product variations, subscription tiers, or custom service packages. Cater to diverse customer needs with options like pay-as-you-go plans,  usage-based billing, or tiered subscription models that allow customers to adjust their service level up or down as needed.

Making returns and exchanges easy can improve customer satisfaction, increasing the likelihood of customers buying from your business again.

  • Payment flexibility.

Offer a variety of payment options including credit cards, debit cards, digital wallets, and even buy-now-pay-later options to cater to customer preferences and remove friction at checkout. Make it easy for customers to manage their subscriptions. Allow them to easily pause, change plans, or cancel subscriptions directly within your app or website.

  • Delivery and access flexibility.

Provide various delivery options like standard shipping, expedited options,  local pickup points, or even in-store pickup to cater to customer needs and urgency. Digital products or services should offer flexible access options. This could involve multiple device logins,  offline access functionality,  or flexible download formats.

  • Communication and support flexibility.

Offer customer support through multiple channels so customers can reach you on their preferred platform. A robust knowledge base, FAQs, or video tutorials also help customers find answers and troubleshoot issues independently,  increasing convenience and reducing reliance on support agents. Consider extending support hours or offering live chat options to cater to customers in different time zones or with busy schedules.

You can encourage satisfied customers to stay loyal in the long run, by offering a variety of options and making it easy for them to interact with your brand on their terms.

7. Personalize the in-store experience.

You can create a memorable and enjoyable shopping experience that fosters customer loyalty and retention, by personalizing the in-store experience.

Equip your sales associates with access to customer data  (with appropriate privacy considerations) such as purchase history, preferred brands, or previous interactions. This allows them to personalize greetings, product recommendations, and upselling opportunities. 

Train your staff to prioritize excellent customer service. Happy employees are generally more inclined to provide top-of-the-line support and form long-lasting relationships with customers that improve customer retention.

Organize product displays based on customer segments or browsing history. This personalizes the shopping experience by showcasing relevant products more prominently. Utilize digital signage or targeted in-store promotions to highlight products or deals relevant to specific customer segments. Another tip is to create pleasant and personalized customer experiences through music, lighting, and even scent that align with your target audience and brand image.

Privacy is key, don't overwhelm existing customers with excessive personalization. Provide options for them to control the level of data sharing and tailor your approach to avoid a feeling of intrusion.

8. Build brand loyalty through consistency.

Consistency is important to increase customer retention and build brand loyalty with your acquired customers. Here's how you can achieve consistency across various touchpoints:

  • Consistent brand messaging.

Develop a distinct brand voice and a set of core values that resonate with your target audience. This voice and these values should be evident in all your communication channels. Ensure your messaging across marketing materials (website, social media, advertising),  in-store signage, and customer interactions all convey the same core message and brand personality.

  • Consistent customer experience.

Develop standardized processes for interactions across all channels. This ensures a consistent level of service quality regardless of how a customer reaches you. Train your employees to understand and embody your brand values. This includes customer service training that emphasizes consistent communication and problem-solving approaches.

  • Consistent brand image.

Maintain a consistent visual identity across all your marketing materials, packaging, website design, and even store layout. This includes using the same logo, colour palette, fonts, and imagery to create a recognizable brand image. Be transparent in your communication and authentic in your brand representation.  Avoid misleading advertising or making unrealistic promises, as this can damage trust and erode brand loyalty.

Consistency is an ongoing effort, but rewarding customers is well worth the investment.

Retaining customers is essential for long-term success.  While it may be easier to acquire new customers, building loyalty among existing customers is more cost-effective and leads to higher profitability.

This blog post has explored eight best practices you should follow when implementing customer retention strategies you can implement as a small business owner to retain your acquired customers

With these effective customer retention strategies and building strong customer relationships, you can transform your small business into a customer retention powerhouse. Loyal customers are your biggest advocates, and their positive experiences are crucial to driving sustainable growth for your business. 

Titilola Shittu

Content Writer
Titilola enjoys writing content that resonates with a target audience. With an interest in product marketing, she understands the importance of using data to provide actionable insights that help with informed decisions. You can find her listening to music or reading African literature when she's not doing anything marketing-related.

Transform Your Customer Support Experience.

Start a free trial.