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Customer Retention Strategies for Small Businesses

Katharine Paljug

Losing customers costs businesses billions of dollars per year. But many small businesses are so focused on bringing in new customers that they forget about the ones they already have.

Sharon and Mark Spero, the owners of a Money Mailer franchise near Chicago, work directly with local businesses to both target new customers and keep the existing ones loyal. After 20 years in business, the Speros aren't just direct mail experts – they've also seen firsthand how important customer retention is for building a thriving small business. They shared their best tips for how small businesses can improve their customer retention.

1. Sell to old customers, not just new ones.

When planning out your marketing strategies, from direct advertising to search engine optimization, it's natural to think about how to attract new customers. But put some of that effort into your old customers too.

"Old and current customers know us well," the Speros explain. "Current customers will often work with us on larger projects than new customers that are just testing us out for the first time."

Creating a sales and marketing funnel specifically for existing customers is not only key to growing your business, it's often a better investment of your time and resources. It generally costs five times as much to acquire a new customer as it does to retain an existing customer, according to Forrester Research. If you spend more of your marketing dollars on old and current customers, you will see more return on a smaller investment.

2. Understand their expectations.

Customer retention depends on customer satisfaction. But many times that satisfaction depends less on the goods or services you provide than it does on expectations. If a customer wants a one-hour consultation to double their revenue overnight, for example, they will be disappointed no matter how good that consultation is.

"One of the most common mistakes [small business owners make] is to avoid hav[ing] the conversation with the client regarding [the client's] expectations," the Speros pointed out. "These expectations can often be unrealistic, unmeasured, and don't match what they actually are trying to communicate."

As a business owner, it is your responsibility to initiate that difficult conversation. Customers should have a realistic picture of what they are buying, including the cost of their purchase, what it includes, what they can expect as a result, and any return or refund policy you may have in place.

If all these components are understood and expected from the beginning of a purchase, customers are much more likely to be satisfied at the end, whatever that end is.

3. Offer to improve.

If for any reason a customer isn't satisfied with their purchase or experience, the best thing you can do to retain their loyalty is to take responsibility and offer to improve. No matter where the mistake or miscommunication occurred, customers expect you to make the situation right – and doing so enthusiastically can turn even a disastrous situation into a loyal customer.

"When a client … wants to cancel, we push back and dive in to why they are canceling," the Speros said. Once they understand why a client is unsatisfied, they offer solutions and improvements that often convince hesitant customers to stick around.

In fact, offering to improve, and making your customers a part of that process, can increase loyalty even in satisfied customers.

In their business, the Speros schedule reviews for every account to see where they can make customers even happier. "[We] have an annual review in person with each client to listen, evaluate, re-examine and refine [their] advertising strategy based on changes in the client's business." This personal attention not only makes clients feel valued and respected, it can also help you anticipate and avoid future problems.

If you don't interact one on one with clients, you can still offer improvements. An email survey, either sent to everyone at certain points in the year or to each customer after a purchase, gives customers the opportunity to offer feedback and you the opportunity to make changes.

Once you've made those changes, don't keep them quiet – let customers know exactly what you've done and how that will improve their experience. When they know you take their feedback seriously, they are more likely to give you repeat business.

4. Communicate and connect.

Regular, personal communication is key to creating the feeling of personal connection that convinces customers to stay loyal to a small business.

Communicate regularly with your customers through a newsletter or email list, keeping them informed of changes, developments and special offers. If you are a local business with local customers, the Speros recommend getting involved in the community to create strong, personal relationships with them. "We frequent our client's business whenever possible, see them at chamber [of commerce] functions and local charity events. This allows for conversations not just about business but about them."

If you are working at a distance, it's still possible to create a feeling of personal connection. "Even if there is not time to meet with a customer in person, a call is important," the Speros advise. "It doesn't have to be every month, but conversations, rather than just emails, create an emotional engagement that tells the customer that we are interested in them."

If you are able to send them, personal thank-you notes and other handwritten notes make loyal customers feel that you are loyal to them in return. You can also create real connections by responding directly to emails and comments on social media, posting content that shows the people behind the business, or finding events such as trade shows where you can talk to customers in person.

By communicating directly with customers, you encourage their engagement, which in turn makes them feel invested in your business, the Speros explain. "Through communication, a relationship is created, which often leads to a more loyal, long-lasting partnership."

Image Credit: iQoncept/Shutterstock
Katharine Paljug
Business News Daily Contributing Writer
Katharine Paljug is a freelance content creator and editor who writes for and about small businesses. In addition to Business News Daily, her articles can be found on Your Care Everywhere, She Knows, and YFS Magazine. Visit her website to access her free library of resources for small business owners.