For many small businesses, gaining new customers is a huge part of their growth strategy. New leads are important, but if you really want to expand your business, you might want to turn more of your attention to your current customer base.
According to marketing solutions provider Collect, loyal, repeat customers account for about 20 percent of your total customer base, but can generate up to 70 percent of sales because they spend more over time. Numerous reports have also shown that the cost of acquiring a new customer is much greater than the cost of retaining an existing one, anywhere from three to 10 times higher, depending on the industry and other factors, said Ben Hamilton, CEO of private air-travel service ImagineAir.
So how do you keep your customers coming back? One increasingly common strategy is launching a loyalty program.
"Loyalty programs help retain core users and, when combined with delivering an exceptional customer experience, help turn them into evangelists for your brand," Hamilton said.
Of course, there's no set formula for a loyalty program, and there are a lot of different routes you can go. Some businesses choose to go low-tech and simple with a punch card, while others have an app connected to a digital-rewards database. Your biggest challenges will likely be in determining what benefits or discounts to offer, and sourcing or building a technology platform to support the program, Hamilton said. [See Related Story: Boosting Customer Loyalty with Big Data]
To decide what to offer, Hamilton advised speaking to current customers to understand what matters most to them. This helps you avoid adding benefits that absorb resources but don't add much customer value, he said.
"In developing our Platinum loyalty program, for example, we learned that realizing significant tax benefits is as important to our Platinum Members as providing the least expensive way to fly private," Hamilton told Business News Daily. "This insight played a major role in shaping our program."
If you're looking into tech solutions to help administer the program, Hamilton said to identify and prioritize your technical needs up front. Thoroughly research and vet the development talent to deliver those needs, or find existing technology platforms that can be customized to meet them.
"In some cases, initial implementation stages involve more manual, human effort, with automation to track and support the program coming later," he said. "Small businesses, though resource-constrained, also have the benefit of being more nimble, and therefore more able to implement new processes more easily."
To learn more about different types of customer loyalty programs and strategies, visit this Business News Daily guide.