customer retention

The Best Customer Retention Strategies for Small Business Owners

Getting new customers and convincing your current customers to stay loyal is a major challenge for many small businesses. Gaining new customers is expensive. It’s almost always better to use time and energy on customer retention strategies instead of fighting a battle to constantly replace them with new customers.

Churn rate matters

In order to retain customers, it’s important to identify the drivers of churn. The churn rate is the percentage of customers a business loses throughout a set period of time.

Most small businesses have a basic understanding of how much a lifetime customer is worth to them, how much it costs to replace that customer if they decide to leave, and how that customer’s decision to go with the competition can affect the reputation of the business.

The higher the lifetime value (LTV) of a customer, the more important it is to focus marketing efforts and business improvement strategies toward customer retention.

Statistically, new customers are much more likely to leave (or churn) than customers that have been with a company for a long time. As the length of the relationship grows, so do order sizes and order frequency.

For a business to grow, the churn rate must remain smaller than the rate at which the business acquires new customers. Lower churn rates mean a company is doing all of the right things to keep their clients happy and satisfied.

Understanding the reasons behind a customer’s decision to go elsewhere for a product or service will help the business shape a customer retention program that will help customers decide to stay.


Related: How to Get Started with Real-Time Mobile Marketing

Below are some common reasons for customer loss that your startup should try to avoid:

Your customers don’t like your prices

It often happens after a rate increase. Even if the increase is necessary, timely and completely justifiable, people don’t like it when their bills go up. It’s important not to take this personally. Customers who leave because they found a lower price with a different product or service may not be happy with the lower level of product or service quality. The chances that they’ll come back for the reliable service or superior product that you offer are good.

Before backing off on a price change, make sure the customers that are complaining the most are really the customers you want to serve.

Your customers are unhappy with your service or product

This problem is harder to solve and requires a willingness to hear your customers’ complaints and act on them. Customer research helps businesses learn more about specific complaints, and if other customers have the same concerns and issues.

In some cases, a customer simply no longer has a need for your product or service. These customers simply must be replaced. This type of attrition is important to understand, so it doesn’t get included in the information about customers that are unhappy with the product or service.

There isn’t a clear way for your customers to communicate their unhappiness

No one wants to hear customers complain, but those complaints often contain information that is valuable to a business that is trying to reduce their churn rate.

Customers who complain are giving a business they respect a chance to fix the problem before they take their money elsewhere.

If the only way your customers have to express their unhappiness is by posting online reviews, then reducing churn by addressing customer concerns isn’t a viable option.

What do you want your customers to do when issues such as the following occur?

  • They placed a high-value complex order and support after the purchase wasn’t available or adequate
  • Returning the product they ordered was not possible, or it was not easy
  • The service they ordered was late
  • They remained on hold for more than 15 minutes and finally hung up
  • They asked a question and were treated in an unprofessional and disrespectful manner
  • The repairman didn’t keep the appointment

Here are a few things you can do to make sure your customers can contact you when they have a problem:

  • Make sure the “Contact Us” page on your website is up-to-date and easy to use
  • Put a phone number on the bottom of every page of your website
  • Offer an email address for the manager or owner of the business, instead of a generic email address

Sometimes, problems within the business are harder to learn about from customers.


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Here are a few issues that businesses struggle with that are more difficult to identify:

  • The phone rings many times before it’s answered. Most people hang up after three rings, so if you don’t have a receptionist that can answer that quickly, you are probably losing business
  • You have an answering service or answering machine that requires your customer to leave a message requesting a callback. Many people don’t like to leave a message. There’s a fear that they’ll never hear back from you. If they have an immediate problem, like a plumbing leak, they want to speak with someone who can set an appointment right away
  • Customer service means being able to address your clients’ concerns, immediately. A customer should be able to ask a basic question and get a reliable answer from anyone in the company. Having a front-end staff that is knowledgeable about your industry is crucial as you position yourself as an expert in your field

Research suggests that 70 percent of churn is due to customers being disappointed with how they are treated. If simply providing reliable, respectful and consistently good customer service could save your business even 50 percent churn, would you put more effort into providing it?

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