Three Keys to Retaining Customers

Many small and mid-sized businesses (SMBs) focus primarily on new customer acquisition versus customer retention, but what is sometimes forgotten is that the cost of acquisition far exceeds the expenses associated with retention. Research from Flowtown estimates that it is six or seven times more costly to acquire a new customer compared to retaining an existing one. And, in the same survey, it is noted that by increasing retention rates by as little a five percent, businesses can yield anywhere from a five to 95 percent lift in profits.

For SMBs, retention programs may range from a targeted offer, for example, an exclusive coupon the most loyal customers, to a more formalized, points based program, where customers receive points or money back for every dollar they spend. Whether you are looking to develop and launch a loyalty program or evaluate and re-launch an existing program, here are three keys that you will want to consider to drive adoption and lift overall customer retention.

  1. Know your customers – If you have a customer database, review it to identify any commonalities in terms of your buyer personas and/or buying trends. Take this opportunity to also determine what types of information would be valuable for you, as a business owner, to help with marketing strategies.
  2. Research program options – Loyalty programs vary greatly in terms of both execution and offerings, so it’s critical to understand what would work for your specific business model. For example, if you own a local quick serve restaurant (QSR), something as simple as a paper punch card may be the perfect starting point. And, don’t be intimated by new technologies. Many of the most successful loyalty and reward programs for SMBs come from stand-alone mobile applications, so it’s important to understand the demographics of your audience, do your homework, and select the most appropriate option for your customers and your business.
  3. Encourage redemption – Industry leading firm, Colloquy, notes that one of the keys to driving long-term sustainable customer value through a loyalty program is redemption. While many think that lower redemption rates would drive increased profits, over the long term you want more people engaged in your program. For example, if you implement a cash back credit for every dollar spent, it is a good idea to build in reminders for any unused credits that may be about to expire.


Loyalty is one of the many programs that, due to technology, are more affordable and actionable for today’s SMB retailers. Customer loyalty has been identified as the top nonfinancial business challenge facing companies. Keeping existing customers is as important if not more so than attracting new customers, so don’t focus every effort on acquisition, but rather ensure that your marketing efforts include a blend of goals relative to both acquisition and retention.