August 29, 2024

4 Best Customer Retention Strategies for Small Businesses

Research shows that customer acquisition costs significantly more than customer retention — up to seven times more, depending on your industry. For emerging brands and small businesses, which need to operate cost-efficiently, it's critical to find ways of maximizing customer loyalty.

In this guide for small business owners, we'll share actionable customer retention tips and best practices that you can start implementing today.

 Follow along as we explore four of the most effective customer retention strategies for small businesses in 2024, such as responding to customer complaints, creating online customer communities, and rewarding current customers with loyalty programs that encourage future purchases.

In addition to sharing customer retention strategies in this guide, we'll also answer some of your customer loyalty FAQs, and discuss tools that can make retaining customers easier for your business. 

Why customer retention matters

Why is customer retention important?

Before we dive into our customer retention strategies, let's look at a few statistics that highlight why retaining customers matters.

Losing customers costs money 

Studies show that the average cost of losing a customer is $243. 

That may sound small, but those figures can add up quickly when you consider that the average churn rate ranges anywhere from around 4% to 19%, depending on the type of business.

Existing customers are more likely to make purchases 

According to Forbes, the probability of making a sale to an existing customer is 60% to 70%. 

However, that probability plummets to just 5% to 20% when selling to new customers.

Increasing customer retention boosts profits 

Long term customers are more likely to upgrade or make additional purchases, giving you opportunities for upselling and cross-selling. 

Increasing your customer retention rate by just 5% can boost your profits by up to 25% — or, according to some sources, as much as 95%.

The takeaway for small businesses

The data speaks for itself: customer retention costs less than customer acquisition and, in the long run, delivers a higher ROI. If you want to optimize your sales performance and grow your business as fast as possible, finding ways to keep long term customers happy is essential. 

What are the key factors that impact customer retention? 

To successfully retain customers, you need to understand what they value and care about — along with understanding their pain points and what factors drive them away from brands. 

Here are some of the factors that influence customer loyalty and decision-making most. 

Excellent customer service

According to research by Salesforce, 91% of consumers are more likely to make another purchase after receiving fantastic customer service

And according to Verint’s 2021 State of CX Trends Report, seven in 10 customers have stopped using a brand because of negative customer service experiences. 

If you want to keep satisfied customers coming back for more, you need to consistently deliver friendly, helpful, efficient support across multiple channels.

Personalized customer experiences

According to the Trends in Personalization survey by Evergage, 78% of marketing experts say personalization has a "strong" or "extremely strong" effect on brand loyalty and the overall customer experience. We'll discuss the importance of personalization later in this guide when we cover customer retention strategy #3. 

Great deals and value

Great deals — or the lack of them — were the number one reason why consumers switched brands in 2022 according to Salesforce data, which shows that 66% of consumers left brands for this reason.

Ease and convenience 

Lack of convenience drove 44% of consumers to switch brands in 2022, according to Salesforce. Ensuring that their experiences are seamless, simple, and easy is key to keeping your customers satisfied and loyal.

By aligning your customer retention strategies with consumers' expectations and values, you can satisfy more of your customer base and increase the number of shoppers who remain loyal to your brand. 

For example, since a significant percentage of consumers care about getting great deals, you should ensure that your customer retention strategy integrates discounts, free items, or other money-saving opportunities to achieve optimal results.

Top 4 customer retention strategies for small businesses in 2024

Here are four of the best customer retention strategies for small businesses to keep loyal customers coming in 2024:

  1. Manage customer feedback on Google, Yelp, and other business review sites
  2. Reward loyal customers with exclusive items, discounts on products, or other perks and incentives
  3. Leverage geo-targeting and other strategies to deliver localized, personalized customer experiences
  4. Provide friendly, efficient customer service and support, including live agents and self-service tools

Let's explore how your small business can retain customers with greater success by implementing these strategies.

Customer retention strategy #1: Manage customer feedback on review sites

Online reviews are highly influential on consumers. Roughly a third of U.S. shoppers say they "always" check reviews of local businesses, and, according to the same research, 50% trust reviews "as much as personal recommendations from friends and family."

You can use that to your advantage by managing your reviews, which is simple and efficient with an AI-powered platform like ResponseScribe.

Here are three review management steps you can take to improve your customer retention rate:

  1. Show off your best reviews
  2. Respond to all reviews
  3. Request customer feedback

1. Show off positive reviews

positive review examples

Showcasing customer testimonials and reviews is a simple, cost-effective way to remind customers why they love your brand each time they visit your website or social media pages.

2. Respond to customer feedback on review sites

A study by Khoros found that 83% of consumers "feel more loyal to brands that respond to and resolve their complaints." The same research also revealed that "68% of customers will spend more money with a brand that understands them and treats them like individuals."

Meanwhile, BrightLocal data reveals that 88% of consumers are likely to use businesses that reply to all reviews, vs. just 47% for businesses that don't respond. 

Customers want to feel heard, appreciated, and understood, which is why it's critical to offer fast, friendly responses to online reviews.

retain customers customer retention rate business owner

3. Encourage customers to leave reviews

Feedback provides you with insights about what's working for customers — and what isn't. The more feedback you obtain, the better customer experience you can deliver, enabling you to increase customer retention by improving customer satisfaction.

customer retention company's reputation

Platforms you should monitor for reviews include Google, Yelp, Facebook, Apple Maps, the Better Business Bureau (BBB), and industry-specific review sites like Zocdoc or DealerRater. ResponseScribe aggregates all of your reviews into one dashboard and uses AI to generate personalized responses automatically, eliminating the hassle and tedium of manual review management.

Customer retention strategy #2: Launch a customer loyalty program

Remember, deals were the number one reason why consumers switched brands in 2022. Offering loyalty programs is a great way to simultaneously reward existing customers for their support, while also encouraging future purchases with the promise of additional rewards.

Plus, retention programs have another bonus: not only do they reinforce the loyalty of existing customers, they can also entice new customers into trying out your product or service. Rewarding your customers also helps nurture positive relationships, increasing the likelihood of getting referrals. 

Types of customer loyalty programs

There are four main categories of customer loyalty programs:

  1. Points-based programs, where purchases earn users points that can be exchanged for various rewards
  2. Value-based programs, which are similar to points-based programs but offer rewards for actions other than purchases (such as sign-ups)
  3. Tiered programs, which offer different types of rewards depending on the customer's membership level (such as "Gold" vs. "Platinum")
  4. Subscription programs, which which act like a subscription service and give members exclusive access to products, content, promotions, or other experiences for a monthly or annual fee

Sephora's Beauty Insider program, which lets members use their accumulated points to try out various products, is a perfect example of a points-based loyalty program.

customer purchase valued customers customer expectations

According to McKinsey, "As of 2020, the loyalty program had about 25 million members." 

Ways to reward loyal customers

When implemented effectively, all types of loyalty programs can yield powerful results — which might explain why "Gartner predicts that one in three businesses without a loyalty program today will establish one by 2027."

customer behavior customer retention rate marketing materials

Of course, you don't have to wait until 2027 to implement a customer retention program. Here are some ways you can immediately start rewarding your most loyal customers for their support:

  • Free products with every fifth purchase, with every tenth purchase, for every $300 spent, etc.
  • Exclusive discounts and sales for members
  • Exclusive access to events and/or content
  • Automatic entry into sweepstakes, giveaways, raffles, etc.
  • Sneak peeks and exclusive previews 

Customer retention strategy #3: Provide personalized experiences for your customers  

According to a report by McKinsey, personalization "can reduce customer acquisition costs by as much as 50%, lift revenues by 5% to 15%, and increase marketing ROI by 10% to 30%. Personalization has also been shown to improve performance and provide better customer outcomes."

The report continues, "Companies with faster growth rates derive 40% more of their revenue from personalization than their slower-growing counterparts. McKinsey research also shows that personalized experiences drive up both customer loyalty and a company’s gross sales." 

Meanwhile, research by Zendesk shows that over 90% of consumers would spend more money with a business that delivers personalized experiences compared to a business that doesn't.

Put simply, personalization boosts profits.

Here are some ways your small business can provide personalize experiences for your customers:

  • Use geo-targeting strategies
  • Personalize your responses to customers’ feedback
  • Provide customers with personalized content or product recommendations
  • Communicate with customers in the way that they prefer 

Use geo-targeting

Geo-targeting is a marketing strategy where you tailor your company's advertisements to the target audience's geographic location. The location can be broad, like a country or region, or hyper-specific, like a city or zip code.

Here's how Google explains:

"Geo-targeting increases ad relevancy by selecting creative content to show based on the viewer's geographic location. Using the same geo-lookup technology that powers Google Maps, you can dynamically update an ad's images, text, videos, and more. For example, you may want to highlight a new business location opening in Paris for viewers in that area."

The benefits of geo-targeting include increased sales, increased customer engagement, and increased response rates to advertisements.

To get started targeting ads to geographic locations, check out this Google Support guide featuring step-by-step instructions. 

Personalize review responses

customer retention customer behavior repeat customer preferences

Earlier in this guide, we learned about why it's important to respond to all customer reviews. Now, let's go over some ways to personalize each of your responses:

  • Always use the customer's name in your review response — for example, "Thank you for sharing your review of [ Business Name ], [ Customer Name ]!"
  • Mention details from the review, like what type of meal the customer ordered or the name of the employee who assisted them during their visit — for example, "We're so thrilled to hear how much you enjoyed your burrito, [ Customer Name ]!"
  • Use different wording and comment structures in each of your responses. For example, consider the difference between these two sentences: "Thank you so much for taking the time to share your review with us, [ Customer Name ]!" vs. "Hi [ Customer Name ], thanks for reaching out to our team with your comments." Here are some more examples of ways to thank customers for positive reviews

Offer personalized recommendations

In a McKinsey survey about what consumers wanted from brand interactions, this was one of the most common sentiments expressed by participants: "Give me relevant recommendations I wouldn’t have thought of myself.”

McKinsey explains, "Customers appreciate being recommended products or services that complement what they’ve already browsed or bought," and adds an actionable suggestion: "Brands should keep track of impressions and stop serving ads to customers who haven’t responded."

McKinsey also recommends that businesses "invest in customer data and analytics foundations," such as "algorithms to identify behavior patterns and customer propensity."

Collecting comprehensive data, while still respecting consumer privacy, ensures you're equipped with the information you need to tailor your advertisements and other content. For example, Starbucks uses AI to make personalized food and drink recommendations to customers based on their history and behavior. 

Align with customer preferences

Personalization isn't just about what you say, but how you say it. Whether you're sharing advertisements, newsletters, requests for feedback, or other types of content with your customers, aim to deliver it in a way that aligns with your customers' preferences.

For example, 32% of consumers indicate that email would be their preferred method of being asked to leave feedback, while 28% would be more likely to review a business if asked in person or during a sale, according to BrightLocal data.

Customer retention strategy #4: Provide customers outstanding service and support tools 

There’s a clear and direct relationship between customer service and repeat business. According to research by the Qualtrics XM Institute, “94% of consumers who give a company a ‘very good’ CX (customer experience) rating are likely to purchase more products or services from that company in the future. In comparison, only one in five of those who gave a company a ‘very poor’ CX rating say the same.” 

Additionally, research by Khoros shows that 43% of shoppers "are more likely to buy something from a brand after a good customer service experience."

As you might remember from a little earlier, Salesforce reports 91% of consumers are more likely to stay loyal after a positive customer service experience — and according to HubSpot, that percentage is even higher, with 93% of consumers saying good service would make them consider a repeat purchase.

No matter what statistics you look at, they all paint the same picture: excellent customer service is an integral part of building brand loyalty. In fact, Qualtrics projects that poor customer service is expected to cost businesses roughly $3.7 trillion in avoidable losses in 2024 alone.

Don't miss out on revenue because of negative customer experiences. Let's look at four ways you can improve your customer retention rate by offering top-notch service and support tools:

  1. Build a customer community or hub, like a mobile app or portal on your website
  2. Provide your customers with convenient self-service support tools, like chatbots and help articles
  3. Ensure that customers can easily connect with live agents or representatives for more complex issues or questions
  4. Train your customer service and support teams to focus on friendliness and empathy 

Create an online community

Numerous brands have created customer communities, including Apple, Duolingo, Lego, and Peloton. 

Your customers (or potential customers) can use online communities to chat with each other, ask questions, share images, post reviews, and more — no matter where they're physically located. 

Your business can use the community to share updates, request feedback, answer questions, announce contests or giveaways, spotlight collaborations with other brands, and communicate regularly with customers.

There are various ways to build a customer community. For example, you can add pages or groups to social media networks like Facebook, or create a forum or portal on your own company's website.

For optimal results, ensure that your community is mobile-friendly and take an active role in moderating the content. 

Offer self-service customer support tools

Excellent customer service is about more than just your attitude — it also means giving your customers the features and tools they need to succeed.

And according to IBM, what more than a third of consumers want — 37% — is to have more options for self-service.   

And in a Salesforce study featuring more than 12,000 consumers, 59% of participants said they were already using self-service tools, while another 23% said they were "interested in using" them in the future.

By offering a variety of helpful and intuitive self-service tools, you can ensure that getting support is a convenient, stress-free experience for your customers. If customers feel confident that they can quickly and easily access solutions to their issues, they'll be more likely to return to your business in the future.

Here are a few ways your business can provide self-service tools for your customers and clients:

  • Build a knowledge base containing how-to guides, text articles, and other relevant content
  • Create an FAQ page and/or online help center
  • Feature chatbots on your website that can answer questions or make recommendations
  • Provide a blend of videos, images, text-based resources, and interactive or conversational solutions, so that every customer can find the self-service tool that works best for their issue and preferences 
self service customer support tools examples

Make it easy to connect with live agents

According to a study by Salesforce, “83% of customers expect to engage with someone immediately when contacting a company,” meaning more than four in five shoppers expect immediate support from a live agent or representative.

And according to research by the German division of PwC, “71% of Americans would rather interact with a human than a chatbot or some other automated process.”

While self-service tools are an important piece of the customer support puzzle, it's also crucial to give your customers fast and easy ways to connect with a live agent. 

Set up a dedicated customer support hotline and/or live chat tool, so that help from a real person — not AI or an algorithm — is always just a click or call away for your customers. 

Focus on friendliness and empathy

According to research by PwC, “42% [of customers] would pay more for a friendly, welcoming experience,” while 65% “find a positive experience with a brand to be more influential than great advertising.” 

You can increase your revenue — while simultaneously encouraging customers to return — by ensuring your customer service team always treats shoppers with warmth and courtesy.   

By delivering an exceptional customer experience and prioritizing customer satisfaction, not only can you retain more of your existing customers, but also attract new customers through the positive reputation and reviews that you earn. 

Manage customer feedback the easy way with ResponseScribe

ResponseScribe is an all-in-one review and reputation management service that offers both human-driven and AI-powered solutions for tracking, responding to, and showcasing customer reviews. 

Designed for small businesses with multiple locations, ResponseScribe has use cases for a wide range of industries, including automotive, food and beverage, healthcare, legal, real estate, hospitality, and more. 

Services ResponseScribe offers include:

  • Review monitoring
  • Review responding
  • Review sentiment analysis and business reporting 

Review monitoring on 50+ platforms

ResponseScribe tracks reviews on 50+ platforms and sends you notifications so that you never miss a rating or comment. Our platform pulls your reviews from multiple sources into one dashboard, providing your business with a secure, centralized, organized hub for all of your customer feedback. Websites and apps we track include:

Personalized review responses

ResponseScribe creates personalized responses to your positive, mixed, and negative reviews and ratings on 50+ platforms using your preferred strategy of AI or human writers. 

AI-generated responses are ready within minutes, while human responses are ready in under 24 hours. Your business can view responses before publication, request revisions, and receive text or email alerts when responses and revisions are ready. 

Using ResponseScribe to reply to customer reviews has multiple advantages for your small business, which include: 

  • Saving time on writing, editing, and publishing 
  • Ensuring professionalism and consistency across your responses
  • Boosting customer satisfaction by shortening your average response time 
  • Guaranteeing a response to every review within 24 hours

Data reporting and business insights

ResponseScribe provides your business with comprehensive weekly or monthly reports. By monitoring your online reviews and analyzing review sentiment, you gain actionable insights into what your customers value most. 

Armed with data reporting and review insights, you can deliver a better customer experience, increase customer satisfaction, and earn more repeat business. And at just $29 per month per location with no long-term contracts, ResponseScribe is an affordable option for businesses of every size. 

Responsescribe a tool for small businesses

Ready to improve customer retention and increase revenue? 

Gain insights into what customers want, encourage new customers to try your brand, and build a loyal customer base with ResponseScribe, your all-in-one reputation management platform.

ResponseScribe monitors 50+ sites for customer feedback, provides your business with reporting and analytics, and generates personalized responses to all of your online reviews, making customer relationship management effortless.

Retain more customers and earn more revenue. Get started in minutes with your free trial of ResponseScribe. 

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