Customer Retention & the SME

The ideal match

Any business – big or small – increases its turnover in 4 ways:

1.    Gaining a new customer

2.    Getting them to buy again

3.    Increasing the frequency of transactions per customer (getting them to buy more often)

4.    Increasing the value of purchases or the range across which such purchases are spread. For example, getting a customer to buy a product and then its accessories at a later stage.

This means that three out of four promotional or growth opportunities involve effective customer retention. Yet, where do most of us focus our promotional effort and money? On attracting new customers.

It makes no sense, yet far too many of us are guilty of this. Everyone knows that repeat customers spend a great deal more with us than new ones – the average is around 67% – and compared to a large business, the SME is in an ideal position to make the most of this growth opportunity. As owners or managers we are privileged to have far more opportunities to interact with our customers and staff than our big business colleagues. We can implement actions rapidly and react faster when things go awry.

A satisfied customer can work for your business in so many positive ways. They can promote you via word-of-mouth referrals and on their social and professional networks, thereby exposing your business to a much wider range of prospects. They’ll also be active on your own social media platforms.

Not only do our existing customers offer the largest scope for boosting our business, they are also the most cost-effective group to promote to because:

•      They have already proved their willingness, ability and authority to purchase. We don’t have to spend as much promotional money just to establish whether they are worthwhile prospects.

•      They are already familiar with our products and services. This means a reduced selling task. Why spend money advertising to them about how great our products or services are? We should rather use the money to get them to buy more frequently.

•      They are familiar with our business, what it stands for, its location and purchasing environment. We don’t have to use expensive advertising spelling this out to them.

•      They are familiar with our staff. Provided the latter are competent and friendly, there’s less need to sell that aspect as well.

•      They are familiar with us or our management team. If a good relationship exists, the selling task is easier. Remember that face-to-face selling is not merely the most effective promotional method, it’s also the most expensive!

Unfortunately, these factors are also the basis for an old business truth which goes: Your customers are your competitors’ best prospects!

Why?

•      Because the product or service has already been “sold” – it is known that the customer is willing to purchase

•      It is known that the customer has the necessary authority and financial means to make such a purchasing decision

•      They need less selling and promotional effort than a cold prospect. All our opposition has to do is to convince our customers that their business is the better place to buy from.

That’s why we dare not refrain from promoting to and communicating with our existing customers, but we should communicate in a different manner – in ways which will make them feel “special”.

The really great thing is that we don’t have to get bogged down by too much theory and complicated retention programmes like the big guys. Customer Retention is little more than applying common sense principles and putting in a bit of effort. It must be an attitude instilled from the top down to the lowliest staff position.

We need to nurture our relationship with our customers, we must get to know their individual preferences and interests so that we can communicate with them more effectively.

Regular communication makes it easier for us to sell to them in the future, because they will have become used to our acknowledgement of their custom.

With electronic methods staying in touch is quick, simple and inexpensive. At the very least we must ask all our customers for their email address and whether they would mind receiving information from us. Businesses which have a client rather than a customer interaction (e.g. a beauty salon or a Bed & Breakfast establishment) are in an ideal situation to do this, but virtually any retail business can and should give it a try. Have registration sheets gummed into pad and place them at sales tills

Any excuse should be used to communicate with them without any direct selling, and some ways of staying in touch are:

•  Following up on a sale. A simple “thank you for your custom” approach is always appreciated. It stimulates positive word-of-mouth testimonials and is a good way to commence an ongoing communication relationship.

•  Enquire whether a product or service was to their satisfaction.

•  Newsletters about your business, its environment, or containing articles on your specific industry. A B&B could send out a newsletter reporting on past and forthcoming events in their area.

•  Keeping them informed of changes or improvements to your products, business, or its services. A direct message lets you give far more detail than a normal advertisement. Plus, you won’t be paying to talk to people who have no interest in your message.

•  Letting them know in advance of any special offers you have planned.

•  Keeping them informed of any address or contact changes.

•  Keeping them informed about anything that might affect or interest them, or that enhances the image of your business. Pavements being mended; easier parking, extended trading hours, new facilities.

•  Try to be aware of personal events regarding your customers. Weddings, births, promotions – anything that can act as an excuse to make contact. Add the information to your database.

•  If you provide a physical product, print small message cards which can be inserted into your packaging. These can be  items such as a discount on future purchases, free samples of other products, gifts, information leaflets – anything which might create a positive response and cause the customer to return to your place of business. The packaging has already been paid for, so use it as a medium for communication.

•  Consider customer reward programmes where you offer something free after a number of purchases. Have Reward/Loyalty Cards professionally printed for this purpose.

Yes, it does take a bit of effort, but if done correctly the results make it worth while, because: Repeat customers are our lifeblood.

A good example of how customer communications can stand you in good stead is a situation where your suppliers advise that a new or revised product range is to be launched in the near future. The good news is that during the first month of the launch period, the price will be the same as the product it replaces. The bad news? Stocks will be in short supply.

If you placed an advertisement in a newspaper, the chances are you’ll be sold out pretty quickly. That’s fine … till a long-standing customer walks in and wants the product. Now he has to wait — like any other new prospect — till you receive additional stock at the higher price! It’s certainly not going to make him feel special.

A better way would be to have the advert prepared well in advance (you still need to announce the new product to the broad market) and then get copies printed. Mail or email them to your customers, along with a letter explaining that you expect a rush at launch time and that you’d like them to receive the first chance to purchase the new product. Put a time limit on their reacting to your advance notice … If they place their order prior to the launch date, you guarantee to supply them the product at the launch price — even if other customers take up all your stock and there’s a waiting period.

Apart from letting your customers know you always have their interests in mind, early orders will stand you in good stead with your supplier. It demonstrates your commitment to the product and could lead to your receiving an additional allocation.

Use your customers

They’re our greatest assets – so why not make full use of them? Our existing customers provide a great way to attract new ones – simply by making use of them in our marketing. It shouldn’t be approached as a “one-way street”, but rather as an opportunity for both of you to benefit. By including them in your promotions you can help to build their business and enhance your relationship with them.

Regularly ask them if they have any success stories or events they’re prepared to share with your other customers – most times they’ll be more than willing to participate. It makes them feel important and appreciated and could even attract new prospects to you if their own customers become aware of this. Spread the word in your newsletters, whether they are printed, emailed, or are online as part of your web site. Include a photo if you can, and tell the story from the customer’s point of view.

Something which is often overlooked is sharing your customers with others. Think about allied businesses who would appreciate networking and be prepared to reciprocate, thereby bringing new business into the fold. Present it to your customers as a “favour” – that you are sure they will benefit by being introduced to these suppliers.

You’ve worked hard for your customers, so handle it correctly and get them to work for you too.

All photos and artwork used in my articles are fully licensed and were purchased from stock photo sites such as Dollarphoto, Fotolia, Adobe Stock, Depositphotos.

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