Learn About Customer Retention Rates and How Small Businesses Keep Customers Coming Back for More
If you run a small business or consulting firm, huge profit margins might be a luxury.
We know it’s not easy running a small business. Between accounting, hiring, marketing and sales, it seems like everything is on your plate and killer profits are out of reach.
That’s why customer retention for your small business is so important.
A lot of marketing efforts focus on customer acquisition—but once a client converts, how long do they stick with you? Customer retention is all about keeping existing customers coming back for more—and it’s five times cheaper than pushing new people through your pipeline.
In this post, we’re going to discuss ten customer retention strategies to improve your customer retention rate and scale your small business!
How a Small Business Can Improve Customer Retention
Small businesses improve customer retention by implementing engagement & retention strategies and tracking their customer retention rate to monitor the success—or failure—of that strategy.
When you know what works and what doesn’t, you can optimize tactics to turn new customers into return customers or satisfied clients into raving fans who reinvest in your services & refer others to you.
What is your customer retention rate?
Maybe you already track churned customers (the ones who stop buying) and have efforts in place to bring them back. But what about your customer retention rate?
You can calculate customer retention with the formula below:
(# of existing customers - new customers acquired) ÷ # of existing customers
Customer retention rate measures what percentage of new clients stay after they’re no longer “new.”
Knowing your customer retention rate means you can understand your progress in delivering awesome customer service to satisfy clients. You can set goals to increase your rate with solid retention strategies.
What Is a Good Customer Retention Rate for Small Businesses?
How do you know if your retention rate is up to par?
According to recent data from CustomerGauge, the average customer retention rate for all industries is 72.5%.
This means that 72.5% of all new clients stay for a minimum period of time to provide recurring revenue for the business or they come back to make additional purchases if the business only offers one-time sales.
Below is the full list of customer retention rates by industry:
- Energy/Utilities: 89%
- IT Services: 88%
- Computer Software: 86%
- Industry Services: 83%
- Financial Services: 81%
- Professional Services: 73%
- Telecommunications: 69%
- Manufacturing: 65%
- Logistics: 60%
- Consumer Packaged Goods: 60%
- Wholesale: 44%
What can we glean? Service businesses, like financial advisors, marketing agencies, business coaches, etc., all sit above average but remain outside the top-3.
Considering these types of businesses usually offer ongoing services after an initial consultation, it’s in their best interest to optimize their customer retention rate as much as possible.
But what customer retention strategies are there to help your business grow recurring revenue and increase your retention rate?
Below we break down how small businesses can improve customer retention.
10 Small Business Customer Retention Strategies
- Customer Service
- Responding to Negative Reviews
- Onboarding Experience
- Self-Service Help
- Create Community
- Build Trust on LinkedIn
- Feedback Loop
- Loyalty
- Customer Calendar
- Personalization
1. Customer Service
Let’s start with the obvious—customer service. Responding to questions, complaints and feedback from customers is the most basic part of customer experience, but also the most crucial.
As a small business, you have an advantage over larger corporations. At this stage, you have the ability to provide friendly, personalized responses almost as if you’re assisting a neighbor or friend.
To improve customer retention, make sure you address customer concerns earnestly, putting the customer first. If you make a mistake, own up to it. If the customer is unsatisfied with something, apologize and find a solution.
Problems happen, but customers care about how you respond. If your customer is happy with your solution, they’ll trust you a lot more.
Customers also appreciate a timely response. If you don’t have the resources available to respond quickly, set up an automated reply thanking them for reaching out and indicating when they can expect a response. This sets expectations so they don't feel ignored when you or your team are backlogged.
2. Responding to Negative Reviews
Every business gets negative reviews sometimes—but how can you convert a bad experience into a lifelong customer relationship?
You build trust with customers by rectifying a problem. A bad review is no exception.
Don’t wait for a customer complaint to land in your inbox. Instead, respond to the review with an apology and offer to find a solution. Then reach out to them (or ask them to contact you if there’s no contact info attached to the review).
Proactively apologizing builds long-term relationships with customers. A bad review is also a great opportunity to identify any bugs, weaknesses or other points of dissatisfaction with your product or service.
Make sure to thank the customer for highlighting the issue, offer a solution and, if it makes sense, tell them what changes you’ll make to prevent it from happening again.
3. Onboarding Experience
Have you ever been thrown into a new task without adequate information and been left to sink or swim? It’s frustrating, to say the least. Don’t let your onboarding process feel that way.
If your small business offers a product or service with a learning curve, ensure you have adequate resources available during onboarding to support new customers.
Support can include knowledgeable support for questions, personal demos, adequate self-service resources and a smooth process for any information intake.
4. Self-Service Help
Building a strong help center is a great way to support your customers without making them wait for a reply or go back and forth with an agent.
At the most basic level, you should have an FAQ section on your website addressing common inquiries.
If you have resources available to make more content, it will strengthen your overall customer experience. Videos, infographics and blog articles support customer goals both with your product specifically and within your industry as a whole to encourage clients to stay with you. And yes, this blog post is an example of industry support—how meta.
5. Create Community
People love engaging with online communities—it’s one of the reasons they might opt for a small business over a larger company, because small businesses can more intimately create that “community feel.”
When it comes to community marketing, you want to look both inwards and out.
Let’s start with looking in. Events, webinars, customer forums etc. on social platforms all build community around your product by encouraging engagement between your and your customers.
You can also create a sense of community by looking outwards. Perhaps there are opportunities to donate to or volunteer with relevant organizations in your industry. For example, if you offer financial services, you could support an organization that helps teach financial literacy to underserved communities. Your support can also reflect your company values like diversity or environmentalism.
6. Build Trust on LinkedIn
LinkedIn is a great place to get in touch with clients, become or remain visible to them and help with retention.
If social selling is part of your sales strategy, building trust starts with outreach. Establishing positive interactions from the start is a hallmark in any LinkedIn sales strategy but isn’t just part of acquisition—customers remember if their initial interactions with you were positive making them more likely to stick with you.
Beyond your sales strategy, you can use LinkedIn to engage with posts about your business, update people on new features & products, discuss topics relevant to your industry and ask for feedback. It can be as simple as publishing a poll about what new feature your customers want to see first to help prioritize next steps.
Fostering positive engagements with customers by leveraging social media and using LinkedIn hacks will strengthen your relationship with them, encouraging them to stay with you..
7. Feedback Loop
This isn’t a therapy blog, but we are talking about relationships (the business kind). It’s psychology 101 that we all want to feel heard. Creating a feedback loop is a great customer retention strategy for small businesses, since you can quickly take that information and translate it into meaningful change.
Many businesses know to reach out within days of activating a new customer to see how they’re enjoying their experience. But not every business continues those checkins over months and years.
What are the key times to reach out to customers:
- When you’ve just acquired a new customer, ask about their experience with your sales team. A happy customer during the selling phase is a happier customer long-term.
- A few days after the sale, ask about their experience. This gives you an early opportunity to address anything that might be going wrong to solve any issues.
- When you release a new feature or service the customer uses, ask them for feedback. Ensure there are no bugs and get feedback on the overall experience.
- Check in periodically—annually, bi-annually or quarterly depending on how frequently customers use your product or service. The more involved customers are, the more they’ll know what’s working and what’s not.
Typeform is a great tool for sending feedback surveys, and offers free feedback survey templates to help you get started.
The key to turning feedback into retention is in the response. Thank customers for their feedback, then update them if/when it’s implemented. Regular touchpoints with customers is integral to retention strategies for small business because you’ll leave people feeling heard and build long-term relationships.
8. Loyalty
A customer loyalty program incentivizes customers to stay with you at a significantly reduced cost compared to acquisition.
But how do small businesses introduce a loyalty model to a subscription product or a loyalty program for a service business?
It definitely doesn’t look like a card you scan at checkout. Instead, consider referral programs, tiered subscriptions or service packages. Your best customers can get a better value by committing to more benefits or a longer contract.
Small businesses can also retain customers through exclusive offers. Often businesses focus on introductory offers to new services—leaving existing customers no incentive to stay next time your competition puts out a deal.
Exclusive offers for relevant add-ons, new tools/features or customer anniversaries help customers feel valued. Plus, you can upsell a new product or service to increase not only retention but the overall lifetime value of the customer.
9. Customer Calendar
Customer calendars in a client communication schedule are a great tactic for customer retention. Most emails sent on a customer calendar will be standardized followups triggered according to the activity (three days after purchase, one month after purchase, monthly newsletters, etc).
Also add in emails targeted to the user, such as a birthday message or about an add-on that complements the customer’s purchase.
These strategically sent emails are an easy way for small businesses to continuously engage their clients using a simple CRM service.
10. Personalization
Customers don’t want to engage with messaging that isn’t relevant to them or their goals. But through personalization, well-targeted messaging can increase retention.
Those targeted messages about complementary products/services we mentioned above are a great way to add value for customers to keep them longer.
You can also let customers know when they’ve used up 80% of their credits for a plan they’re on, when their subscription is about to expire or when it’s about time for them to use your service again.
Improve Customer Retention With Sales Enablement
For the best ROI, you need to be providing customers with the best value and experience possible throughout the entire customer journey.
Winning over new customers with tips from our LinkedIn lead-generation guide is a great start to a happy customer relationship—but it’s just the beginning. Retention takes continuous effort and investment.
But with a strong customer experience (like customer service, onboarding and self-service options), positive customer interactions (from a good sales experience at the start to continuous feedback loops) and well-targeted messaging, you can increase the lifetime value of customers and start growing.
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