Customer loyalty 101: How small businesses can retain more loyal customers

8 min read
Lauren Licata

UPDATE: This customer loyalty post was originally published on 26 February 2016 and was updated on 27 April 2020.

There’s nothing quite like the rush of seeing new customers walk through your door. But without a strategy to retain these fresh faces, up to 50 percent of new customers will never return to your business. Considering that it costs five to seven times more to acquire a new customer than to retain an existing one, one-time customers, like one-hit wonders (Blue (Da Ba Dee), anyone?) are not very lucrative.

Ignore customer retention and you’re doomed to become a throwback jam on ‘90s night.

So, how do you retain those first-time customers coming through your door? Here are my tried-and-true customer loyalty tips to make sure you never lose another customer.

Offer a digital loyalty program

Here’s the nightmare: A customer walks into your store, makes a purchase and leaves. Now your mind starts racing. Who are they? Why did they choose to come in today? Will they ever come back? If you’re not breaking into a cold sweat visualizing this scenario, you should be.

Forty-eight percent of consumers say that the most critical time to gain their loyalty is when they make their first purchase or begin their service.

Thanks to digital loyalty programs like Belly, small businesses can access technology that large companies like Starbucks, Kohl’s and CVS rely on to build customer relationships.

Offering a digital loyalty program ensures that you can capture customer information the first time a customer visits your business so that you can continue to engage with them after they’ve left.

Make it super simple for customers to sign up by requiring just an email address or phone number. It’s also critical to make sure that the rewards you’re offering are relevant and enticing to your customers. The top two reasons consumers participate in loyalty programs are that they’re easy to understand (81 percent) and the rewards and offers are relevant (75 percent). But in order for your customers to sign up for your loyalty program, they have to know about it! It’s critical that you and your staff clearly pitch your program. Say things like:

  • “It’s free to join our loyalty program, and you’ll get a free cup of coffee after just 5 visits! You can sign up with just your email address.”
  • “We reward our loyal customers with unique experiences! You can get a styling party for you and 5 friends after just 10 purchases!

Provide fun, memorable experiences

Discounts and monetary rewards are great, but to really stand out, consider offering memorable experiences to your loyal customers. In a survey conducted by coalition loyalty program company LoyaltyOne, 95 percent of Canadian consumers polled confirmed that “surprise and delight" experiences (unexpected moments that “wow" shoppers and leave a lasting impression) from retailers and brand owners boost their positive perception of the brand. With 90 percent of the survey's respondents preferring special privileges from the brands they're most loyal to, it’s pretty apparent that these one-of-a-kind, unique moments are what consumers really want.

On top of that, our data at Belly shows that offering a high-point value reward has a positive impact on customer visit frequency. Take Classy Girl Cupcakes in Milwaukee, for example. Last spring, Belly Member Matt Agen visited 85 times in order to earn enough points to get the reward he was after: a tour of the bakery and a private session with the bake shop’s head decorator. Classy Girl Cupcakes even made a video about Matt’s unique experience.

Another way to retain more loyal customers, is to add some fun to the mix. In a COLLOQUY-sponsored nationwide survey of 1,000 U.S. consumers, 34 percent of millennials said the word that best describes their participation in a customer reward program is “fun.”

If you can deliver on the promise of fun, you’ll captivate this demographic of shoppers.

A little over one-quarter of the millennials surveyed (27 percent) continued their participation in a loyalty program because it featured a competitive game, or a social element such as badges, leaderboards or communities. For one tropical smoothie franchise, offering surprise rewards has also decreased time between customer visits by 50 percent! Through their loyalty program, they were able to set the odds of winning a free smoothie to 1 in 50 check-ins. They then promoted their game to their loyal customers via email. Customers visited more often as they tried to win that free smoothie!

Hook new customers with free samples

You know when you go to Costco and stroll the aisles for lunch — I mean, free samples? There’s a reason Costco invests so heavily in sampling. According to Giovanni DeMeo of Interactions, the company that handles Costco’s sampling program, “When we compare it to other in-store mediums … in-store product demonstration has the highest [sales] lift.”

Financially, retailers love giving free samples because they can boost sales by as much as 2,000 percent. Behaviorally, samples can influence consumers to habitually buy things they never used to purchase.

Last year, Costco published some figures in regards to the success of its sampling program. In the past year, beer samples lifted sales by 71 percent on average, and samples of frozen pizza increased sales by 600 percent. Sampling has proven to be effective for both short-term sales boosts and customer loyalty to stores and brands over longer periods of time.

Sometimes, consumers come to their decisions to buy or not based on factors other than the taste, quality, or price. Sometimes, they decide to buy simply because they’ve gotten something for free and feel obligated to pay the company back.

Offering free samples of your product gives you an opportunity to introduce new customers to your business and what you have to offer.

Does your customer service stand out? Maybe it’s the cool atmosphere or signature pizza roll that keep your customers coming back time and time again. Remember that a customer who comes in for a free sample is experiencing your business for the first time, so making a great first impression is key. Get them through the door and signed up for your loyalty program!

Provide your customers with exclusive, personalized offers

Engaged consumers buy 90-percent more frequently, spend 60-percent more per transaction and are five times more likely to indicate that yours is the only brand they would purchase in the future. All of these factors lead to engaged customers delivering three times the value to the brand over the course of a year.

How are you engaging with your customers? With email marketing, mobile push notifications, and text messaging, you can alert your customers of sales, special events and promotional offers happening at your business. Plus, with the data collected from your loyalty program, you can segment your customers by their buying history and engage with those most loyal to your business.

For example, let’s say you want first-time customers to become regulars. By sending them an exclusive offer which entices them to return, you’re setting the tone for a long-term relationship. In an effort to retain new customers and keep them coming back more frequently, YoFresh frozen yogurt sends automated coupons to first-time customers, incentivizing them to return within two weeks of their first visit. Through the power of automated marketing, customers who received the YoFresh email visited an average of 45 percent more in a 30-day period, and came back twice as fast — driving 178 visits to the store!

The stats don’t lie

I could rattle off even more facts about the importance of retaining loyal customers, like how a repeat customer spends 67-percent more than a new one or how a 5-percent increase in customer loyalty can result in more than a 25-percent increase in revenue.

Or I could let you follow in the footsteps of businesses that have stood the test of time.

Street Fight surveyed small business owners in the U.S. about their marketing priorities. For those in their first year, 80 percent of SMB merchants said customer acquisition was their main priority and only 8 percent said customer retention was a priority. But, the longer the business had been around, the more emphasis they placed on retaining their current customer base. For those businesses fortunate enough to be in their 10th year, almost half listed retaining customers as their No. 1 priority.

Go for the classics, not a one-hit wonder.

If you have any other tips for retaining loyal customers, I’d love to hear them. Leave a comment below!