Marketing research has shown that it costs as much as three to five times more for businesses to acquire a new customer than to sell to an existing customer. For this reason, it's important to retain customer loyalty for a business to thrive. However, many small companies have a short customer life cycle. They are failing to retain their customers and are losing their customers to competitors. Here are five reasons why this is happening.
Reason #1: They Don't Understand Their Customers
Many small companies simply don't understand their customers. They assume what their customers want and don't understand the problems their customers are having with their business. They simply don't have an effective way to collect feedback from their customers. In reality, all small businesses need to do is build a survey and give customers a strong reason to provide feedback.
For example, Burger King
Reason #2: They Don't Have a Unique Selling Proposition
Another big reason why small businesses and companies fail to retain customer loyalty is due to not having a unique selling proposition. Many businesses simply don't have any kind of unique marketing advantage or customer benefits. As a result, they are seen as a commodity in the customer's eyes and their customers. Their customers simply shop based on price and usually go with cheaper competitors.
It's essential to develop a unique selling proposition to differentiate yourself from the competition. Think about what your business specializes in and what unique benefits you can offer customers. For example, Walmart focuses on everyday rock bottom prices while GEICO allows you to save 15% or more in 15 minutes. You must also communicate this in your marketing and branding in order to reach your customers and give them the incentive to stay with your business.
Reason #3: Not Focusing on the Customer Experience
In order to get your customers to stick with you, you must work on improving and optimizing the customer experience. There are many things that you can do improve customer experience from teaching customers how to use your products/services after the sale, providing great follow-up content, offering unique experiences that tie them to your brand, to simply delivering outstanding customers support.
One thing to note is that the customer experience is quantifiable. CRM analytics is the key to loyalty initiatives. It allows you to look into demographic and behavioral insight so that you can segment your customers appropriately and offer the right kind of experience.
Reason #4: Offering the Wrong Products and Services
A big mistake that many small businesses make is offering the wrong products or services to their customers. Small businesses often have to scramble with creating multiple products or services to maximize profits from their customers. In this scramble, they make the mistake of assuming that a customer would be interested in a specific product or service.
In order to get customers to come back, you have to make sure you offer products and services that they're actually interested in and want. The easy way to figure this out is to look at direct competitors and see which of their products and services are succeeding. Then, you can take this data and execute it in your own business. Of course, a survey will help with gathering the information you need to create the right products and services to offer as well.
Reason #5: Not Taking the Initiative
Small businesses also need to take the initiative in creating customer loyalty. They need to do things like creating unique customer experiences, building campaigns to tie customers to their brand and rewarding repeat customers with loyalty programs. Loyalty programs, in particular, have been proven to be one of the most effective ways to bring customers back.
Many surveys and statistics prove that initiatives like loyalty programs are effective. Social Annex has compiled a great collection on the effectiveness of loyalty programs. One survey shows that 87% of shoppers want loyalty programs. Another one shows that 68% of millennials wouldn't be stick with a brand that didn't offer a loyalty program. There are more surveys and studies that should make you want to start a loyalty program no matter how simple the structure is.
In conclusion, small businesses need to do a lot more to retain their customers' loyalty. They need to conduct customer research, differentiate themselves, improve the customer experience, make the right offers and be proactive with their marketing initiatives. Without the right customers’ loyalty strategy, the life of their business is at risk.
Kate Lincoln is a Senior Content Editor at Customer Survey Assist with a great interest in business, customer motivation and engagement. She helps companies connect with their customers through different channels of correspondence, both online and offline. Kate has graduated from the University of Suffolk in Boston, Business Analytics program.