Start-up businesses need to retain customers as much as they need to attract new ones. While new customers are indispensable in creating new business for your company, existing customers are just as important. Given that these buyers are already familiar with your products, the only challenge left for you is to give them more reasons to stay. Customer retention, however, is a real challenge. In a study done by Brian Woolf, a customer loyalty expert, between 95 to 96 percent of new customers are likely to leave a brand or business by the end of one year. When it comes to creating brand recognition for your business, therefore, customer retention is highly crucial.
The Importance of Customer Retention Rate
Customer retention rate is a measure of how well your business is able to retain existing customers. According to studies, a company with a 70 percent retention rate will have lost as many as two to three times more customers than a company with a 90 percent retention rate within a period of 5 years. As a small business looking forward to more growth and market expansion in the future, you need to keep your customers from defecting. A promotional gift card system can keep your customers in place and helps to create loyal customers in the long run.
Moreover, 20 percent of your customers translate to approximately 80 percent of your total sales, a concept better known in the business world as the 80/20 rule. This customer-to-sales relationship is even more critical for small businesses and start-ups that have yet to build and promote brand awareness.
3 Categories of Small Business Customers
According to marketing and promotions researchers, small business customers tend to fall into 3 categories. These categories are Satisfied Customers, Dissatisfied Customers, and Loyal Customers. Satisfied customers are good, but given that they are not necessarily loyal to your brand they can be easily swayed over by your competition. Dissatisfied customers, on the other hand, are likely to leave your business without so much as a word of complaint. Finally, loyal customers are those customers who have been impressed by your product or service. These people are willing to serve as unpaid brand advocates of your brand, spreading news about your business through word-of-mouth marketing.
To transform satisfied customers into loyal customers — and even win back dissatisfied customers — you can plan an incentive or promotions program. Through bulk gift cards or wholesale gift cards that offer a reward to your frequent customers or a tie-in gift for every purchase, you are engaging your customers and creating brand awareness as well.
Most small businesses feel the pressure to establish themselves in a cutthroat market of big industry players. Established companies continue to thrive because they have a long list of loyal clients who keep doing repeat business with them. A customer retention plan that includes gift card promotions or rebate promotion as incentives helps these start-ups to retain their best customers.
Planning to execute an incentive program for customer retention purposes? Contact us at Mpell Promotions today to see how you can make promotions work best for your business.