This article first appeared on Nett.com.au on April 28, 2011
Author: Louis White

As worrying events unfold around the globe, most people react by becoming increasingly risk averse, which means getting people to try new behaviours can be more difficult. However, that doesn't mean business has to suffer, if you take the right approach.

As people become more conservative, companies have the ideal platform from which to approach existing customers. After all, if these customers have already purchased goods or services from you before, and are happy with the end result, then you have already won their trust. The next step is to get them to increase their spend with you.

Approaching them with a new or improved service or product will be a lot cheaper than selling to new customers. You already have their contact details. Small businesses often make the mistake of thinking that they need to grow and constantly win new customers but in the process ignore the loyal customers they have built up.

Bain and Company, a business-consulting firm, estimates that an improvement of 5% in customer retention can lead to profit improvement of between 25% and 85%. They have also conducted studies showing the direct link between customer retention rate and the average lifetime of a customer. If the customer retention rate is 90%, then the average customer lifetime will be 10 years.

The analogy is simple – the longer you keep a customer the more they will spend with you.

“The biggest mistake small businesses make is spending too much time and resources trying to win new customers rather than concentrating on existing customers,” says Phoebe Netto, managing director of Good Business Consulting. “It is far more effective to sell to existing customers than new ones. Your initial price and service may have won them over but that may not be enough to keep them.”

Growing your small business by retaining existing customers doesn't mean throwing lavish parties and taking them out to lunch every week. It can be a lot simpler than that.

“You need to build relationships with your customers and make sure you maintain them,” says Brian Levine, director at Blinc International.

But keeping customers doesn't always need to be so complicated.

Firstly, make the relationship personal. Secondly, consistently ask questions and listen to the answers. Thirdly, make it easy for them to be a customer by engaging in constant communication and lastly, make your customers proud. Keep them happy and delighted.”

Companies often embark on ambitious customer loyalty programs and now more than ever we are seeing big companies work together, such as Qantas and Woolworths, to enhance the customer experience and expand the amount of points a customer can then eventually receive.

But for small companies it doesn't need to be as elaborate as that. The Footprint Shoe Clinic, which specialises in ensuring you are walking and running in the right shoes through a digital gait assessment upon your arrival, teamed with Endless Rewards to build brand loyalty. Between them they devised the On-Trac rewards club to build customer loyalty.

“We examined five different loyalty programs and went with Endless Rewards because we are a relationship-driven business rather than a sales-driven one. Their philosophy about rewards versus discounts matched ours,” says Andrew Taylor, managing director of Footpoint.

“At Footpoint we do not discount as we don't believe this builds loyalty with our customers. Rather we offer customers our On-Trac rewards club card whereby they receive 10% of each purchase back onto their card each time they purchase an item in store.”

The program has been an almost immediate success since its launch in August last year, with the average spend per transaction for members being 40% higher than for those customers who do not have an On-Trac rewards card.

In addition, the program allows The Footprint Shoe Clinic to send out a courtesy text message to their clients three weeks after the client has bought new shoes to check whether they are happy with their purchase. If they receive a negative response it is followed up with a phone call and the problem is addressed.

“The Footpoint On-Trac card has enabled the business to focus its marketing efforts on retaining and building loyalty with its existing customers,” Neil Joseph, CEO of Endless Rewards, said. “This has resulted in an increase in return business and it has proven to be an excellent way for Footpoint to engage regularly with its repeat customers.”

Increasing your bottom line isn't that hard when you concentrate on the clients you have already secured. It is a cheaper, more effective way of growing your business.

“If you build a relationship with your customers then they will contact you if they have a problem rather than just walk away,” explains Good Business Consulting's Netto. “If you can build a personal relationship and help them understand what you are all about, you are definitely heading in the right direction for your business.”

Mystery Customer Comment:

As the article noted, "But keeping customers doesn't always need to be so complicated." By utilising the Mystery Customer Program, you are able to let staff know what you expect of them and see whether or not they are upkeeping your standards in providing the best service for your customers at all touch points to build up their relationship with your business.