Buried Treasure: Why Customer Retention is Hidden Gold

We spend a lot of time, money, and energy chasing brand new customers, which is akin to a business dating app where we are endlessly swiping right on strangers. Meanwhile, we're ignoring the people who already know us and love us (or at least, they like us enough to have bought something once). The real secret to growing your business isn't just about finding new fish; it's about keeping the ones who are already in the boat. Focusing on customer retention is less like a frantic fishing trip and more like a “happy hour” with all your best friends. They’re already here, and they're ready to spend.

The Facts Don't Lie: A Profitable Choice

As a guest panelist during a marketing webinar, I was explaining how crucial customer retention is when an audience member, looking utterly over-caffeinated and defeated, insisted she was too busy to even think about it. I saw her thousand-yard stare and knew exactly what she meant. As a busy single parent and small business owner myself, I've been there. My heart went out to her.

Instead of just offering advice publicly, I privately scheduled a one-on-one meeting. We pulled up a spreadsheet, and I asked her a simple question: "If you spent just 15 minutes a day on automated customer outreach; a few texts or emails each day, do you think you could bring in a couple of repeat customers a week?"

She agreed that 8 to 10 regular customers a month was a reasonable number. I explained that statistically, repeat customers spend more than new customers…a lot more. Her average sale was $300. According to the numbers, her repeat customers’ average sale would be closer to $500.  When we calculated how much a handful of repeat customers could add to her bottom line; an extra $20,000 to $25,000 a year on a $50,000 net income, I saw a glimmer of hope in her tired, overworked eyes. She looked like she'd just found the Holy Grail of spreadsheets and finally understood that making time for customer retention wasn't a choice; it was a necessity, a very profitable necessity. 

The data on customer retention isn't just compelling; it's a cold, hard, slap in the face with a money-filled glove. Here are some facts regarding the profitability of marketing consistently to your existing customers.

• It's Cheaper: Acquiring a new customer can cost anywhere from five to seven times more than retaining an existing one. This is because you've already invested in the marketing, sales, and onboarding processes for your current customer base.

• They Spend More: Loyal, repeat customers are not only more likely to make future purchases, but they also tend to spend more.  Some studies show that existing customers spend an average of 67% more than new customers. Over time, this consistent spending contributes significantly to a customer's lifetime value (CLV), a key metric for long-term profitability.

• Increased Profitability: An article by business author Amy Gallo in the Harvard Business Review reported that a mere 5% increase in customer retention can lead to a staggering 25% to 95% increase in profits.  This is a testament to the power of a loyal customer base and the efficiency of a retention-focused model.

• They Become Your Best Marketers: Happy customers become brand advocates. They are more likely to refer your business to friends, family, and colleagues, and their word-of-mouth marketing is highly valuable and often more trusted than traditional advertising.  They are also five times more likely to overlook a delay or mistake, highlighting the strength of the emotional connection they have with your brand.

• The 80/20 Rule in Action: The Pareto Principle often applies to customer bases, with statistics suggesting that 80% of a company's future revenue will come from just 20% of its existing customers. This underscores the critical need to identify and nurture your most loyal patrons.

Ideas for Ongoing Marketing and Engagement

So, how do you make customer retention a core part of your business strategy? It's all about proactive and consistent engagement that goes beyond the initial transaction.

1. Personalize, Personalize, Personalize

Customers today expect a tailored experience. Use data from past orders to understand their preferences, purchase history, and behavior. Then, use that information to create personalized communications and offers.

• Targeted Emails: Instead of a generic blast, send emails with product and art recommendations based on their past purchases and preferences.

• Personalized Onboarding: Tailor the initial experience for new customers to ensure they are successful with your products and services from day one. Put a gold star on the workorder of a new customer, so you can ensure that everything goes perfectly, and they have a positive experience with your shop.

• Address Them by Name: Simple gestures, like using their first name in emails or other communication can go a long way in making them feel valued. Most POS systems have a place for customer notes in their databases. Write down key words about their interests, pets, children, etc., to give a more personalized experience when they come back into your shop. They will see you not only as a framer but as a friend.

2. Master Customer Service and Support

Exceptional customer service is the backbone of retention. It's not just about resolving issues; it's about building trust and demonstrating that you care.

• Be Proactive: Anticipate customer needs and potential problems. For example, if you have a customer who is concerned about timely delivery, you can send proactive updates about their artwork’s journey to prevent anxiety.

• Offer Omnichannel Support: Make it easy for customers to reach you on their preferred channels, whether it's through phone, email, live chat, or social media.

• Use Feedback to Improve: Actively solicit feedback through surveys and polls. Show customers that you are listening by making tangible changes based on their suggestions.

3. Create a Sense of Community

Engage customers by fostering a community around your shop. This creates an emotional connection that extends beyond the product itself.

• Online Forums or Groups: Create a space where customers can connect with each other, share tips, and get support.  This could be something like, “Art Happenings in Our Town,” or “Supporting Local Art” as a Facebook or Instagram page.

• Host Events: As an independent framer or gallery, it’s important to establish yourself as the authority in your area. Virtual or in-person, events like webinars, workshops, or classes can bring your customers together and deepen their relationship with your brand.

• Showcase Customer Stories: Nearly every piece of art brought into your shop has a story. Feature your customers in your marketing. Write heartwarming social media posts or customer spotlights that make them the heroes.

4. Build a Loyalty Program That Rewards

Loyalty programs are a classic, effective way to incentivize repeat business and show appreciation.

• Tiered Rewards: Create a tiered system where customers unlock greater perks and benefits as they spend more. This can include exclusive discounts, early access to new products, or free shipping.

• Gamification: Use a point system, badges, or punch cards to make engaging with your brand a fun and rewarding experience.

• Referral Programs: Encourage existing customers to spread the word by rewarding both them and the new customer they bring in. I sent any customer who referred a friend a $20 coupon to apply on their next purchase. My referrals went up and my existing customers were pleased with their bonus.

Obviously, acquiring new customers is a necessary part of growth, however a business's long-term success is fundamentally tied to its ability to retain its existing customer base.  By prioritizing engagement, delivering value, and building genuine relationships, you transform your customers from mere transactions into your most profitable and powerful brand advocates. And sometimes, they end up being friends.