October 21, 2014 Business Development en_US A mere 5 percent increase in customer retention can translate to a bump in profits of between 25 and 95 percent. Inspire your customers to keep coming back. https://quickbooks.intuit.com/cas/dam/IMAGE/A5ZaNHn24/1b41c0491538d61ba89cf52ce918e1af.jpg https://quickbooks.intuit.com/r/business-development/keep-customers-boost-profits How to Boost Profits by Retaining Customers
Business Development

How to Boost Profits by Retaining Customers

By Katherine Gustafson October 21, 2014

Customer retention is a bit of a holy grail for small-business owners. A study done ten years ago by Bain and Company and Harvard Business School showed that a mere 5 percent increase in customer retention can translate to a bump in profits of between 25 and 95 percent.

An updated version of the study looking at e-commerce found the same promise of profit through customer loyalty. However, while the cost to acquire new customers is even higher for online businesses, the rate of return from keeping them is even better.

“The evidence indicates, in fact, that web customers tend to consolidate their purchases with one primary supplier, to the extent that purchasing from the supplier’s site becomes part of their daily routine,” the study’s authors write.

Loyal customers also have the advantage of being rich sources of referrals, both for brick-and-mortar stores and online outfits. Referrals are an inexpensive and easy way to acquire new customers, who can otherwise be difficult and costly to attract.

The study’s takeaway for both traditional and e-commerce retailers — that “you cannot generate superior long-term profits unless you achieve superior customer loyalty” — begs for some tips on how to inspire your customers to keep coming back. Here are some ideas:

Make Your Customers Feel Good

The late Maya Angelou said, “I’ve learned that people will forget what you said, people will forget what you did, but people will never forget how you made them feel.” According to SCORE, a customer’s perception of how he or she is being treated comprises 70 percent of his or her satisfaction with a shopping experience.

Do Small Things to Make Your Customers’ Day

Help Scout calls this the “frugal wow.” These are things that make your customers’ life easier or more pleasant but don’t cost your business a lot. Offer a chat window on your website to answers shoppers’ questions. Help take customers’ purchases to the car. Have stickers for kids — a tiny thing like that can turn a harried mom into an avid fan.

Fix Customers’ Problems

If you ensure that your customers are happy, no matter what, chances are they’ll think of you first next time they shop. Resolve complaints promptly and with exceptional courtesy. There’s a reason Zappos offers a three-day boot camp that teaches other businesses about the online clothing company’s famously effective customer-focused culture.

Create a Positive Environment

Customers want to like where they shop; if they do, they’re sure to return. Cultivating a positive environment for customers and a pleasant workplace for employees is one of the best ways to keep everyone happy. Shape a company culture that values each employee’s contribution and makes the workday enjoyable, and your fans will keep coming back.

Be Real

Especially when engaging in social media, talk to your customers like people talking to other people. Avoid sounding impersonal or corporate, or addressing your customers only as revenue sources. With few exceptions (mortuary services, perhaps), your customers want you to be approachable, fun, funny, happy, and maybe even cool. How else could Denny’s get 117,000 eager followers on Twitter?

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Katherine Gustafson is a freelance writer based in Seattle, Washington. Read more