Business owner running a business

If you own a small business, you know that getting customers through the door is only half the battle. You have to provide an experience that keeps them coming back, because customer retention is a crucial aspect of small business success.

What is customer retention?

Customer retention is a business’s ability to keep customers quarter after quarter. While customer acquisition is a focal point of business strategy, keeping up a strong retention rate is key to growing in the long run. For example, imagine you start with 100 customers, gain 100 customers every quarter, but also lose 80 over the same time. You might be raking in the new business, but you’re losing it so fast your growth can barely keep up, even with 20 customers gained per quarter. View this same scenario through the customer retention equation. Your retention rate is:

(# customers at end of period - # acquired during period) x 100

# customers at start of period

Considering the above equation, your retention rate would only be 20 percent. It’s better than nothing, but it’s going to take a long time for your customer base to see significant growth.1

How to calculate churn rate

Customer churn rate is the rate at which a business loses customers over time. This can equate to people unsubscribing, going elsewhere for a product or service, or otherwise deciding to stop doing a business for any other reason. Your customer churn rate is:

(# customers at start of period - # customers at end of period)

# customers at start of period

The higher your churn rate, the more customers you’re losing. It follows that every business should try to keep its churn rate as low as possible.2

10 tips for customer retention

Check out the list below for the top 10 customer retention strategies and tips to help your small business create a loyal customer base.

1. Customer service

Every successful small business owner knows customer service is massively important. The better the experience you offer your customers, the more likely they are to come back. This often equates to doing the little things – smiling, listening to customers, and showing you care by addressing any and all concerns.

2. Empower employees

Good leaders don’t just lead, they empower others to succeed! Get to know your employees and their strengths. Give support where it’s needed and take a step back where it’s not. When you let your team members play to their strengths, your whole business benefits. Give your employees the authority to make decisions that can help your customers. Happy employees make for happy customers.

3. Say "thank you"

You'd be amazed at the long-lasting impact of a simple "thank you." Taking this extra step can make your business stand out.

4. Resolve problems

Even the largest stumbling blocks can become stepping stones, if responded to correctly. Check resources like Yelp, Google reviews, and social media to see if any customers have posted negative reviews. If you do find bad reviews, reach out and see if you can make it right. This builds customer trust and helps you learn about correctable problems.

5. Reward loyalty

It’s not easy to build customer loyalty. If your business has fans, reward them for sticking around! Discounts and loyalty programs are great ways to show repeat customers that you value their business.

6. Earn trust

Leverage your expertise to offer customers advice in your field. Helping a customer solve a problem, often pays off later.

7. Get social

A successful social media plan can help create a successful business. Encourage customers to share their experiences using social media. Even negative feedback can have an upside. Replying gives you an additional chance to make your customers happy.

8. Identify with customers

Treat your customers as individuals. Get to know them on a personal level and invite them to events and gatherings.

9. Streamline pay

Find ways to streamline the billing process. Retaining billing and shipping information on a website makes it more likely a customer will complete a second purchase.

10. Just ask

Get feedback on what your business does well and what it could do better. Customers feel valued and are more likely to repeat business.

For more insight into how you can grow and protect your small business, check out the Small Business section of the Learning Center.

Sources:
[1] https://blog.hubspot.com/service/customer-retention, accessed June 2022.
[2] https://www.salesforce.com/resources/articles/how-calculate-customer-churn-and-revenue-churn/, accessed June 2022.
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