At the dawn of the new year, most were happy to see the end of 2020 – especially small businesses that have struggled to keep afloat. A whole 45% of small businesses in the US have earned less than half their pre-Covid-19 revenue, and 75% of SMBs reported laying off an employee. Yet, despite the hit small businesses have taken, the new year represents an opportunity to embrace customer loyalty as a focus to keep business going. Those businesses that prioritize customer loyalty and get it right will be in a position to bounce back and grow as never before.
The majority of almost every successful company’s business comes from existing customers – 65% in 2020 – which points to customer retention being the root of companies’ success. A seemingly simple 5% increase in customer retention can lead to a 25% to 95% increase in profit. According to customer loyalty statistics, obtaining new customers costs five times more than retaining existing ones; and customers with an emotional relationship with a brand have a 306% higher lifetime value and will recommend the company at a rate of 71%, far higher than the average rate of 45%.
Loyal customers also spend more – with 43% of consumers willing to pay higher prices to brands and stores which they already have an existing rapport with. Therefore, the focus should be on customer loyalty, especially when the chances of a first-time visitor making a purchase on an e-commerce website are less than 20%. While acquisition can be a part of a business’ 2021 plans, it is unsustainable to put all faith and budget into winning new customers. The cost and time of marketing to new consumers can be fruitless, especially when many marketing efforts miss the mark.
Customer loyalty platforms provide businesses the ability to target those who will buy with the right deals at the right time. Targeting existing consumers leads to better conversion rates, higher profits, lower costs, and many other benefits. When 83% of customers say their brand loyalty stemmed from trust, it is essential to acknowledge this reality and act on it. No amount of marketing can replace positive feelings about a brand. Loyal customers can help expand a business’ lead pipeline, and companies with formalized referral programs even experienced 86% more revenue growth over the past two years compared to those without.
Investing in company loyalty isn’t just about preventing customers from leaving – it’s also about maximizing the opportunity for growth. A study showed that satisfied customers tell nine other people about their positive experiences, while dissatisfied customers are likely to share their negative experiences with 22 other people. These numbers tell us that having loyal, satisfied customers not only ensures a business isn’t buried under bad reviews, but becomes an organic growth engine for customer acquisition.
This pandemic has shown that many consumers have remained consistent in their spending habits while stuck at home. Those who purchased less than 25% at nearby stores have increased spending at those locations by 15%. Consumers want their local businesses to succeed! A recent survey indicates that people are eager to contribute to their communities and do their part to keep these vital product and service providers open for business.
Consumers are behind small businesses, but customer loyalty programs are what can turn those positive feelings into a flourishing business. At our current retail crossroads, loyalty is more important than ever before. Consumers are changing where and how they shop and their commitment is up for grabs. Magnifying the importance of the opportunity is the fact that small businesses are hurting like never before and can’t afford to stay caught up in the never-ending customer acquisition loop.
Businesses need a positive boost and investing in cultivating loyalty amongst customers is far more valuable than a one-time payment – it’s a lasting solution for those that get it right.
Gaia Finer is VP of marketing and content at Glue, a loyalty solution designed for local business owners. With over 12 years of content creation, marketing, and UX experience, she is an expert in turning processes into clear, engaging stories and creating a theme, rhyme, and reason for even the most complex concepts. In her almost non-existent spare time, Gaia is also a screenwriter, a pool hustler, and an avid fan of old Hollywood musicals.