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How to retain customers and build brand loyalty

Published on 11/05/2023 by Andrew Blair

Every business wants its customers to keep coming back —but how? We take a look at customer retention strategies SMEs can put in place to build brand loyalty.

how to retain customers and build brand loyalty

There is value in maintaining and developing positive customer relationships. Repeat customers are more likely to spend more than new customers —reportedly up to 67% more. Developing a loyal customer base can keep customers coming back and can generate more revenue for your business.

Building customer loyalty makes good business sense, but it can often be forgotten when marketers are focused on the excitement of generating new leads, especially with the digital tools available today.

In this article, we look at customer retention strategies for small to midsize enterprises (SMEs) and ask how they can build a loyalty program that delivers a long-term benefit for them and their customer base.

What is customer loyalty?

The Pareto Principle, also known as the 80/20 rule, states that 80% of consequences come from 20% of causes. In sales and marketing, this is often interpreted to mean that 80% of sales come from 20% of a brand’s customers.

Customer retention is vital for any business, but especially for growing SMEs who need to establish a solid revenue base. So focusing on key customers and building loyalty among them should be at least as important as any marketing that targets new ones.

Loyalty means different things to different types of businesses. SMEs that sell products directly to consumers might place less value on repeat purchases, as there is a vast potential client base out there, especially online. But firms that deal with other businesses will want to bring clients on board, foster relationships, and keep them coming back. SMEs that sell products as a subscription —like software-as-a-service (SaaS)— have loyalty built into their business model, and may already track customer turnover or ‘customer churn’. Whatever your company’s approach, you should determine the cost of any loyalty-building activity and assess whether it suits your model.

How to build customer loyalty

Businesses use several customer retention strategies to drive customer loyalty. Implementing and tracking a customer retention strategy can give decision-makers an indication of which strategy best suits their business and their customers.

We identified a few ways SMEs could get to know their customers by offering a more personalised customer experience and tailored ways of encouraging repeat business.

5 customer loyalty strategies to consider 

1. Focus on quality

Consumers in Australia said value for money was the most important factor in building loyalty, according to GetApp research. But beyond that, they also rated the quality of the product or service over time and the reputation of the company very highly. Companies will always be susceptible to competitors undercutting them on price, but existing customers will be able to overlook price differences if their expectations for quality and service are being met. More than two-thirds (67%) of respondents to the GetApp survey said they rarely stop buying from a brand if they are satisfied after purchasing a product or service. 

2. Use first-party data to deepen customer relationships

Changes in web technology and the privacy landscape mean that third-party cookies are on their way out. Marketers will soon be unable to use them to target advertising at potential customers. Many experts are suggesting that brands focus on first-party data instead. They should encourage customers to share information that lets the brand know about their preferences and offer them better experiences as a result. This might include smarter recommendations, more relevant offers, or a slicker checkout process, for example.

3. Encourage feedback

By listening to customers’ views on your brand, you can understand what your most engaged clients think about you and how you can better meet their needs. 

There are other benefits, too. If you can show these customers how you are taking action on their feedback, they can see that you value their point of view. Plus, reviews can provide useful information for potential new customers to refer to when thinking about buying from you. In the same study by GetApp, we found that of those open to trying new brands, 54% cited good reviews as something that would drive them to do so.

4. Work on trust

Trust can be important to people, especially when shopping online. SMEs that want to foster a loyal customer base should make sure their business acts in a trustworthy and ethical manner and communicates openly about how they do it. This means applying appropriate safeguards for data, complying with relevant legislation, and making it easy for customers to understand how interacting with your brand is secure. Compliance can also greatly improve the customer experience, knowing they are safe when transacting with a trustworthy brand. 

5. Establish a customer loyalty program

Customer loyalty programs are the most systematic way for brands to build and track loyalty. They reward customers for interacting with your brand, but they can also provide SMEs with useful data that they can use across the business to further increase loyalty.

How to build a customer loyalty program

Millions of Australians already participate in customer loyalty schemes. A recent GetApp study found that 84% of Australians currently use a loyalty program, and of those, 90% subscribe to more than one.

Programs like this often allow customers to earn points on purchases they make with your business, and sometimes through affiliated partners, and then spend the points on discount vouchers or other rewards. Further results from the GetApp study identified a higher number of loyalty program users that seek discounts from these programs compared to those that cited discounts as an advantage that they currently get. 

Side-by-side statistics highlighting the use of discounts in loyalty programs

But this is not the only type of loyalty program that exists, and others may be better suited to your business. 

First, ask why you want a loyalty program. Is it to boost sales outright, encourage more value per transaction, or drive high-spending customers to buy more often? Answering these questions can guide you towards the right type of loyalty program (and there are at least five).

Next, explore whether customer loyalty software can help get your program off the ground. These tools allow SMEs to offer points, rewards, incentives, and email updates. They also help brands collect and use the data that these programs generate, which in turn helps them personalise their approach to their most valuable customers.

You will also need to establish some success measures for the program. This might include ensuring that a certain percentage of your key customers sign up to the scheme, or it might be based on revenue or profit goals. Agreeing on key performance indicators (KPIs) for your customer loyalty program at the outset —and tracking them rigorously— will help you demonstrate what value the program brings to the business.

Give customers a reason to stay loyal

However you choose to set up your program, focusing on customers’ needs over the needs of your business is a good guideline. Gathering customer feedback can be vital to developing loyal customers and improving customer satisfaction by addressing their needs. Give customers the information they need when they need it, try and put the most relevant offers in front of them, and listen to what they have to say before, during, and after a purchase. These tips will help keep them happy, and build a relationship that works for both of you.

Looking for small business loyalty program software? Check out our catalogue!

This article may refer to products, programs or services that are not available in your country, or that may be restricted under the laws or regulations of your country. We suggest that you consult the software provider directly for information regarding product availability and compliance with local laws.

About the author

Andrew is a Content Analyst for GetApp, giving SMEs insights into tech, software and business trends. Interest in entrepreneurship, furthering projects and startups.

Andrew is a Content Analyst for GetApp, giving SMEs insights into tech, software and business trends. Interest in entrepreneurship, furthering projects and startups.