Why Is Customer Loyalty So Important To Small Businesses?

Posted by Karen Erdelac on Jun 3, 2020

Why Is Customer Loyalty So Important To Small Businesses?We all know that customer loyalty is important, but why is it so important to small business? Loyal customers have a profound impact on marketing costs and brand awareness, not to mention the continued revenue generated through their purchases. Here we take a closer look at the impact of customer loyalty.

Marketing Costs

Acquiring a new customer can cost five times more than retaining an existing customer. Increasing customer retention by 5% can increase profits from 25-95%. The success rate of selling to a customer you already have is 60-70%, while the success rate of selling to a new customer is 5-20%.”

Since 65% of a company’s business comes from existing customers, it’s key to focus on the customers who already spend their time and money with your business, and offer them perks. The investment will pay for itself.”

Setting up a loyalty rewards program is a great way to nurture your current customers and keep them focused on your brand. Newsletters, email campaigns and social media posts can all be used to gain repeat business from your current customers, and all come at a relatively low cost. Taking even a small portion of your marketing budget away from new customer acquisition and dedicating it towards rewards programs and retaining customers can result in a much higher return on your marketing investment.

Word Of Mouth Advertising

Word of mouth is the primary factor behind 20% to 50% of all purchasing decisions.”

Did you know word of mouth marketing drives $6 trillion of annual consumer spending and is estimated to account for 13% of consumer sales. Word of Mouth marketing impression results 5x more sales than a paid media impression and people are 90% more likely to trust and buy from a brand recommended by a friend.”

Word of mouth advertising has been the lifeblood of small business marketing since the dawn of time. People trust what their peers have to say and they also tend to follow trends set by those they look up to. Repeat customers are far more likely to mention your brand in a good light when amongst friends and colleagues. A simple mention of your brand in front of the right people can result in a great deal of business.

Referral Customers

77% of consumers are more likely to buy a new product when learning about it from friends or family.”

Lifetime Value for new referral customer is 16% higher than non-referrals. This is likely because they already have a positive opinion on the business, and friends are more likely to recommend “perfect fit customers” or those that they know will benefit from your product or service.”

What’s even better than word of mouth advertising is a direct referral. Those customers that have become loyal to your brand and have had good experiences in many cases will directly refer a friend or connection to your business and its products or services. Referrals are an integral piece of maintaining a small business and driving new revenue. Make sure you’re taking care of those that are sending customers your way. Referral programs that reward those that provide direct business can dramatically amplify your marketing efforts.

Business Plan

Topics: Marketing