Small Business Owners Shift Investment From Customer Acquisition to Customer Engagement –

Wed Apr 9, 2014

MST Staff

A new report by Manta and BIA/Kelsey reveals that, for the first time, small businesses are investing coffeeshop1more of their time, money and resources in strengthening relationships with existing customers versus acquiring new customers. “Achieving Big Customer Loyalty in a Small Business World” details findings from nearly 1,000 small business members of Manta’s online directory community.

“Manta’s mission is to help small businesses thrive by engaging with their customers online,” said John Swanciger, CEO of Manta. “That’s why in addition to our proprietary research, Manta’s joint report with BIA/Kelsey provides best practices for how business owners can jumpstart successful digital customer loyalty programs that help them stand out and create the loyalty and repeat business they desire.”

Existing Customers Bring in More Dough than New Customers 
In 2012, BIA/Kelsey reported that small business owners prioritized customer acquisition over customer retention at a 7-1 ratio. Recently, a new trend is developing as 61 percent of small business owners surveyed report over half of their annual revenue comes from repeat customers rather than new customers and that a repeat customer spends 67 percent more than a new customer. In line with this, small business owners are spending less time and money on customer acquisition; only 14 percent are spending the majority of their annual marketing budget to acquire new customers, and only 20 percent are investing most of their time and effort to acquire new customers. This is a significant shift in behavior as small business owners have realized that existing customers play a more influential role in business success than new customers.

Early Stages of Customer Retention 
Even with this shift in small business behavior, business owners are not yet poised to take full advantage of their customer relationships. The study found that only 34 percent of SBOs have a loyalty program while the majority (66 percent) do not. Moreover, the majority of SBO loyalty programs are offline rather than online, failing to take advantage of technologies that enable seamless implementation and deeper customer insights.

Two members of the Manta community, Viralprint International Wholesale Graphic Design and Printing Services and Ronnie T’s SPALON, report that the digital customer loyalty programs they run have generated a return on investment (ROI). Unfortunately, while email and social media rank as the most effective features, only 46 percent of customer loyalty programs are digitally run and managed, with more than 50 percent of small business owners still relying on paper-based or word-of-mouth programs.

“Our joint research shows that customer loyalty programs are starting to gain traction in the small business community,” said Jed Williams, BIA/Kelsey’s vice president of strategic consulting. “This finding aligns with BIA/Kelsey’s analysis that over half of small businesses will launch customer loyalty programs by the end of 2014 to help their businesses become more competitive.”

The following tips outline the first three steps small businesses can use to begin building a customer loyalty program:

Start with the End in Mind
Start with the desired outcome in mind. Define your goals and what you want to achieve from a customer loyalty program. Make sure the goal is specific and can be measured, as it will dictate the strategy and tactics you put in place. The goal of wanting more business is too broad; instead determine if you want to decrease customer churn, increase average order size, improve customer acquisition, etc.

Determine Your Audience
Will the program be for all customers or just your best customers? You may want to target customers by spending thresholds, frequency of purchases or even specific products. Targeting a specific group helps you reward ideal buying behavior, subsequently driving more of it. If it’s your first time launching a customer loyalty program, starting with one group could keep you focused and make it easier for you to track results and metrics.

Structure Your Program ROI-Positive
Once your primary goal and audience are in place, you can then determine your program structure. Will your program be points-based or have a tiered reward structure? Make a list of multiple options that could help you meet your goal, assess how much they cost and how much they will net you in return to identify the best structure for your business.

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