Why it's all about knowing the customers you've got
As the COVID-19 pandemic continues to cause economic uncertainty, many small businesses must shift their business models in order to stay open. According to a July 2020 GetApp Business Model Survey, 92% of US small businesses have pivoted and had to do it quickly. Shifts included offering new online services, providing online customer support, or introducing new products. These changes in business practices have helped small businesses stay afloat, while the pandemic has led to shrinking customer bases.
Customer attrition is a natural part of any business, but it’s happening exponentially during the pandemic. While businesses need to attract new customers, cash flow may be an issue, even with federal aid, like the Paycheck Protection Plan (PPP). With shrinking funds, small businesses need to determine if investing in new customers is the right thing to do. After all, it is almost common knowledge that retaining customers is 5 to 25 times cheaper than acquiring new ones.
Customer retention should be a business strategy not just for long-term success, but merely to survive the pandemic. With customers tightening their belts, businesses need retention tactics that nurture current customer relationships and build loyalty. Some tactics include personalized, relevant, timely responsive communications and interactions, strategically applied special offers or discounts, and loyalty programs and rewards.
To implement these retention strategies successfully, every business needs a complete understanding of their existing customers. Why did they buy? When did they buy? How much did they spend? How frequently do they visit and purchase? Will they buy again? An RFM Value Analysis (Recency, Frequency, and Monetary) can provide a business owner the answers to these questions. This analysis also provides powerful insights into customers, particularly to identify the most loyal ones and those who require attention or extra care because they are most likely to leave.
Small businesses that use e-commerce platforms or point of sale (POS) systems will have the data required for an RFM Value Analysis. A CDP (Customer Data Platform), like VIEWN, can ingest this data and give business owners the analytics they need to drive their retention strategies. As per the Bain & Company research, repeat customers spend more than new ones. Additionally, a 5% investment in an existing customer earns a 95% increase in profit. For these reasons, retention strategies make sense to implement until COVID-19 is contained and the world can get back to business as usual.