There is no question about it, your most profitable customers are your loyal customers; the ones who continue to purchase your product and tell others about your products and services.
Acquiring new customers can be challenging and costly. Amazon at one point was spending nearly $70 per new customer, but they could afford it because their customer retention rates were are very high and their long-run customer profitability is among the best for any retailer.
Why is it then that small business has very little in the way to track and incentivize customer loyalty? After all, wouldn't you want to do everything you could to ensure your best customers were being treated like your best customers?
Some small businesses offer the paper hole-punched loyalty cards that offer a promotional discount after so many purchases. But since these cards are given to everyone and they offer no personalization to your best customers, they are often not as effective as they could or should be.
Small businesses are at a huge disadvantage to larger retailers and businesses that spend millions on building customer loyalty tracking programs. By tracking customer loyalty, they are better able to target promotional campaigns and communication to their most frequent or non-frequent customers to incentivize further purchases.
The importance of customer loyalty was shown when airlines first introduced their frequent flier programs. These programs were a huge success that helped airlines catapult themselves to having some of the highest profit margins in any industry. The reason is quite simply that they were better able to incentivize customer purchases with a single airline that mitigated the risk of competition.
As a small business, it is very cost-prohibitive to build a "frequent-flier" system, but there are steps that you can take to help you track and notice your most frequent and profitable customers. Start by getting your customer's email address. Don't simply ask for their email address, but offer an incentive to do so. Perhaps you offer $5 off their next visit if they sign up for your newsletter.
Once you have populated a customer database of emails, you can use tools such as Constant Contact and other small business e-newsletters to send out coupons and other promotional fliers. Now with your digital database you can track:
1. Which customers clicked on your email
2. Which customers bring the promotional message to your store for redemption
Track these results and over time you will start to build a customer profile list in your database that will help you understand who your most loyal customers are. It's not perfect, but it will help you improve customer relations and give you a competitive advantage over your competitors by allowing you to better understand who your most frequent and presumably profitable customers are.