During this unprecedented crisis, small and medium-sized businesses (SMBs) have been hit harder than many larger enterprises. As business owners decide whether to shut their doors or find a way to pivot, it’s clear that the new normal is going to be different.
While many large corporations can float along on shareholder capital, smaller businesses can’t just “go back” to the way things were. Acquiring new customers requires two of the resources most SMBs lack right now: time and money.
Fortunately, these businesses can still survive and thrive in today’s new normal by focusing on one key area: existing customers.
Retaining customers to improve profit
Building new relationships is important for any business, but SMBs have to put a premium on customer retention, especially in the post-COVID-19 economy.
First, let’s look at the numbers:
- Acquiring new customers is about five times more expensive than retaining current ones.
- Loyal customers spend 67% more than new customers
- Improving customer retention by just 5% can help companies increase their profits by 75%.
When shelter-in-place became a reality earlier this year, the gulf between retaining and acquiring customers became even more pronounced. For many SMB owners who already had limited marketing and advertising budgets, the challenges imposed by the COVID-19 crisis made it all but impossible to bring in new business. Even as these businesses reopen their doors, customer behavior has changed—probably permanently.
Personalization creates loyalty
But some SMB owners are reimagining the way they do business, with a huge emphasis on customer retention. Take Evet DeCota, a hairstylist and owner of Salon DeCota in San Rafael, California. DeCota has revamped her operation in a profound, but simple way. She realized that amidst the pandemic, she could offer something to customers on a personalized level — something that only she could create thanks to her knowledge of them.
Within a week and a half of California’s shelter in place declaration,, DeCota gathered the resources she needed to create customized hair color kits for her clients. She assembled the kits in her apartment kitchen. She worked with her building manager to allow her clients to come into the building, as long as they were wearing protective gear, and pick up the coloring kits outside her apartment door.
“They ring my doorbell and then they stand very far away from me and tell me they miss me, and I tell them I miss them — and that’s how that goes,” she told RingCentral on a recent episode of That Changed Everything. “Yeah, it’s a little love fest.”
Knowing her existing customers and meeting their demand in a personalized way has allowed DeCota to continue working with the customer base she’s established during her long career as a hairstylist, even amidst the coronavirus crisis.
And when the time comes to go back to some sort of normal, DeCota’s customers will be there for the next phase of her business.
Putting a premium on customer retention
Whether you’re a large business or a small one, there’s lots to learn from DeCota’s example — not just her ingenuity and ability to spot trends, but also her knowledge that her most important and valuable customers were the ones she already has.
For SMBs with limited resources, this lesson is extra important. Never stop trying to acquire new customers, but work even harder to retain those you already have. Loyal patrons are the ones who will sustain you, especially when times get tough.
To learn what your company can do to keep your customers coming back, read RingCentral’s guide, 8 Strategies to Improve Your Customer Retention Rate.