When it comes to running a business, having a steady stream of revenue is important. It’s likely that some periods will be better than others – for example, in the run up to Christmas – but the rest of the time, you need to ensure you’re seeing a steady income.
One crucial element of keeping your till ringing is to focus on improving customer retention rates.
Customer retention – also known as customer loyalty – can have an impact on every element of your retail business. And financially, it doesn’t only influence your incomings: it can greatly influence your outgoings too. Marketing to gain new customers is an average of five times more costly than marketing to retain your current customers.
Referrals are a great way to both increase customer retention and gain new customers. Ensure that each and every person who interacts with your shop has a good experience, from customer service to product quality. If they do, it’s more likely that they’ll recommend your business to family and friends.
In fact, studies have shown that 83% of consumers would only recommend a company that they trusted, so building a good relationship is crucial.
Once you have a steady number of regular customers visiting your business, you can start to implement the customer loyalty ladder theory. Calculate what step of the ladder they’re currently at and how you can move them up to the next step as quickly as possible.
One measure that has shown great success in increasing customer retention rates is by introducing a customer loyalty scheme.
How effective are loyalty schemes?
Loyalty rewards schemes are a proven method of increasing your customer retention rate. Not only do they offer incentives to your customers, but they also offer retailers a chance to measure a whole range of data pertaining to their business – and more specifically, customer loyalty.
In fact, 88.2% of all consumers regularly use at least one loyalty scheme, so it’s likely that the majority of your regular customers would be more than happy to sign up. You’ll also see people defecting to your business from your competitors, as 90% of consumers said they would choose a business offering a loyalty scheme over a competitor without one, but offering cheaper pricing.
90% of consumers said they would choose a business offering a loyalty scheme over a competitor offering cheaper pricing
Customer loyalty systems are also great for helping you to reach your customers even when they’re not in your shop, as Reward-It’s platform features built-in marketing email capabilities. You can communicate rewards, offers, and shop updates – and anything else you could possibly want – with just a click of a button.
Email marketing is hugely popular amongst consumers and businesses alike. 80% of business owners believe that email marketing increases their customer retention rate, whilst 59% of consumers said that receiving marketing emails directly influences their purchase decisions.
Measuring the impact of a loyalty scheme by recording AOV
One way you can measure the impact your loyalty scheme is having on your business is by calculating your Average Order Value (AOV).
For example, before you implement your loyalty scheme, you have 50 unique returning customers each month, and your business has an AOV of £100 for each of those customers. If all 50 customers sign up to your loyalty rewards programme – which is likely, considering those 50 customers have been visiting your business each month – then their Average Order Value will increase.
Research shows that loyalty programmes can increase your AOV by an average of 13.71%. In our hypothetical situation, that’s an extra £13.71 per person each month, and a total of £685.50 per month.
Reward-It’s basic loyalty package starts at a monthly cost of just £17.50, meaning the extra AOV generated from the loyalty scheme will pay for itself 39 times over, every single month. That’s over 3 years’ worth of monthly loyalty programmes from just one month’s excess income from the increase in AOV.
For the whole range of benefits that a loyalty scheme affords you, including customer data, retention, and marketing, it is a worthy investment.