Path to Profitability: Always choose customer retention over customer acquisition
Did you know that the probability of selling to existing customers is 60% -70% compared to 5%-15% to new or prospective customers? Perhaps, if you want to build a thriving business, you need to take care of your biggest assets – loyal customers. Customers express loyalty in many ways. For starters, they order more frequently from your restaurant, recommend your brand to their friends and family and most importantly, spend 67% more than new customers. Plus, they know your product and don't need big budgets to convince them to try new products or dishes.
Of course, you need new customers to accelerate your reach, but the fact that customer retention, as a category, is often overlooked has had turned out to be one of the main reasons for failed establishments. Let's just say along with the new ones, you need your old, loyal friends to build a profitable revenue foundation. Without loyal, repeat customers, it’s hard to succeed in any business.
So, how can we make every customer a long-haul partner? Here are five approaches:
Connect with your customers!
Customers have a lot of options these days. It's no wonder why creating a strong connection has become a challenge for most businesses. However, with today's heavily digitized landscape, there's no reason why brands can't establish a one-on-one relationship with their customers. As you gather insights on your customers’ habits and preferences, don't forget to put them to use! Understanding your customers is the connect with them on the micro level. With highly targeted marketing you can generate a personalized experience that feels more personal and persuasive for your customers. To the point above, making efforts to say thank you to your loyal customers can go a long way toward building a brand that's lovable and memorable.
Start a loyalty program
Americans are a fickle bunch. 60-80% of customers who describe themselves as "satisfied" switch to a different brand for their next purchase. How can that be? Often it’s due to a lack of rewards or incentives.
Accenture's reports state that 43 percent of customers stay loyal to the brands that offer some kind of loyalty rewards - just an incentive they need to keep them happy and loyal. With reward systems in place, customers are encouraged from the moment they make their first purchase to refer a friend. Just make sure that the rewards are worth it
The upsides of a strong loyalty program are many. Click here to learn the various benefits of Loyalty Programs for Restaurants. TGI Friday’s UK saw a 66 percent increase in repeat customers within the first four weeks of launching a new loyalty program in July 2018. In fact, Starbucks’ 16 million loyalty members account for about 40 percent of the chain’s U.S. sales.
Surprise and delight your customers
People are passionate about food. Just ask Cody, who orders Pizza from his favorite place at least three times a week. The question is what makes him go back to the same restaurant every time? think of a valuable offer or a surprise deal that he gets on his email or text message every day as a reminder to feel excited about his next purchase with the brand.
Restaurants should spend a considerable amount of time to understand their customers and use this information to implement the principle of surprise reciprocity i.e delight the customers with spur-of-the-moment deals and promotions to order food or make reservations. These surprises don't really have to be big or expensive, but enticing enough for them to click on the “call to action”.
Keep your revenue steady and increase profit with customer retention
Believe it or not, it's cheaper to get your existing customers to make a repeat purchase than to generate new leads. What's the point of having a set of random people visit your website, place an order, and leave immediately – without ever coming back? in today's highly competitive time, it's very important to engage and re-engage with customers to stick to your brand. If you're yet to build a cohesive strategy for customer retention, our recommendation would be to start with retention email campaigns designed to encourage current customers to purchase from you again.
In general, as you move right on the curve of profitability, you should start focusing more and more on retention. But remember, you should never really stop investing in customer acquisition. By applying the right analytics to your customer data, you can find a balance that makes the most sense for your business.