Is it more important to keep customers or bring in new ones?Â This question is a difficult question for many business owners because, as much as you always want to reward faithful customers for their repeat business, you also want to expand and increase your business as well.Â It’s possible to survive on the business of long-time customers, but companies want to thrive not survive.
So what is a small business owner to do?Â Focus on customer retention programs that seek to keep its customer base strong, or investigate marketing campaigns to generate new business?Â One thing is for sure, whichever you choose, you don’t want to lose your current customers or miss out on opportunities to expand.
At this point, most people would say you can’t have your cake and eat it too.
While it may be true that you will ultimately have to favor one over the other, why not devise a strategy that gives you the best of both worlds?
In a word: Client referral incentives.Â Any business owner, and especially any small business owner knows that the most powerful method of marketing is referral.Â Customer referral is so effective because the pitch that one of your customers makes to one of her friends is unsolicited, candid, enthusiastic, and comes from a reliable source.Â If a friend suggests you buy a pair of a certain kind of pants, you are much more likely to buy those pants than if a sales rep recommended them.
The challenge is getting your customers to talk about your products.Â Sometimes, if a customer is impressed enough, she will make the product the focus of a conversation, but most often talk about your store comes up organically, and infrequently.
Your customers have access to the market and demographic that you appeal to, ie their friends will typically have similar tastes and values as they do, meaning that, properly incentivized, you have an army of covert marketers right under your nose.
How do I incentivize them?
It might seem overly simplistic, but the best way to get your existing customers to refer new business is to just ask them.Â The next time one of your best customers is in the store, ask her to spread the word about the business.
Of course, there’s a little more to it than just that.Â When you ask for your customers to refer new clients, tell them about the new reward structure you have in place for referrals.Â Don’t have one? It’s simple: existing customers get half off their next purchase when they refer new customers.
And that’s just one way to put it.Â The nature of the incentive will change depending on your business, but the idea is to give your current customers a reason to talk about your business.Â Make them want to talk about it.Â Maybe even set up a model that discounts a new customer’s first purchase from the next purchase of the customer who referred the new one.Â (X refers Y, Y buys something for $Z, X gets $Z discounted from X’s next purchase.)
Exactly how you choose to set up your reward model is up to you.Â Some other ideas are:
- Reward packages: chocolates, flowers, a comped meal at a restaurant, movie tickets, etc.
- Handwritten thank you note: never underestimate the power of a simple “thank you.”
- Travel discounts
Whatever you do, you will find that your current customers will want to keep shopping with you to get more rewards, and also that you will be bringing in a ton a new business based on the referrals of your old clients.
About the Author
This is a guest post by Eliza Morgan who is a full time blogger.Â She specializes in writing about business credit cards. You can reach her at: elizamorgan856 at gmail dot com.