May 22, 2024

Small Business Advice

How to grow and retain customers

Jerry Osteryoung | 12/26/2016

Too often I see small businesses concentrate only on getting new customers and completely neglect their existing customer base. It is so easy to focus only on bringing in new sales, but you must not forget retention and upselling efforts.

Best practices tell us that for most businesses, new customers should represent only 10% of sales. The other 90% should come from existing customers. With existing customers generating the bulk of your sales, it becomes very important to have strategies for keeping and growing these existing accounts.

The secret to growing and retaining customers is making sure you have regular contact with them. One of the best ways to do this is to have a loyalty program.

Many companies now use loyalty programs to cultivate repeat business, but I have found that some are obviously set up to help the firm and not the customer.

For example, I was recently in a pet store buying a treat for my wonderful lab, Sophie. After I paid, they gave me a rewards card that stated if I spent $200, I would receive 10% off my next purchase. I immediately threw the card away because I knew it would take me over a year to spend that amount. Plus, the 10% offer just was not much of an incentive.

To have a successful loyalty program, rewards must be easily attainable and have direct value to the customer. At AMC Theatres, for example, they frequently offer discounts on ticket prices. In addition to that, members get their popcorn and drinks upgraded to a larger size automatically when showing their loyalty cards.

In addition to loyalty programs, e-mail communication can be very effective as a retention strategy. A recent study showed messages that were sent via e-mail were far more effective than via social media. The key is communicating frequently but not over communicating. If you have not heard from a customer in a while, it is also very effective to send them a nice note to reinforce that relationship.

Another great way to cultivate repeat business is to delight your customers in unexpected ways. Sending a box of cookies or a Starbucks gift certificate is an easy way to tell a customer you appreciate them.

When your customers feel valued, they are more likely to remain loyal and do more business with you. In fact, a recent study showed the longer you keep a customer, the more products and services they will use, which makes your profitability higher.

For example, I hired Dickerson Landscaping just to do routine maintenance – mowing and shrub trimming – at first. After some time, however, I had built up some trust, and I enlisted their help putting in a driveway extension and redoing our landscaping completely. What started as just routine service became a much more profitable relationship, and all it took was time and keeping me as a customer.

Now go out and make sure you have implemented effective strategies for retaining and growing your existing base. By doing so, you will improve the quality of service you provide and increase your profits as well. And, as most of these strategies have minimal costs, there is very little at risk.

You can do this!

Dr. Osteryoung has directly has assisted over 3,000 firms. He is the Jim Moran Professor of Entrepreneurship (Emeritus) and Professor of Finance (Emeritus) at Florida State University. He was the founding Executive Director of The Jim Moran Institute and served in that position from 1995 through 2008. His newest book co-authored with Tim O'Brien, "If You Have Employees, You Really Need This Book," is a bestseller on He can be reached by e-mail at

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