The State of Customer Loyalty in Small Businesses

A joint study of approximately 900 small business owners presents an interesting insight into what small businesses are doing in the world of customer loyalty. The surveys were performed through a joint study by BIA/Kelsey and Manta in 2014. Some of the top level findings from the study are noted below:

1.      61% of small businesses now generate the majority of their annual revenue from repeat customers.

2.      62% of small-business owners are now spending the majority of their annual marketing budget to retain existing customers.

3.      The survey reported that a repeat customer spends 67% more on average than a new customer.

4.      Only 34% of small businesses have a loyalty program.

5.      Of the small businesses that have a loyalty program, only 46% are in digital form, such as an e-mail list.

6.      Only 29% of small businesses use a customer relationship management (CRM) tool to track customer information.

7.      When asked about the purpose of their customer loyalty program the dominant answer was “improve customer relationships”. Only 39% of those with a loyalty program noted this as their primary purpose. The secondary purpose was to “grow revenue”, which occurred with 36% of the small businesses.

There appears to be a dramatic change over the last several years for small businesses. Surveys done in 2012 found that small businesses focused on customer acquisition seven times more than customer loyalty and retention. In the 2012 Survey only 6% of the small businesses surveyed spent more than half the annual marketing budget on customer retention.

The bottom line is that small businesses seem to be migrating to the concept that loyal customers provide a greater source of revenue from each loyal customer than a newly acquired customer.  It is also obvious, that loyal customers lower the cost of customer acquisition and provide a more sustainable revenue flow.  Customer loyalty programs work for small businesses just as well as they do for large businesses. It's about time that all the small businesses think about customer loyalty and make the decision to make it a strategic component of their business.