WANT TO KEEP YOUR CUSTOMERS COMING BACK? THEN HAND OVER YOUR CASH

James Done, CEO, Tail

 

Every business that wants to create a sustainable future for itself needs to put a great deal of energy into attracting new customers. This will always come at a cost.

A one-off customer, of course, isn’t a bad thing but it’s the customers that keep coming back that bring real value to a business. So as well as attracting new ones, there should be just as much effort – and investment – put into creating an effective customer retention strategy. And if you’re going to ask them to regularly put their hand into their pocket, you’re going to have to be prepared to do the same yourself.

Customers that come back time and again shouldn’t be taken for granted. You can’t assume that they’ll always be with you – no matter which industry you are in, your competitors will be doing their utmost to win those customers from you. Your objective, then, should be to ensure that you give them every reason to stay.

The sheer depth and breadth of choice on offer means that you need to have some kind of loyalty programme in place. You can’t just rely on the quality of your products or the efficiency of your service to stand out. If you really want to boost loyalty among your customer base, then it is going to cost you. The trick is to make sure you invest – and reinvest – sensibly, keeping your long-term strategy in mind and ensuring that you don’t slim down your profit margin too much.

 

Hand over your cash

Discounts are commonly used as an incentive by many different types of companies that are looking to attract new customers. They’re also used as a way of rewarding existing customers, but these discounts are not always appropriate. There is a something of a ‘one-size fits all’ feel to them, and they’re easy for your competitors to replicate, or even undercut you with. On top of all this, these discounts might very well get people through the door but come with no guarantee of resulting in repeat business. Targeted discounts, where you offer customers money off things they regularly buy are better, but personalised campaigns can be very difficult to manage and require solid data analysis. In most cases, this isn’t the best use of your reinvestment.

No one is going to turn down the promise of free money every time they make a purchase. That’s why more and more businesses are using cashback schemes to attract new and existing customers. The downside of this, of course, is that it can hit your bottom line. It requires careful consideration – just how much of your profit margin are you prepared to give up, and how big does the amount have to be to provide a genuine incentive to customers? A balance needs to be struck and the sweet spot will differ depending on the nature of the business.

You may be thinking that cashback incentives aren’t right for you, and are generally limited to large chain businesses anyway. I would argue that there are very few sectors and sizes of organisation where cashback schemes wouldn’t work – any business with a heartbeat should be thinking about it. For example, what’s to stop an independent gym or travel agency from offering cashback? It would certainly be a point of differentiation and could encourage someone to choose your business over your competitors.

Another hurdle where cashback is concerned is the relative ease of redemption. If it’s too difficult for a customer to actually get their hands on the reward, then the offer has very little appeal. The good news is that it’s easier than ever for vendors to implement cashback-based reward schemes as it’s the banks that do much of the hard work. The customer simply makes their purchase on their bank card and the reward is calculated and applied to their account. Your staff won’t even have to know that it is happening, but your customer certainly will.

 

Taking the next step

While offering cashback as an incentive can get customers through the door, to generate true, long-term loyalty among your customer base – and get a significant return on your investment – you’ll need to go beyond this.

As a business owner, you should have a strong grasp of how your customers use your product or service and the other areas where they may need help or support. If you can pinpoint the things that you could be doing for them – things that really add value – take the next step and work out how to incorporate these into your offering.

It could involve a partnership with a complementary organisation, or it could involve buying in technology in order to foster innovation that will surprise and delight your customers. For example, are there any training schemes or educational programmes that could be relevant to your customers? The key is to ensure that any new services or innovations you introduce provide a point of distinction from your competitors.

Cashback can be a highly effective way of attracting new customers and encouraging existing ones to keep coming back. But the reality is that it needs to be a part of a broader gameplan, just one of many elements that really add value. A fully-fledged loyalty strategy will cost money, but if you make wise investments in things that really add value – and go above and beyond your competitors – then these investments will really pay off.

 

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