Increase Customer Retention with Technology
by Brian Bullock | January 26, 2024
Retailers know exactly how important customer retention is and statistics reinforce their belief.
- 65% of the average company’s business comes from existing customers.
- 43% of consumers spend more money at stores they are loyal to.
- The probability of selling to an existing customer is 13 times greater than selling to a new shopper.
- Acquiring a new customer can cost up to 25 times more than keeping a current one.
(Sources: Zippia, Bain & Company, Harvard Business Review)
That’s why customer retention is so important and savvy retailers use every tool possible to keep their loyal customers close and encourage new ones to become part of the family. Retail technology is one of those important tools in keeping regular customers happy as well as helping stores turn occasional shoppers into loyal customers.
How can retail technology help?
Customer rewards programs benefit retailers as much as they do shoppers. They provide stores with valuable customer information. When customers sign up for an incentive program, which can be done on a point-of-sale system with the swipe of a driver’s license and answering a couple of questions at a checkout terminal, a store can start a customer profile that turns into a treasure trove of information.
The nuggets collected are a customer’s name, address and license type. A couple of optional questions can add phone numbers and email addresses which are conduits for text and email marketing, along with a birthdate, which can be utilized for celebratory rewards coupons.
Starting these customer accounts gives stores information about purchase histories and preferences which are like gold for savvy retailers.
Ben Honeycutt owns Oak Knolls Hardware and Home Center in Orcutt, California and he uses his Paladin Point-of-Sale system and a rewards program to manage his inventory and track his customers.
“I look at my customer listings and rankings. I find out who my best customers are. Last year, we bought some nice gifts and sent them out at the holidays,” he explains, adding that unexpected gifts like that go a long way in building loyalty and retaining customers.
The leading hardware suppliers have their branded programs such as Ace Rewards, (Do it) Best Rewards, True Value Rewards, FanBuilder™ (Orgill), and others. Programs such as Paladin Data Corporation’s Rich Rewards or providers such as Repeat Rewards can provide independent businesses customer incentives that keep them coming back.
Successful incentive programs rely on being effortless to use and require everyone at a store to be well-versed in the rewards. Associates must know as much about the details of the program and its members as they do about where products are inside the store. They need to know to ask each customer if they are incentive program members, how to apply rewards, and often help customers take advantage of those rewards. For many stores with successful incentive programs, “Are you part of our rewards program?” is the first question to customers at checkout.
Stay in contact
Keeping your customers loyal is the ultimate goal of customer retention and using the information gathered from them when they join your rewards program is critical. Text messaging (short message service/SMS) and email messaging are the easiest ways to keep your store in touch with your customers and they’re an important part of any effective rewards program.
Customers must opt-in to accept these messages, but they’re effective platforms to communicate everything from the addition of new products to sales promotions to changes in store hours or policies. Unlike social media platforms, these messages are targeted directly to a store’s customers or followers, and they are statistically effective.
- 98% average open rate.
- 45% response rate.
- 19% of the test message advertisements are clicked on.
JoLynn Weist, who owns and operates Weist Hardware in New Cumberland, Pennsylvania with her mother Audrey, uses a rewards program that sends text messages out to advertise sales and special events. The program even targets individual customers by sending a birthday greeting and a coupon to use on their next visit. She mines all her customer information through her Paladin Point of Sale system. She’s also very active on social media, posting videos on the store’s Facebook page to stay in touch with her loyal shoppers.
“The software works well. I have the great flexibility of working with my customers more frequently. I don’t have to sit at the computer and do all sorts of analyzing. I can be out working with our customers and having a great relationship with everybody who comes in,” JoLynn says.
Adjust and manage inventory
Once a store collects customer information, the magic starts. Each purchase by a rewards customer gives retailers a clearer understanding of what products they buy, what times of the year they buy them, how they purchase – cash, card, or charge – and more. That information helps retailers improve their ordering, increase turns, avoid outs, and increase profits.
JoLynn also uses a different and slightly unusual method to gauge her store’s success with Paladin.
“One of the things I noticed when we started using Paladin was that I could see more of our basement floor,” she explains. “That sounds kind of funny. What does that have to do with anything? But it has a lot to do with inventory management. Because now, where I used to have 50 brooms and mops sitting down there covering most of the floor, we’re down to only five mops sitting down there and five brooms sitting down there, so I can see more of the floor. So, that is really exciting to me that, you know, we’re doing more inventory management and not having too much inventory on hand and all of our money sitting in the basement.”
The best way to improve the customer experience starts by finding out what shoppers think of your business by examining retail data. Tools such as Net Promoter Score help businesses gauge their customer experience, satisfaction and loyalty.
NPS is a post-transaction survey that asks customers: “On a scale of 0 to 10, how likely are you to recommend our products or services to a friend?” Responses are categorized: Scores 0-6 are Detractors, 7-8 are Passives, and 9-10 are Promoters. To calculate an NPS score, subtract the percentage of Detractors from that of the Promoters.
Dan Nesmith, founder and president of Paladin Data Corporation says NPS responses provide invaluable insights for his company, and they can be used by any business regardless of size.
“If there’s a secret to Paladin’s ongoing success it would have to be the loyalty of our customers. Many who were with us in those early years are still with us today,” Nesmith says of his 44-year-old company.
Instead of trying to coax customers into the store to sell them something, ask them what changes, improvements, or products they would like to see in the future. It’s a way of personalizing your store and service.
A customer survey could be part of the effort. Some businesses use Key Performance Indicators – short customer surveys – to help them improve their store and services. This can be part of an email campaign, post-transaction survey, social media post, or even an old-school suggestions box.
“Consumers expect more from merchants today. Due in part to the evolution of retail, which now offers more personalized choices from e-commerce companies, shoppers want similar features such as personalized offers and rewards programs from their neighborhood stores,” Nesmith explains.
Customer retention done correctly is part of a business’s routine customer service. If it’s incorporated into a store’s retail platform, it can become automatic and benefit both the customers and the business forever.
“The actions taken in your stores every day drive customer retention. Customer retention and increased ticket totals will drive increased customer counts which will drive increased revenues,” Nesmith says.