Introduction

What do companies like Lux Bond & Green, Seaside Inn, and Waterhouse Tavern have in common? On the surface, not much. One sells jewelry, the other is a hotel, and we all love a good tavern.

Yet, they do share a common thread: Each is a local business that has been open since well before the 1900s. They’ve endured.

Building a brand people love isn’t about vanity. For local businesses, prioritizing retention is important to their survival. And while that endurance game starts with creating an excellent customer experience pre-purchase, it also means keeping close to customers even once a purchase is complete.

Studies have shown that repeat purchases can account for 40% of revenue for some businesses—with returning customers spending, on average, 33% more than new customers.

In this guide, we’re sharing best practices to help you build a better customer retention strategy to grow repeat purchases.

Specifically, you’ll learn:

• How businesses across industries can adapt to changing customer expectations
• Steps for delighting and engaging with customers during every stage of the customer journey to improve retention
• Best practices for retargeting customers with compelling loyalty and reward programs

Growing a Sustainable Local Business

What do beloved local brands have in common? You could argue great prices, products, etc. But, according to our State of Local Business report, it boils down to three things: reputation, customer experience, and expertise. 

Whether your ambitions are to stay one location strong or expand your company to multiple areas, staying connected to loyal customers is critical. But what keeps a modern customer loyal today? And how can you ensure you’re giving them the right experience at every step of their journey? 

Let’s dive in. 

What Today’s Customers Want From Local Businesses 

People love shopping local. They understand that it helps their community and have more trust in shopping with people they know. 

That said, the “feel-good factor” of shopping local can only get a business so far. Customer retention means keeping customers coming back. You need to understand what today’s buyers are looking for in a great local business experience. 

According to our data: 

“…today’s consumers look for ease of doing business second only to price as a key differentiator of local businesses. This preference increases when it comes to repeat business and referrals.” – State of Local Business Report 

Long story short, convenience is your strongest driver for repeat business. That could include how easy it is for customers to:

• Find your location
• Get the products they need 
• Connect with your business/employees 
• Complete a transaction
• Contact your support team
• Get a good deal

The importance of convenience in a buyer’s lifestyle is prompting more local businesses to use digital solutions and easy payment options—across the customer journey. 

How Happy Customers Grow Your Business

No customer journey looks exactly the same. But there are common touchpoints you can identify when determining why customers might be leaving, or churning, from your business. If your business is difficult to find, hard to buy from, and impossible to contact—most likely buyers will not return (or sing your praises). 

Yet, many businesses strictly prioritize the customer acquisition part of the customer journey. 

Focusing purely on new buyer acquisition means missing out on additional revenue from current customers. In fact, more than 80% of marketing budgets are spent on just acquiring new first-time customers. 

Customer retention looks at customer loyalty over time. Repeat purchases are the ultimate goal of a high-performing customer retention strategy. The journey we showed, and often the way we think about the customer journey, is not inclusive of the purchase journey made by repeat customers. After all, repeat customers: 

• Know your business
• Know your products/services
• And in some cases, know what they want right away

With that in mind, you cannot build an acquisition strategy for repeat customers in the same way you would with new customers. 

You have more information on these customers and should use that to build unique, personalized experiences, campaigns, and touchpoints for these folks. 

Throughout this guide, we’re sharing what a good customer retention and repeat purchase strategy look like. To start, you must have a grasp on your customer retention and repeat purchase rate.

Retaining Local Business Customers

You’ve probably seen the infamous quote from Harvard Business Review plastered in marketing materials and business books near and far: “Increasing customer retention rates by 5% increases profits by 25% to 95%.” 

Like most generalized statistics, this isn’t exactly a one-size-fits-all rule. What is true: Retaining customers is a lot less expensive than acquiring new ones. In other words, keeping customers happy—and engaged with your brand—should always be a top priority. And one important way to ensure that you’re doing a good job here is by staying on top of your metrics. 

How to Measure Your Customer Retention Rate, Repeat Purchases & More

In terms of your customer retention, there are a few key metrics it pays to know: 

• Customer retention rate/churn rate 
• Repeat purchase rate
• Customer lifetime value 
• Opt-ins

Customer Retention Rate & Churn Rate

Your customer retention rate (or CRR) shows how long first-time buyers stay with your brand. That way, you know what your customer growth needs to be at any time. At a high level, your CRR is best expressed by the following formula:

Many local businesses track multiple retention rates—like monthly, quarterly, or yearly— to get a clear idea of their performance.

The flip side to a retention rate is, of course, your churn rate. Churn rate shows how many customers are leaving your business over a given period. While a certain amount of customer churn in your business is inevitable, there are active steps you should take to keep and retain your customers over time. 

Repeat Purchase Rate 

Outside of retention and churn rates, you’ll want to understand your average repeat purchase rate. Calculating this is pretty straightforward: 

Now this formula does not take into account the number of times a customer returns to your business, right? That’s why it’s just as important to measure churn rates (as we mentioned above) to see why this number might fluctuate. 

Customer Lifetime Value

Increasing your repeat purchase rate will also increase your customer lifetime value (or CLV). That said, to even start calculating your CLV, you’ll need to know the following averages: 

• Customer lifetime: How long do customers tend to buy from you before churning? 
• Purchase frequency (repeat purchases): How frequently do customers purchase your service or product? 
• Purchase value: How much do customers tend to spend, on average, with you over a period of time (start with a year, shorten or expand the timeframe based on your business)? This is expressed by the value of all purchases over a period of time, divided by the number of purchases in that period. 
• Customer value: Get this number by looking at purchase frequency multiplied by your average purchase value. 

Whew…that’s a lot. But, once you have all this data on hand, you can use this formula to determine your CLV: 

Opt-Ins 

If you can’t reach out to your customers once they’ve purchased a product or service, it’ll be pretty dang difficult to drive future business with them. Sure, growing a social media presence is one way to stay connected—but it’s not a direct line. 

Building a healthy database of emails, phone numbers, and addresses will allow you to reach out to customers with unique promotions, offers, and experiences. 

While opt-in tracking doesn’t come with a traditional “formula” like the metrics we mentioned before, it can still be measurable in your CRM software. Later in this guide, we’ll walk through best practices for growing your opt-in numbers through email and text marketing. 

Customer Retention Rates Across Industries

Benchmarking yourself against a business from a different industry is a bit like comparing apples to oranges. 

With that in mind, it helps to know the average customer retention rate in your industry so you have a goal in mind. Below, we’re sharing a few specific industry retention rates:

Automotive – 83% 

There’s no question that the automotive industry has undergone several shake-ups in the last few years. In our research, supply chain and staffing shortages had a significant, negative impact on daily operations for many dealerships. 

That said, according to ServiceBell, the average customer retention rate for automotive and transportation companies is 83%. This may be due to great relationships in this industry, strong loyalty programs, and vehicle brand loyalty. 

So, how can you keep customers coming back to your automotive brand? Here are a few ideas: 

• Keep customers in the loop on inventory/hour changes: Don’t keep customers guessing about what’s in stock or when your hours change. Keep an open line of communication across social media, text, and email. 
• Remind customers of upcoming service: Customers who service their car regularly are 86 times more likely to buy another car from you. Again, you can use things like automated text messages to keep customers informed of upcoming services. 
• Build loyalty programs that incentivize customers: From coupons to gift cards, use special incentives that reward customers for their continued patronage.

Financial Services – 78% 

Financial services is a highly competitive industry, with customer experience being a key differentiator. To keep customers coming back for more, look at improving touchpoints, such as:

• Customer service: Being able to connect with your bank or credit union at convenient hours is a big plus for many customers. 77% of customers are frustrated with how long it takes to reach a live agent. Streamlining your website with some kind of website chat can help here.
• Reward programs: Many customers expect their banks or credit unions to provide reward and loyalty programs that are unique and catered to their buying habits. 
• Mobile experiences: Members crave “Netflix experiences” in banking where they can start an interaction, go do a task, and pick up where they left off on a different device such as a tablet, smartwatch, or laptop.

Retail – 63% 

According to Salesforce, half of repeat buyers make their second purchase within 16 days of their last purchase. As such, retailers have a unique opportunity to quickly engage with customers after an initial purchase. This could include:

• Opting customers into subscriber lists: During the check-out process, be sure to ask customers if they’d like to sign-up for exclusive offers and deals sent straight to their phone or email. 
• Strategic targeting and retargeting: Understanding your customers’ purchase habits can inform your marketing outreach. Using these insights will allow you to personalize your customer experience and drive more revenue. Almost 90% of marketers believe personalization improves marketing conversions.
• And, yes, you guess it, loyalty programs: Loyalty programs across industries are invaluable for keeping customers coming back for more. 

Healthcare – 45% 

The average retention rate for healthcare is around 45%, with a churn rate of around 48%. Part of this can be the natural “shopping around” when looking for the best doctor. However, there are several retention strategies you can focus on to retain patients: 

• Make booking appointments easy: Giving patients options when it comes to booking appointments is important for not just acquiring new patients—but keeping the patience you have—whether that’s via phone, email, or on your website. In fact, 43% of patients now prefer to book appointments online if they can. 
• Send appointment reminders: We’ve all had doctor’s appointments sneak up on us. Send plenty of notice so patients don’t risk missing a necessary scheduled appointment. 
• Create an exceptional front office experience: Your front desk experience sets the tone for every visit. Creating a warm and inviting environment is important for keeping patients at ease. 

Now that you understand the role of customer retention on your bottom line, and the steps you can take to retain current customers. It’s time to go a step further. In the next few sections, we’ll discuss ways you can engage current customers to drive more revenue. 

How to Increase Repeat Business

Repeat customers are loyal customers. In fact, a study from Shopify found that second-time customers are 45% more likely to purchase from you again, and four-time customers are 56% more likely to purchase from you again. 

But all of these things do not happen by chance. Here are the steps you should take to grow repeat purchases from current customers: 

Get Customer Information

Asking customers for their information during key moments, like at check-out, is one way to grow your database and personalize your customer experiences. 

An opt-in or subscriber list is a list of customers who have agreed to receive your marketing messages. And while email is often used to grow their customer opt-in list, text is making waves.

Text has a 209% higher response rate than phone, email, or Facebook. And consumers are twice as likely (1.8x) to prefer texting to any other communication method, across all age groups.

That said, whether you’re building an email or text list, you’ll need to find ways to get people to sign up. Here are a few suggestions: 

• Point-of-sale: As mentioned, check-out or point-of-sale touchpoints are an excellent time to ask customers if they’d like to sign-up for deals, discounts, and loyalty programs. As most customers will need to provide their email or phone number during the check-out process, this subscription CTA can be as simple as clicking a button.
  
  
• Website sign-ups (forms, banners, pop-ups, etc.): When someone is revisiting your website, you can use either dedicated landing pages with forms to increase sign-ups, or include pop-ups on high-traffic pages. You can even personalize this experience so certain pop-ups appear for unique visitors on a page. 
• Website chat: While most people know website chat as a feature to answer customer questions, convert leads on your website, and set appointments, web chat is also a valuable sign-up tool. Similar to a form on your site, chat can be used to prompt visitors to share their email or phone number. 
• QR codes: Creating QR code signage for your brick-and-mortar locations or on product packaging is also an effective way to grow your database. With QR codes, you can create unique images to be placed anywhere that will drive people to a sign-up page. 
• Text-to-join: With “text-to-join” signage, you can give people a unique keyword and number to text to instantly sign them up for your marketing or business promotions.  

Use Retargeting Ads & Text Campaigns 

Retargeting is a form of online advertising or promotional activities used on a target audience based on past activities with your brand. With retargeted advertising, the process involves adding remarketing “pixels” to place a cookie in a visitor’s browser. The cookie then lets the remarketing platform (for example, Google Ads or Facebook Ads) show ads to the user.

Marketers use this method on buyers who looked at items or services on their websites in the past. But this same method can be used based on someone’s purchase history as well! 

Now, ads are just one way to do retargeting. There are many tactics you can take to retarget customers across different channels. The idea is the same: Using past interactions to entice customers. 

Text is a channel many local businesses are tapping into to drive repeat business with current customers. Text has a 98% open rate, and is many customers’ preferred communication channel. Using text campaigns, you can send personalized messages to customers to drive them back to your business.

Build a Strong Customer Loyalty & Rewards Program

Loyalty programs reward long-term customers and drive them to continue purchasing from you. The benefits of customer loyalty programs include:

• Higher customer retention: The point of loyalty and rewards programs is to ultimately keep customers happy and engaged with your brand. 
• More referrals: If your loyalty or rewards program includes incentives for things such as “referring a friend,” you can increase both net new sales and brand awareness.  
• More sales: Incentivized customers are willing to spend more with your brand.

Almost 90% of local businesses have some form of loyalty or rewards program. What your customer loyalty program looks like will depend on your industry and your current customers’ preferences. 

But the payoff for loyalty programs can be huge. According to McKinsey, loyalty program customers are: 

• 43% more likely to buy weekly from a brand
• 59% more likely to choose a brand over a competitor
• 62% more likely to spend more

There are different types of loyalty and reward programs out there, but most can be categorized as such: 

• Point systems: Point systems involve customers accumulating a certain number of “points” over time, which they can then cash-in for services, cash, products, and more. Think: For every $1 spent, you get 1 point. 50 points to a free perfume or to spend how you please. 
• Physical (punch card) systems: This option is popular among automotive and retailers. It involves giving customers a physical or digital card they can sign up for to receive an ultimate “prize” at the end. Think: Free tune-up after five service appointments or free ice cream after a purchase of 10. 
• Tiered systems: Tiered systems are interesting in that they focus on “milestones.” This provides a level of “exclusivity” that involves customers remaining loyal over a certain period of time or spending a certain amount of money. Customers will then receive rewards unique to each tier. Think: All customers after a year receive a free gutter cleaning. 
• Cashback systems: Cashback systems were popularized by credit card companies and are now making their way into other businesses as well. Typically, this involves receiving a certain percentage of money back with every purchase. Think: 2% cash back on every in-store purchase. 
• Paid systems: Premium membership loyalty programs are fee-based. Which is exactly what it sounds like. Customers pay a certain amount of money each month or year to get XYZ benefits. And while some might be surprised customers are willing to pay extra for these programs, nearly 63% of U.S. consumers are part of a paid customer loyalty program. Think: Amazon Prime!

If you are building a loyalty program from scratch, you should first identify what customers would want out of such a program: 

1. Survey: Start by sending a survey to your current base to identify worthwhile incentives. You can use text campaigns to increase your chance of getting the most responses. 
2. Promote: Once you’ve decided what will be included in your loyalty program, launch a  promotion (again, text is a great way to do this) among current customers to encourage them to sign up and reap the rewards. 
3. Inform: Make sure all new customers are made aware of your loyalty program after their first purchase. Specifically, make this part of the check-out process.  
4. Monitor and evolve: Continue monitoring how your loyalty program is impacting sales and sign-ups, adjust where necessary over time, and continue getting feedback from customers. Speaking of…

Gather & Act on Customer Feedback

Sending out regular customer feedback surveys to see how happy customers are with you is necessary for:

• Improving retention
• Identifying areas of weakness in your business
• And driving future referrals and reviews 

There are a few different survey methods you can use to gather feedback. By “methods” we mean how you formulate your survey questions. What you choose will depend on what you’re trying to find out! Some popular options include:

• Net Promoter Score (NPS): NPS measures the overall sentiment a person has with your local brand/company, and if they would recommend you to someone they know. That means NPS questions are excellent for identifying customers who may be willing to write a review or give a referral. Customers are asked on a scale from 0-10 how likely they are to recommend you to a friend or colleague. Respondents are then designated as detractors (0-6), passives (7-8), and promoters (9-10). You can use this information to follow up and reply appropriately. 
• Customer Satisfaction Score (CSAT): As you can guess from the name, CSAT measures how satisfied customers are with your company or an interaction with your company. For example: On a scale from 1-7, how satisfied are you with your experience today? 
• Customer Effort Score (CES): CES measures how much effort a customer made to solve a problem or interact with your company. This question is asked after a specific interaction, like speaking to customer support or reading a support article, and can be answered on a scale of 1-5 or using a yes or no statement. For example: “How easy was it to solve your problem today?” OR “It was easy to solve my problem today. Yes or No?” 

Sending a survey is best done when an interaction is fresh in your customer’s mind. If customers do respond to your survey, it’s important to thank them for their time, as well as follow up on any issues they might have highlighted. 

Just like responding to a negative review can save you a customer, responding to survey feedback, whether through words or action, is game-changing.

Once you receive your feedback, you’ll need a process to act on it or a “customer feedback loop.” Here we see an example:

1. The transaction takes place and a survey response is left for the business.
2. The business takes note of the survey response (positive or negative) and responds if needed.
   • If the survey is positive, the business reinforces existing processes or performs optimization. 
   • If the survey response is negative, the business alters existing processes to improve customer experience.

From that point, the feedback loop continues to provide insights and the business continues to alter or optimize processes. Using text to easily gather reviews and survey feedback is a great way to reach out to many customers at once. 

Be Active on Social Media

Having an active social media presence doesn’t seem like an obvious play to drive repeat purchases—but you’d be surprised. 

People spend an average of 147 minutes every day on social media, which means you have a captive audience that far surpasses email. 

Using social media to keep customers and followers updated on what’s happening with your business, including promotions, sales, new items, etc., is a good way to drive people back to you. 

That said, one of the main challenges local businesses face is limited resources. And juggling multiple social media channels can be taxing on your employees’ time. Focusing on the right tactics and channels will save you resources and your sanity. 

Here’s how to be more strategic with social media to get more repeat purchases:

• Set your goals and define the audience: Before breaking into any new channels, you need to understand your audience. Who are you trying to target? What are you trying to compel them to do? The metrics to focus on here are audience size (number of followers), engagement (likes, comments), and content promotion (reposts, shares, and retweets). 
• Choose your social media platform wisely: What platforms do your customers frequent? While big companies have the luxury of tackling almost infinite channels, you will need to be more discerning. Once you’ve defined your key audience, you’ll be able to narrow down which channels they might frequent. 
• Brand your social media pages: If you are going “all-in” on a certain social site, you want the information about your company to be as accurate and inviting as possible. 
• Optimize your website: Tying your website and social channels together is important for reaching the widest possible audience. This can include adding social links to the footer or your website, and CTAs to share your content on social platforms. 
• Create a content plan/schedule: Having a well-devised social media calendar will keep you actively engaged with your community.
• Don’t just post, build relationships: It’s not one-and-done when it comes to social media. You should strive to get engagement on each post and respond to comments as soon as possible. 

5 Examples of Customer Loyalty & Reward Programs to Inspire You

Looking to kick start your own customer loyalty or rewards program to drive future purchases? We’ve got you covered. Check out five examples of businesses doing it right from across different industries. 

Kohl’s Rewards & Cash

Kohl’s is famous for its loyalty program and Kohl’s Cash. As part of their program, customers accumulate rewards with every purchase and receive special gifts on their birthdays. 

The value of Kohl’s Cash is that customers can spend it how they want on what they want in-store, allowing them to accumulate a certain amount for big-ticket items. 

As a Kohl’s Rewards member, you also earn an additional 5% on every purchase. Kohl’s additionally offers even more perks when you couple their rewards program by signing up for their Kohl’s Card. 

Here’s what makes this loyalty program so effective:

• It’s free and flexible: Like many reward and loyalty programs, Kohl’s Rewards is free. However, what sets them apart is the flexibility to use perks how and when people want. This is particularly helpful as it doesn’t force customers to buy in a defined time window. 
• It’s personalized: Attaching perks to special occasions and holidays is a great way to show customers you care about the important moments in their lives. 
• It’s coupled with additional incentives: Kohl’s offers even more perks from their rewards/loyalty program when coupled with their credit card.

Starbucks Rewards

While many businesses now offer dedicated apps, Starbucks was one of the first to couple their app with a loyalty program. Using the app to make purchases allows customers to accumulate points toward future orders. 

For Starbucks, this offers a wealth of information about spending habits and a direct line to communicate deals and product updates to customers. 

While building an app is out of reach for many local businesses, point-of-sale systems can also be used to capture similar information so you can offer personalized incentives for customers. 

Here’s what makes this loyalty program so effective:

• It’s easy to use: Having the loyalty program tied directly to a phone or as part of a check-out process means customers never miss out on savings. 
• Wealth of data: Understanding how and what customers buy can improve future merchandising decisions and allow businesses to personalize offers to customers. 

FordPass Rewards 

FordPass Rewards by, you guessed it, Ford, is a good loyalty program example from the auto industry. Not only does it offer a tiered, point-based approach (which means more rewards over time for loyal customers), but it encourages good vehicle health. 

Points can be earned when purchasing a product or service, and used towards everything from tune-ups to car accessories to buying a new vehicle. Plus, points can be easily tracked from the Ford app.  

For local Ford dealerships, this provides an easy way to encourage customers to come back to the store to access future savings. 

To recap, here’s what makes this loyalty program so effective:

• Big and small purchases: Listen, saving up points for a new car might not be in the cards for most customers. But being able to put points towards accessories and car services? That’s valuable. 
• Milestones = long-term loyalty: Unlocking even more perks by hitting certain milestones encourages long-term loyalty among customers. 

ExtraCare CVS

One of the best and perhaps most extensive examples in our list is ExtraCare CVS. 

ExtraCare is a free membership that, similar to a credit card, gives you 2% back every time you shop. But that’s just the start. ExraCare also provides incentives on beauty products, pharmacy purchases, and free same-day RX delivery when joining their CarePass.

Members also receive special offers based on their buying history. This means the deals you get are the deals you’d actually want. 

To recap, here’s what makes this program so effective:

• Well-rounded: CVS could easily leave its loyalty program dedicated to the 2% cashback incentive. But by tying ExtraCare to its beauty and pharmacy selections, they provide additional value to customers (literally from head to toe). 
• Personalized: Give the people what they want. Providing deals for items or services that buyers have shown interest in will only increase the likelihood of repeat purchases. 

United Tire & Service | Loyalty Rewards Program

Our final example, a local business, is United Tire & Service. United offers a reward point-system similar to others on our list, but also includes perks just for signing up. Points can not only be used for auto repairs and tire needs, but tacked on to additional savings during special sales events. 

Many businesses tend to not allow customers to use points during sales events. United leans in the opposite direction, with special promotions doubling or even tripling reward points for loyalty members. 

Here’s what makes this loyalty program so effective:

• No limits to savings: It feels like a bit of a bait and switch when rewards can’t be used during a sale. So we’re happy to see a business encouraging customers to double up on savings. 
• Incentives for sign-up: We mentioned earlier that getting customer information is key to driving repeat purchases. United encourages customers to sign-up with an account to get even more reward points. Smart! 

Final Thoughts 

A stand-out customer retention strategy hinges on your ability to continue connecting with loyal customers. By offering additional benefits outside your products and services, you create opportunities for future engagement and repeat business.

If you’re looking to connect with your customers faster than ever before, check out Podium. 

• Save more time: Manage all your customer acquisition and retention channels through a single, secure platform that lets you turn phone calls and chats into texts.
• Convert more leads and incentivize repeat purchases: Attract and retain more customers by using the channels and tools your potential customers prefer to communicate with you on.
• Elevate the customer experience: Have the visibility you need into your leads and their interaction history to respond quickly and in an informed manner to your customer’s request.

Start a free trial today.