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Why Customer Retention Marketing is Important for Small Businesses

Travis Balinas
December 12, 2013
small business owner meeting with clients

Customer retention marketing for small business owners is so important to make your business successful. A lot of our customers in mortgage, real estate, insurance, and promotional products distribution are familiar with word-of-mouth marketing but a lot really don’t understand what retention marketing means for their business. Where customer acquisition marketing describes our marketing efforts to get new business from seemingly nothing, customer retention marketing is focused on building and nurturing the relationships you have with your existing client base.

With much longer sales cycles than a typical B2C company, small businesses that see their customers every few years or so are especially good candidates for learning and embracing the value of customer retention marketing. From the perspective of the small business owner, it might feel misguided to spend your money on customers you already have, but there is a lot of value behind customer retention marketing that might not be as apparent.

Value Proposition #1: Builds Customer Loyalty and Drives Referrals

The idea behind this is simple. Build loyalty with your clients and they’ll refer their friends to you in the future. But remember, with longer sales cycles, small business owners know how great the churn of these customers can be. So by keeping in touch with your current and past customers through the channels that they use most (email and social media), you’ll be able to stay top-of-mind for the next time they want to do business.

When you do your email marketing and social media marketing correctly, you’ll get to keep open a line of communication with people who might otherwise never hear from you again. Be helpful; don’t sell. Exceed their expectations with incredible marketing campaigns that inspire, entertain, and engage. When they’re ready, they’ll come back and they’ll also be more inclined to refer you to a friend.

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Value Proposition #2: Increased Customer Lifetime Value (LTV)

In an earlier blog post, I laid out a simple method for calculating the lifetime value of a customer in the promotional products distribution world. The same method can be applied to other industries too but the point is that without a nudge or prompt to a past customer, they’ll never know to come back to you for business.

With customer retention marketing, you can increase the LTV of each customer significantly increase your profits. It’s true. Email marketing and social media marketing help to build trust and loyalty, and ultimately increases retention. Increasing your customer retention rates by only 5% actually increases your profits by 25% – 95%. How’s that for increased LTV?

Value Proposition #3: Lower Acquisition Costs

Lastly, customer retention marketing is a marvelous way to lower your overall customer acquisition costs. Think about this for a moment…the cost of customer acquisition versus customer retention could reach as high as 700%.

To put this into perspective, three separate studies say the same thing. It is 5-10x more expensive to acquire a new customer than it is to retain an existing one. Even further still, the cost of bringing a new customer to the same level of profitability as the lost one is up to 16x more expensive.


As you look at your plans for marketing spend right now, I urge you to reconsider what you choose to spend your money on for new business. Word-of-mouth is the engine that drives your business, but customer retention marketing is the fuel that makes the engine go. You’ll build a loyal customer base for more referrals, increase your customer lifetime value, and reduce your acquisition costs. So please, take the time to invest in your existing clients and customers. Or better yet, we’ll do it for you.


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