Introduction

Building a sustainable business and brand people love is a balancing act. Often, customer acquisition takes front and center when growing a business. But focus too much on acquisition alone, and you’ll quickly create a revolving door of customers. And yet, that’s exactly what many businesses do.

Every local business should strive for a group of loyal and repeat customers who are proud to sing your praises—because when you increase your customer retention rate by as little as 5%, you can directly increase profits by 25% to 95%.

At the same time, investing time and resources into attracting new customers is necessary. By focusing your efforts on both customer acquisition and retention, you’ll have two of the most powerful growth levers a business can pull at your disposal.

In this guide, we’ll help you win at both customer acquisition and retention by walking you through:

• How customer expectations have changed over the years
• Retention and acquisition best practices every local business should know
• How local businesses can balance both customer retention and acquisition programs on limited resources

Customer Acquisition & Retention for Local Businesses

You can’t improve what you can’t measure. Justifying costs when it comes to acquisition and retention activities is only possible if you have a strong understanding of ROI.

What is Customer Acquisition and How Do You Measure It?

Customer acquisition is any marketing method used to help you convince new customers to purchase your products or service. Acquisition can involve digital ads, traditional ads, referrals, word-of-mouth marketing, content marketing, and more.

To measure the effectiveness of your customer acquisition marketing strategies, you need to look at how much money your business spends to bring in a new customer. This is known as your customer acquisition cost (CAC).

For instance, if you spend $1,000 on an ad and 100 people make a purchase because of that ad, you can then calculate that your CAC is $10 per customer.

However, it can be somewhat tricky to figure out which channels or ads are driving new customers to purchase, especially when you’re running multiple campaigns. To determine what is truly attributable ROI, it’s important to calculate your return on investment from a specific marketing plan or individual campaign. To do this, you can use this equation to remove sales growth that isn’t directly attributable to your campaign:

Tools like Google Analytics automatically track your conversion rates for specific campaigns. This helps you get a clearer picture of how much you’re spending to convert each potential customer to a paid customer.

What is Customer Retention and How Do You Measure It?

Your customer retention rate or CRR is the number of customers who purchase more products and services from your business after their initial purchase. Customer retention rates often differ between specific industries. As such, it helps to do research into how you measure up against industry standards. For example, retail has a higher turnover rate, given the nature of the business, than financial services.

To determine your customer retention rate, you need to track the number of customers at the beginning and end or a specific time period, such as a month or quarter, alongside the number of new customers acquired during this period.

Here’s the formula:

• CE = The number of customers at the end of a certain time period
• CN = The number of new customers acquired during the same time period
• CS = The number of customers at the start of the time period

Due to the nature of the formula, retention rates tend to be much higher when you measure over a short period of time and lower for first-year analyses. Because of this, you need to keep track of your retention rates over a longer period to get a clear understanding of your business performance.

Why You Need Acquisition and Retention to Grow Your Business

Customer acquisition costs tend to be much higher than retention costs. On average, it costs between 5 to 25x more to acquire a new customer than to retain a current customer.

Despite the higher costs, you still need to focus a reasonable portion of your efforts on acquisition. As noted previously, the average retention rate is 20%, which means that most businesses are losing 80% of the customers they acquire.

This makes it necessary to continue to focus on trying to acquire new customers just to keep your business at the same level of revenue. And, if you want to grow your business, you’ll need to acquire even more customers.

At the same time, retention is crucial to increasing your overall revenue. Loyal customers are 5x as likely to repurchase, 4x as likely to refer, and 7x as likely to try a new offering.

Yet, only 6% of U.S. businesses make customer retention a top priority.

So, for the best business outcomes, you want a marketing strategy that focuses on both customer acquisition and retention.

Customer Acquisition 101

When you develop a customer acquisition strategy, you will need to think about who will run your acquisition campaigns, what channels you’ll use, what marketing tactics will be most effective, and what tools you’ll need to make it all work.

Here’s a look at each of these areas.

Roles and Responsibilities: Who Owns Customer Acquisition

Everyone working at your business has some role in customer acquisition. From your receptionist to your accountant—simple interactions like how a potential customer is treated on the phone or word-of-mouth referrals by employees can drive more business. So, ensure all your employees know they can—and should help—with customer acquisition.

However, the primary responsibility for customer acquisition falls on sales and marketing.

Marketing teams create campaigns, ads, and content that help support and drive sales. Marketing’s work has both a long-term focus, such as building brand awareness and educating potential customers on the products or services your business offers, as well as a short-term focus of helping to identify hot prospects for sales to follow up with.

Based on the type of products or services you sell, sometimes marketing alone can be enough to make a sale. In fact, 81% of retail customers conduct research online before ever buying. And that type of customer journey isn’t unique to retailers. Many customers are now leveraging marketing materials to make more informed buying decisions.

That said, sales is still a vital role in any company. Sales can step in to reach out to customers, develop relationships with those customers, and negotiate prices and terms with customers when the product supports this type of negotiation.

To achieve both long and short-term goals, marketers can use traditional methods such as billboards, radio, newspaper, TV, or direct mail and digital marketing efforts such as paid ads, social media, search engine optimization (SEO), and content marketing.

In some smaller businesses, sales and marketing roles can overlap. However, keeping some level of separation between the two can be beneficial as each has a unique role to play in the customer acquisition process:

• Marketers: Run campaigns, create content, and place ads to acquire leads and make sales.
• Sales: Takes hot leads from marketers and works to close sales. A sales team is especially important for expensive or complex services or products.

Channels: Where to Acquire Customers

With more channels than ever, there are more opportunities to find and acquire customers. But it can also be difficult deciding which channels work best for your local business—let alone manage all of those channels—especially if you have a lean staff.

However, 73% of consumers say they prefer shopping on multiple channels, so every business needs to sell on multiple channels. The key is to find the channels that your customers frequently use—and that deliver the most cost-effective CAC.

Here’s a look at the top channels local businesses successfully use.

Organic and Paid Search

When customers are looking for a specific product or service, one of the first things they do is open their web browser and type in a query, such as “dental services near me.” Since over 25% of people click the first search result, your goal is to be the top one—or at least in the top three.

You can either do this by having content on your website that makes you the most relevant answer to the query (organic search) or by paying to have your business promoted at the top of the query as an ad (paid search).

Both channels can be effective. Organic search is free, but is a long-term strategy as it takes time to build up enough authority to achieve a high rank in the search results.

Paid search allows you to get your business in front of new audiences by advertising on search engines like Google or other advertising platforms or social media sites. You pay every time someone clicks on your ad. The plus of paid search is that you’ll see results much faster than with organic SEO, but the costs can quickly add up.

Website Chat

Your website is one of customers’ first places to learn more about your business. Website chat, can be a highly effective channel to connect with these visitors and provide immediate answers.

Many small and local businesses are finding that investing in chat has led to a very strong return on investment. Local businesses like Portland Window Coverings have seen web interactions increase as much as five times using website chat. Likewise, the largest mattress retailer in the United States found that after adding a web chat platform, web conversions increased by 24%. And the average order value increases by 10% for customers interacting with webchat before buying.

Reviews

How important are reviews to your local business? Let’s look at the facts:

• Nearly 60% of consumers look at online reviews at least once a week, and 93% say that online reviews impact their purchase decisions.
• Reviews influence 88% of consumers in discovering a local business and are 2x more likely to be an important factor in choosing a local business than loyalty and 7.4x more important than traditional marketing

Clearly, reviews are now essential for local businesses’ customer acquisition strategy. So, you want to make sure that you have not only great reviews, but also a high frequency and a high number of reviews, as these factors also influence how customers view your business.

Social Media

There are 4.74 billion social media users around the world, equating to 59% of the total global population — and that number continues to grow, with 190 million users joining in just the last year. You don’t have to be on every social media channel, but you should be on the ones that matter most for your business.

For example, a local dentist might find the most success on Facebook, but an interior design firm may do better on Instagram because that’s where people often go for design inspiration. Understanding where your potential customers spend their time online is key to investing dollars appropriately.

Email

With 90% of internet users using email, it remains an important channel for customer acquisition. Email can be an effective channel to let customers know about discounts, store sales, and other vital information that can help convert them from prospect to customer. In fact, 81% of SMBs still rely on email as their primary customer acquisition channel.

For example, a local landscaping company can send educational email reminders about the need to blow out sprinklers and do a fall clean-up before winter. This may trigger prospects to reach out and schedule this service.

Text

Text (also known as SMS) is quickly becoming a preferred channel for many consumers. Not only do 41% of consumers say it’s their preferred way to communicate, 54% of consumers say they want to receive marketing text messages from businesses.

Many businesses are seeing significant results with text for customer acquisition. Woodstock Furniture saw instant customer acquisition with text—going from send to sale in less than 30 minutes.

Third-Party Sites

Third-party sites or marketplaces, such as Amazon, already have an active and large customer base, which gives your business access to more customers than you could ever reach on your own.

While third-party sites can help you increase your sales volume, these marketplaces take a percentage of each sale. You also need to learn the ins and outs of each third-party site, so you’ll want to carefully evaluate which ones make the most sense for you to use.

Events

Local events can be a great way to promote your business to potential customers in your area. Events can include your own sales events, such as a Labor Day storewide sale, or hosting a booth at popular community events that align with your business—whether that’s a health fair, a tradeshow, or a sporting event.

One of the biggest benefits of in-person events is that they can build brand recognition and help you create relationships through in-person interactions. Plus, participating in local events shows your commitment to the community while helping you reach potential local customers.

Tactics: How to Acquire New Customers

Once you’ve identified which channels you want to use, the next step is to identify how you will use those channels to acquire customers—this is known as marketing tactics. In this section, we’ll dive into what tactics you can use and what channels they’re appropriate for.

Content Marketing and SEO

Previously we discussed organic versus paid search as a channel. Content marketing, which includes creating content like blogs, podcasts, videos, and other online content, is a tactic you can use on organic search channels. It goes hand-in-hand with SEO, which searches your content for keywords people are querying and surfaces the most relevant content to the top of the search results.

Since 93% of online experiences begin with a search engine and 70-80% of users ignore paid ads and focus on organic results, the dual combination of content marketing and SEO can be a powerful tactic.

However, it can be a challenge to create a lot of content consistently, especially if you have a lean marketing team. Making a content calendar so you have content scheduled in advance, reusing content in different formats, such as pulling out snippets from a blog and using it on social media, are a few ways you can try to stay consistent and get more mileage from the content you create.

Social Media Marketing

Social media sites such as Instagram, Facebook, TikTok, and Twitter can all help you connect with prospects. To stay on top of brand mentions on social media platforms, you can use tools that automatically gather information about why customers love your brand or why they’re leaving – all of which is intel you can use to improve your future customer acquisition strategies.

While your marketing team should be paying attention to all the relevant social media channels for your business, as a small or local business, earned channels can often be the best place to put your focus and effort first. Getting more reviews can deliver a lot of bang for your buck as they will boost your local SEO and increase trust and confidence in your business.

So, be sure your business is on Google Business Profile, industry review sites, local reviews pages, and other social media channels.

Email Nurturing

Most people aren’t ready to buy immediately. They need time to learn more about your business and build trust in your brand, especially if it’s a higher-cost purchase like buying a car or reroofing their home. Email nurture campaigns allow you to continue connecting with potential customers, educating them on your business and building more trust and offering promotions that may finally tip the scales to getting them to make a purchase.

Not only is email highly effective, but according to the Data and Marketing Association, you can expect a $42 dollar return on investment for every dollar you spend. Personalizing your email messages can also boost their effectiveness, as click-through rates are typically higher when a message is personalized.

You can also tie your email nurture to your other marketing tactics as well, such as text marketing to drive more opt-ins and promotions.

Text Marketing

Text is quickly becoming a preferred marketing tactic because of customer responsiveness  of receiving one (at a nearly 100% read rate).

You can create text campaigns that are fun and interactive using gifs, videos, images, links, quizzes, and more. This can further boost engagement as 41% of customers say they are more likely to engage with text messages that include images, gifs or videos, and 52% of customers say they are more likely to engage with text messages that contain a link to more information.

Pura Vida’s text marketing campaign for Botox treatments has been a huge success. Not only did they text the promotion, but they used text to send a payment request once someone expressed interest. This allowed Pura Vida to collect $20,000 in sales in two days.

Video Marketing

Video marketing can be used on almost any channel and is a great way to reach viewers, especially younger generations. In one survey, Gen Z and Millennial internet users in the U.S. said YouTube was their platform of choice to follow influencers.

YouTube is also the second largest search engine and the second most popular website next to Google, making it a great way to reach your target audience. Using the right keywords and tags to pop up in the search results, you can use YouTube as part of your organic SEO efforts.

Paid Advertising

You can promote your business with paid advertising on digital channels like search engines like Google or Bing or through social media platforms like Facebook.

Some businesses also invest in paid advertising on third-party sites like Amazon. Traditional paid advertising channels like radio, TV, bus benches and billboards can also be a successful tactic for local businesses.

The benefit of paid advertising is that it puts your business in front of new-to-you customers that are similar to your ideal customers. This can increase the likelihood that they’ll buy. However, paid advertising can quickly add up, so you want to know your CACs and ensure that you get the return on ad spend you need to be profitable.

Referral/Review Marketing

Referral programs, in which existing customers recommend your brand to friends and family, are an excellent way to acquire new customers. Considering that up to 92% of shoppers trust recommendations more than advertisements, referral marketing could be one of the most powerful (and cost-effective) tactics.

Review marketing is similar to referral marketing because customers trust other people’s recommendations. The big difference is that they do not know those recommending your business. However, review marketing is still quite effective, with 45% of local businesses saying that online reviews are “very important” to their business’s success.

Tools: How to Scale Customer Acquisition

The right technology can make a big difference in managing your customer acquisition marketing more effectively and ensuring you achieve the best return on your marketing investment. Some of the top tools that local businesses use to help scale customer acquisition include:

• Customer relationship management (CRM): A CRM helps businesses to keep track of customer data and to integrate it with other tools to improve audience targeting and marketing tactics.
• Email marketing software: Email marketing software lets you automate many steps in an email campaign, saving you time and money.
• Social media tools: These tools help streamline posting on your social media channels or help you keep track of brand mentions so you can respond and stay engaged with potential customers.
• Review management tools: These tools help you manage the review process end-to-end, from sending out review requests to notifying you when a review posts.
• Texting tools: These tools make it easy to send and receive text messages. Those with additional features can support moving conversations from phone or website chat to text messages and collect payments via text.
• SEO tools: These tools help you determine what keywords will help you rank in search. You can use these tools for both organic SEO and paid search.

Having the right tools can help streamline processes, save time, and most importantly, help you run more and better customer acquisition campaigns.

Customer Retention 101

Now that you’ve successfully acquired customers, the next step is to build an ongoing relationship with them that results in repeat business. An effective customer retention strategy has many of the same components as a customer acquisition strategy in terms of assigning roles and responsibilities for customer retention and utilizing various channels, tactics, and tools to achieve your customer retention goals.

At the same time, because your objective is different, the who, what, and how you succeed at customer retention are all slightly different.

Roles and Responsibilities: Who Owns Customer Retention

Like with customer acquisition, on some level, everyone working at your business owns customer retention. Anyone who interacts with a customer impacts the experience, which is a large part of what draws customers back again and again to a local business.

In a study by Qualtrics, positive experiences were directly tied to increasing purchasing and referrals.

Because customer retention is largely about customer experience, customer support and customer experience teams play an important role. However, customer marketing and product marketing also have a key role to play in driving your retention strategy.

When customer experience and support teams can collect and share information about how customers are using your products or services, what their frustrations, and what language they use, marketing and product marketing teams can then take this information to shape marketing messages and product development, which will help drive greater retention in the long run.

• Customer Experience: Analyze customer feedback and data in order to share insights with the rest of the organization to improve the customer experience.
• Customer Support: Directly interact and assist customers who need help on a variety of issues.
• Customer Marketing: Create marketing campaigns and communications to upsell customers, grow loyalty, and encourage repeat business. Feedback from customer experience and support teams is integral to effective messaging and marketing campaigns.
• Product Marketing: Research and define the position of your product in the market. Having customer feedback insights is crucial to them being able to do this effectively.

Channels: How to Engage with Current Customers

When it comes to customer retention, your customers will be on many of the same channels as those you’re trying to acquire. However, how you use these channels to interact with current customers will be different, as your goal is different. Instead of building awareness around your local business, you’re trying to develop a deeper relationship with your customers to encourage upsells and repeat business.

Let’s examine what channels can help you do this—and why.

Email

Email is a great channel for building long-term relationships with customers. You can use email to send personalized messages to specific groups of customers, send friendly reminders or special promotions, and to collect customer feedback. Today, 80% of businesses still rely on email for retention.

Phone

Phone remains a preferred channel, especially regarding customer support. In fact, 42% of U.S. consumers still say they prefer phone calls to resolve customer problems. However, it’s also important to know your customer demographic. In one study, 66% of millennials and Gen Z said they hate calling people, while those over 35 said they don’t mind.

Text

Not only do 65.6% of consumers think that texting makes working with a local business more convenient, 40.5% of consumers say they are likely to switch to a different business because they offer text messaging to communicate.

The takeaway?

If you’re not using text to communicate with your customers – you’re likely to lose them. This makes text a critical channel when it comes to customer retention.

One of the ways that text makes the customer experience so much better is how convenient and efficient it can be. LA Furniture, for example, saw a dramatic drop in customer service and response times by switching to text.

“You’re not going to get out of a phone call with a customer in under five, six minutes, at best. With Campaigns, our response time is less than a minute. That’s five times less, if not more. That’s crazy time savings.”

–Madeline Sweeten, LA Furniture

Website Chat

It’s not just new customers that visit your website; returning customers come to your website to make purchases, find your contact information, schedule appointments, and more. Having website chat on your website can further boost customer retention.

In fact, 79% of businesses that started using webchat saw boosts in customer loyalty, revenue, and sales. What’s more, 63% of customers say they are more likely to revisit a website with a live chat.

Events

Hosting events for your current customers can be an excellent way to further build relationships and loyalty. In fact, 75% of B2C marketers said that in-person events are crucial for their brand’s success. Likewise, 40% of consumers say they become more loyal to the brand after an event.

Tactics: How to Retain Current Customers

Once you’ve identified which channels you want to use, the next step is to identify how you will use those channels to retain customers. In this section, we’ll dive into not only what tactics you can use, but how they can impact the customer experience, which is a key component of retaining customers.

Welcoming New Customers: Setting the Tone for the Start

It’s important to start any new relationship on a good foot—including your relationship with customers. Personalizing the experiencing, setting the right tone, and creating a human connection are all important to establishing a relationship that will sustain customer loyalty.

One way to begin your relationship is with an email welcome sequence. In one survey, automated welcome emails sent by e-commerce companies had a 30% open rate and a 51% conversion rate, which is much higher than the average email open rate of 23%.

To personalize the relationship and add a human element, you can also use website chat, which allows you to collect your customers’ names, phone numbers and inquiries. From the onset, this will help you continue communicating with your customers via text, a channel customers have already clearly expressed a preference for.

Customer Education: Make Customers Experts on Your Products and Services

When customers understand more about how your products and services can improve their lives, save them time or money, or provide other benefits, they are more likely to purchase from you. For example, if customers understand how a bi-annual dental cleaning helps reduce cavities and gum disease, they will be more likely to follow through with scheduling and attending those cleanings.

Customer education can come through any number of channels – email, text, website, social media, and even customer support or in-store interactions. You can also use educated customers as brand ambassadors, encouraging them to share what they know with their friends and family.

Customer Communication: Newsletters, Events, and More

Ongoing communication with your customers is essential to building a relationship and increasing their loyalty. Newsletters, events, and text messages are just some ways to keep communication flowing with your customers.

Sending a monthly or quarterly email newsletter is probably the easiest and cheapest way to stay in touch with your customers. You can use your newsletter to showcase your expertise, generate interest in your products and services, build stronger relationships, and promote seasonal deals and new product offerings.

Events that provide customers exclusive access to new products, feature VIP speakers, or include other small touches like gift bags are great ways to show you value your customers.

Texting regular communications to your customers can also help with retention. For example, reminding customers of annual or seasonal services, like tire rotations, carpet cleaning, or haircuts, and then making it easy for them to call and schedule those appointments right from their phone, can increase repeat purchases.

For Real Salt Lake, an American professional soccer franchise, text has become a powerful tool to communicate with fans. With Podium Campaigns, RSL uses text to send match day notifications, promote ticket and merchandise sales, and build its brand by showcasing community events and team updates–all leading to a more personalized experience for fans and increased fan engagement.

Loyalty Programs: Reward Your Best Customers

Loyalty programs play an important role in customer retention. Not only do 83% of customers say loyalty programs make them more likely to continue doing business with companies, data shows that 67% of consumers spend more when they are part of a sustained customer loyalty program.

If you’re looking for how to set up a loyalty program for your local business, there are a number of different models you can use. One of the most simple is offering a free product or service after every 10 purchases. This can work great if you offer lower-cost products or services. You can also send special offers that are exclusive to loyalty program members. Offering gift cards in exchange for referrals or online reviews is another way to reward your best customers.

NPS & CSAT: Measuring & Responding to Feedback

The net promoter score (NPS) and the customer satisfaction score (CSAT) are both ways to measure how customers feel about your business.

NPS measures the loyalty of customers to a company. NPS scores are measured with a single-question survey and reported with a number from the range -100 to +100, a higher score is desirable.

CSAT measures customer satisfaction by asking customers how they would rate their overall satisfaction with the goods/service they received (i.e., very satisfied to very unsatisfied). The metric is typically scored as a percentage—with 100% the best possible score and 0% the worst.

Customers appreciate that you care enough to ask for their feedback. In one study, 77% of people said they have a more favorable view of brands that collect and accept customer feedback. For younger generations, it is even more important to ask for feedback — 82% of those aged 18 to 34 say they have a more favorable view of brands that ask for feedback.

The biggest benefit of collecting customer feedback though is that you’ll know what customers like about your business and what they don’t. With these insights, you can change areas of your business that may be causing customers to churn.

Tools: How to Scale Customer Retention

Like with customer acquisition, the right tools can streamline customer retention campaigns. They can also offer more personalized, engaging experiences that will allow you to build stronger relationships and collect more customer feedback about your business.

Here are the key tools local businesses need to support their customer retention efforts:

• Customer relationship management (CRM): Whether you’re acquiring or retaining customers, a CRM is a foundational tool for any business, allowing you to keep track of all your customer data.
• Customer loyalty program: Running a customer loyalty program will be much easier with a tool that lets you store loyalty program data, automate the delivery of rewards, and track customer behaviors to help you personalize reward offers. Depending on the type of loyalty program you create, there are a number of different tools on the market that can help.
• Gamification: Gamification tools create game-like experiences in order to boost engagement. Some of the gamification features tools might offer include leaderboards, virtual currency, redeemable points, achievement levels or badges, and performance graphs to show performance over time.
• Personalization: Personalization tools allow you to customize your website, emails, and other content and interactions based on customer purchasing data, website behavior data, and other psychographic or demographic data.
• Customer service and support software: Customer service tools enable you to collect, organize, respond to, and report on customer support requests. Integration with other tools, such as your CRM, Customer Feedback, and Personalization tools, can enable customer service agents to provide a more personalized and seamless customer experience to your customers.
• Customer feedback: A customer feedback tool should make it easy for customers to provide feedback and for you to monitor that feedback and extract insights. One key feature is the ability to send surveys via text.

The goal with whatever tools you choose to use is to allow you to make the customer experience as seamless as possible while creating more efficiency for your business. Your customer retention tools should allow you to consolidate all customer information – conversation history, purchase history, reviews, and customer feedback – in one place for a single record of truth for the entire customer journey. This way, when a customer contacts your business, the customer experience is frictionless, and will keep the customer returning.

Final Thoughts

Communicating with your customers on their preferred channels is a critical part of the customer experience for customer acquisition and retention. But you not only need to be on these channels – you need to be able to deliver and manage the experience on these channels in a cohesive manner.

When you can connect the customer experience across the entire customer journey—you’ll not only attract more new customers, but you’ll build increased loyalty in the customers you already have, allowing you to continually grow your business.

Acquire new customers and retain the ones you already have with 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.