Customer Retention Strategies for Small Business

July 26, 2022

When was the last time you reviewed customer data? Or even thought about it? Like many tasks as a business owner, digging into customer retention data can easily fall to the bottom of the list of priorities. But, I’m here to tell you that marking a reminder in your calendar every quarter to delve deeper into customer satisfaction, retention and churn, can actually help your business level-up.

Why Customer Retention Matters

It’s a well known fact that keeping and nurturing customers can be up to five times cheaper than acquiring new customers. Yet, only 18% of businesses focus on retaining customers as opposed to the 44% that spend their time acquiring new customers. It makes sense that people wanting to grow their business prioritize marketing efforts on attaining new customers. However, when considering the process, time and money involved in acquiring new customers, it’s easy to see why a joint strategy for growth–encompassing both new customer acquisition and retention–is key. But don’t just take my word for it. New York Times best selling author, business strategist and creator of the Net Promoter Score (NPS), Fred Reichheld, states that the return on investment (ROI) of customer retention strategies is well worth it. Data suggests that a 5% increase in customer retention can boost revenue by 25-95%!

Of course it’s not all about revenue. Loyal customers can also help you get good reviews on things like Google and Facebook, giving your businesses a boost in the word of mouth marketing department. Word of mouth marketing is another secret weapon of successful small businesses. It’s not only one of the most effective types of marketing, it’s also cheap, if not free. I don’t know about you, but if I could save a few dollars just by focusing on customer retention to secure long-time customers and help boost acquisition, I’d do it.

How to Calculate Your Customer Retention Rate

Yes, it’s time for math. While it’s not my favorite subject, I will endeavour to make this as quick and simple as possible.

Customer retention rate measures the number of customers a business has retained over a period of time. It considers the number of customers who have churned (cancelled subscriptions or found a new service provider) as well as the number of new customers that have remained a customer for the given period. Together, this calculation gives you a percentage result. The closer to 100% the result is, the better.

Ok, it’s time. Get those calculators ready. Here is the formula you’ll need:

Customer retention rate formula

CRR = [(E-N)/S] x 100

To calculate the retention rate follow these steps:

  1. Choose a timeframe for your calculation, this could be a quarter, six months, or a year
  2. Plug your data into the formula. Here’s what you’ll need:

An S representing the number of customers at the start of the time period for the customer retention rate formulaS represents the number of customers at the start of a time period

An E representing the number of customers at the end of the time period for the customer retention rate formulaE represents the number of customers at the end of that time period

An N representing new customers in the time period for the customer retention rate formulaN represents the number of new customers added within the time period

  1. If you’re doing this in a spreadsheet, it’ll calculate the answer for you (if you have it entered correctly). But, if you’re doing it by hand, remember you’ll first want to calculate inside the brackets (E-N) then divide that number by S, then multiply the result by 100, to get your final rate. If this pattern is not followed, you won’t get the correct answer.

Phew, that’s a lot of numbers and letters! So, let’s do one together.

Let’s calculate a CRR for the past calendar year. Say you started that year with 100 customers (S) and ended the year with 100 customers (E) and added 20 customers over the year (N).

The calculation would be as follows:

CRR = [(100-20)/100] x 100 = 90%

If you want to dig even deeper into this formula, as well as a few other key metrics, take a look at this blog by Zendesk which provides a really comprehensive insight into calculating these metrics.

Ideas For Small Business Customer Retention Strategies

Once your business CRR is calculated, it’s time to move onto implementing strategies to improve that rate.

Six circles with mobile, email, phone, location, @ and speech bubbles showing different forms of communication

Personalize every communication and interaction

Exemplary customer service and in turn, customer satisfaction can exponentially help your retention rate. Microsoft research shows 58% of consumers surveyed are likely to change providers because of poor customer service. While Zendesk reports that 54% of consumers expect their experience with a company to be personalized. This data just goes to show that these days, it’s not just enough to get the job done well, the key deciding factor about whether a customer uses your service again is their experience. And, to make things more interesting, there’s a big swing to a more conversational style of customer service. Maybe it’s the oversaturation of technology and automation, or maybe it’s a lockdown hangover but, customers no longer want to feel like just another number. They want customer service that feels transparent, open and reliable.

Speed is another necessity when it comes to communication and service. 82% of customers rate getting a response within 10 minutes as very important when they have a sales or marketing question. Luckily, this is a part of business where the trades (especially small and medium businesses) usually excel.

Post-sales service

You’ll start to notice a theme to some of these strategies. They’re all about customer satisfaction and ensuring your customers are looked after. Post-sales service can include a range of collateral, communication and advice. Things like an automated text message with a link to a downloadable invoice, or a follow-up email with a feedback survey are great ways to make that final touchpoint with customers and allow them to reflect on the service. These communication tactics also open the door for you to provide your contact details again in case the customer has any follow-up questions.

An email nurture stream with relevant blog posts and discount opportunities or maintenance reminders is another great way to incorporate post-sales service into your business. This also establishes you as a leader in the market and helps to build trust with customers. Better yet, a simple newsletter can also go a long way in reminding your customers about your brand.

A sad face, a scale and a happy face showing customer feedback

Leverage customer feedback surveys

Feedback from customers is vital in growing your business, acquiring new customers and also retaining existing customers. Feedback surveys allow customers to explain what you can implement or change to improve their experience as well as identify opportunities for your overall marketing and retention strategies. It is also great to receive positive feedback and boost the morale of your team.

Use gamification

This is an interesting technique, but one which may just help you retain customers if used correctly. Gamification describes the process where game-style incentives or strategies are implemented in non-game activities. In other words, consumers are incentivized to purchase products or services using gaming techniques. It’s thought using these gamification strategies engages consumers with your brand by appealing to our natural tendency to be motivated by competition and achievement. Think frequent shopper programs or loyalty rewards.

Small Business Customer Retention program Ideas

Computer with trade business reviews

Community and customer advocacy program

A customer advocacy program is a great way to encourage your loyal customers to help you spread the word about your company. It is a marketing strategy that incentivizes customers to review your business. For example, customers could leave reviews on sites such as Google My Business, or refer a friend, provide a testimonial for your website, or even help you build a case study with their experience.

Of course, many customers are more than happy to recommend your business without incentives, however, it’s nice to have something to say “thank you” to your customers and ensure they keep coming back.

Incentives you could provide for your brand advocates could include a gift voucher for a local shop or a percentage off the next job you complete for them. For more information about how to get reviews and potential incentives to provide, check out our blog How To Get Good Reviews For Your Trade Business.

Customer loyalty program

Loyalty programs are another great retention strategy for businesses. Think about the coffee card in your wallet. Every 10 coffees you buy, you get one free. The coffee card costs the shop next to nothing, but it helps it to make that cafe your coffee-spot of choice. Why go somewhere else, if you can get a free coffee after 10?

Loyalty programs for trade businesses are similar, however not quite as straightforward as a coffee card. Using the same premise as a coffee card, if you are an HVAC business, once a new air conditioner is installed, you can offer the customer a free 12-month maintenance service. Or, perhaps, if a customer is returning business, you could provide 10% off the next job you complete for them.

Loyalty programs in trades can be a bit tricky to think of, however, just think outside the box or ask your customers what they’d like to see as a reward, and implement their feedback.

By showing gratitude to your customers, you’re already putting your business on the front foot compared to your competitors who may not be doing the same.


Retaining customers in the trade industry can be challenging. However, by putting some time aside to delve deeper into the opportunities customer retention presents, you can sustain and grow your business.

Want more tips on how to market your business to new and existing customers? Check out our latest eBook, Map, Stack, Attract: How To Scale Your Field Service Business. This comprehensive ebook has a ton of great resources from marketing to sales and everything in between.