The True Costs of Not Having a Customer Loyalty Plan

Small Business Marketing Blog

The True Costs of Not Having a Customer Loyalty Plan

Customer Loyalty Plan

The ABC’s of Business Basics Series – L is for Loyalty

As the old expression states, “people come and people go.” In your personal life, it can be easy to shrug off a person and move on. However, when it’s your business, this can be a very costly attitude to adopt.

The creation and implementation of a customer loyalty plan is necessary for all small businesses.

Look at the costs of customer acquisition vs. customer retention. While sources vary, they do agree that it costs between 4 and 10 times more to find new customers than it does to keep the old ones happy.

First, let’s look at the cost of acquiring new customers.

Do you know how much your company spends on attracting new customers and getting them to buy? It’s called the ‘Cost of Acquisition.’

There are varying ways to flush out this important number. You can look at what it costs to send out an email, an advertisement, purchase Google Ad words, or arrange a visit from a sales person.

However, you also need to look at other costs such as training, agency costs (if you use one), or internal costs for marketing. Once this number is added up, owners are usually surprised at how high the initial costs of acquiring a new customer can be.

How about the customers you attract through the door or by getting them to click online and shop?

Here’s the reality for you. It can take several transactions with that customer before they become loyal (Source: www.refresher.com/).

How much is it costing your company every time you attempt to draw them back?

If you are unsure of what to review, look at performance indicators like marketing and advertising costs, employee costs, cost-of-goods, the hard costs of keeping your business open such as rent, hydro etc.

Customer retention is the name of the business game. Here’s a statistic that should give you incentive: “A 5% increase in retention yields profit increases of 25% to 95%” (Source: Bain & Co. 1990).

So, in the big game of business and profit, it’s all about loyalty.

Pamela Chatry

About the Author, Pamela Chatry

Do you work too hard? Is your business in chaos? If you are struggling with business issues, contact Pamela Chatry for a complimentary assessment. Pamela has been a trusted and highly respected Business Consultant, Mentor for Women in Business, Self-Employment Advocate, Trainer and Keynote Speaker for over 25 years.


Visit www.pamelachatry.com or call her at 778-856-8970 for help in getting your business to its fullest potential.

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