Blog Article

Why Customer Engagement is Important for Small Businesses in 2021

Author: Katya Heckendorn 2-minute read

Customer engagement is a term that can sound a bit vague to most of us. “Customer engagement marketing,” “digital customer engagement” or “creating a meaningful brand relationship through customer engagement” these are just some of the concepts associated with the buzzword.

But what does customer engagement actually mean and why does it matter?

We’ll shed some light on what customer engagement is, how it relates to your small business, and how you can benefit from it. 

What is customer engagement?

Simply put, customer engagement is any interaction between a customer and your business or brand. These interactions could happen online or in-person, and the list is endless.
Here are just a few examples of how customers can engage with your business:

  • Walking into your store
  • Writing a Google review
  • Making a purchase
  • Tagging your business on social media
  • Talking about your business to a friend 

Depending on the type of engagement, it can increase your sales, grow word of mouth referrals, or strengthen a customers’ connection with your business. Your business may value certain types of customer engagement over others, for example, a small increase in the number of customers who purchase from you regularly may be more important than doubling your Instagram followers. 

Why is customer engagement important?

The more frequently your customers engage with you, the more likely you are to keep them for the long-term. 

Whether your business is online or brick and mortar, acquiring new customers takes a lot of effort and marketing dollars that many small businesses don’t have.

Since acquiring new customers is 25x more expensive than retaining current ones, customer engagement is one of the most effective and least expensive ways for small businesses to grow their profits. 

By interacting with your customers in ways they find valuable, you will retain more of your customers and increase their loyalty — by that, we mean turn casual customers into regulars. 

Loyal customers are the key to any business’ success because they can account for up to 80% of your revenue, and 55% of them will recommend your business to family and friends which means you acquire new customers without having to spend anything. 

How to measure customer engagement:

But how do you know if you’re engaging your customers effectively and what the actual impact is on your profits? 
If you run a small to medium-sized business, there are two simple metrics you can use to determine if you’re on the right track.

Average purchase amount will tell you how much your customers spend per purchase. Loyal customers tend to spend 66% more than the average customer.

Purchase frequency will give you an idea of how often your customers buy from you and how long it takes them between purchases. The more you engage your customers, the more likely you are to stay top of mind, and the more they’ll visit.

How can small businesses improve customer engagement?

With so many customer engagement strategies and solutions out there, you first need to determine what kind of customer engagement matters most for your business. 

For small businesses, focusing on the following objectives will make the biggest impact on profits:

  • Increasing purchase/visit frequency
  • Boosting spending 
  • Improving customer retention
  • Creating advocates by increasing loyalty

Reward your customers for spending with you. 

One of the simplest most effective tactics is to launch a loyalty program. With the right loyalty program, you’ll be able to hit on all of the above objectives with little effort and cost involved. 

  • Spending: A loyalty program can increase your average purchase amount by about 25%. Why? Because 65% of customers modify the amount they spend to maximize their rewards earned. If you’re worried about the points or rewards you give away cutting into your profits, don’t. For most loyalty programs, the value of a point is around 1.5% of the purchase which is a small price to pay for a 25% return. 
  • Visits: Customers tend to shop more at a business that offers a loyalty program because they have an incentive. In fact, 75% of customers report they are more likely to make another purchase after receiving a loyalty reward. Loyalty programs like ours, also have built-in communication tools, which means you can regularly send your members messages that get them back in the door. 

Customer retention comes naturally when you give your customers a loyalty program that they value. Plus as you increase customer loyalty, you’ll also increase the number of customers who promote your business via word of mouth or social media.  

Resolve customer service issues with incentives.  

When we think about the definition of customer engagement, any interaction with a customer, we mainly think of positive interactions. Unfortunately, that’s not always the case. 

Although you may strive to provide great products and services, situations will arise in which customers have unsatisfactory experiences. 

Resolving these issues quickly and smoothly is the key to retaining your customers. If they remain unresolved, not only could you lose the customer, but they can have wider implications like bad reviews or negative word of mouth that spread to existing and potential customers. 

While listening to the customer and offering sincere apologies may repair the relationship in the moment, there’s no guarantee that the customer will give your business a second chance. 

One of the best ways to bring back customers who have had unsatisfactory experiences is by offering them an incentive to come back. Promo cards are a great way to issue these incentives and are perfect for small businesses. Promo or discount cards are similar to gift cards except they have an expiry date, encouraging your customers to return within a time frame of your choosing so you get a second chance to wow them.

Engaging your customers in meaningful ways doesn’t have to be difficult, and when done effectively, it creates more value for your customers and your business. Check out more strategies on how to use customer engagement to boost your sales. 

Katya Heckendorn
ABOUT THE AUTHOR

Katya Heckendorn

Katya Heckendorn is a content marketing strategist specializing in the fundraising space. She likes all things peanut butter and thinks dogs are pretty cool.