With the holiday season coming up, small businesses are trying to figure out the best ways to maximize revenue for the end of the year and beyond. Gift cards have long been the go-to tactic, and for good reason — they’re an effective way for merchants to drive cash flow, they allow current customers to refer like-minded friends who will probably enjoy the same products, and the feeling of “free money” frequently makes shoppers spend more than the value of their gift card. All good signs for the merchant, but what happens if they don’t come back after redeeming their gift cards? What if their gift cards are never even used? In fact, as many as 10 percent of gift card holders never redeem them, so not only do retailers lose profit, but they’re losing the opportunity to turn these new customers into customers for life.
Besides, furniture stores aren’t exactly a traditional venue for buying or redeeming a gift card. Some furniture stores sell them, but they are few and far between. If your store doesn’t sell cards, you should focus on methods you can use to retain current customers, and how to keep your new gift card customers coming back after the holiday deals are gone. Data from FiveStars shows that customer lifetime value is a persistent problem for small businesses—17 percent of general small business customers come back one month after their first visit, but that number declines over time, reaching a low 3-percent return after 10 months.
With such a high influx of new customers coming in this holiday season, it’s important for your store to know how to keep them coming back months later. Here are FiveStars’ three top tips to drive customer loyalty and increase retention this holiday season and beyond:
Enroll shoppers in a loyalty program. RetailerNOW explored loyalty programs in its March 2015 issue. The easiest way to ensure you retain your current shoppers is to offer relevant deals and rewards for being a loyal customer. Whether it be as simple as sending your shoppers email updates or using a loyalty tech platform, providing your current customers with personalized shopping experiences and opportunities to save on what matters to them is essential to make sure they come back. Remember that the more personalized the loyalty program, the better — a loyalty program is only as good as its ability to provide the customer with something they want.
Send holiday promotions and discounts. Major retailers take advantage of the holiday shopping craze by offering special deals and discounts. If small retailers want to ensure they don’t lose their current customers to big businesses during such a competitive time, it’s important they keep up with holiday deals. Participating in relevant promotional holidays such as Small Business Saturday is an excellent way for small businesses to keep up with the excitement of Black Friday and Cyber Monday. Additionally, offering extra-special deals to your long-term customers will strengthen the existing shopper-merchant relationship, build loyalty, increase referrals and keep retention high.
Price effectively and introduce new items for the following year. During the holiday season, it’s important to effectively price your furniture and accessories to maximize spend. If most of your gift cards are distributed in increments of $100, you can price popular products like accessories at $99 so customers are likely to purchase additional products out of pocket. While end-of-the-year sales are great for increasing traffic and driving revenue, it’s important to plan for the following year — especially during the slower times. Using the high traffic of the holiday season is a perfect opportunity to promote new, upcoming products to ensure that your loyal customers continue to come back even after the holiday products and deals are gone.
By following these tips, small businesses can maximize holiday spend and increase the likelihood of customers coming back in the months to come. After all, increasing retention a mere 5 percent can increase profits by 25 percent to 90 percet, so focusing efforts on driving loyalty is the key for year-long success.