How likely are loyal customers to purchase again?

It’s common business knowledge that it’s cheaper to retain a current customer than it is to attract a new one. Acquiring new customers costs five to 10 times more than selling to a current customer, and current customers spend 67 percent more on average than those new to your business, according to BIA Advisory.

That’s why companies focus on excellent customer service. A great customer experience keeps a business’s current customers happy and satisfied. However, while great customer service is crucial, there’s another way to retain customer loyalty: the recurring revenue model.

What is recurring revenue?

Recurring revenue occurs when companies find a way to turn a one-time sale into recurring purchases. For example, let’s say you have a dog grooming business. You could offer a one-time dog grooming session for $50. But you could also ask the customer to join a club that offers unlimited dog grooming for $130 a month.

You might initially think that offer could lose you money. What if the customer comes in every day? Realistically, that won’t happen. Customers will likely come in only a few times per month. Your initial offer doesn’t foster customer loyalty; the next time the customer’s pooch needs a trim, they’ll likely seek out the dog groomer currently offering the best discount. But your unlimited offer keeps the customer tied to your business with an incentive to keep working with you. 

Did You Know?

Adobe found that 7 in 10 shoppers consider themselves brand loyal after at least three purchases from the same brand. What’s more, existing customers are also 50 percent more likely to try your new product, according to Invespcro.

The benefits of recurring revenue

You might think giving customers a deal on more frequent product or service use will only benefit their pocketbooks. Instead, your business will thrive because of the benefits of implementing this model.

Consider the following upsides to implementing a recurring revenue model:

• A recurring revenue model brings reliable income. With recurring revenue, you won’t have to guess how much business you can drive in the door each month. As long as you do a good job of keeping your recurring customers, you can count on that revenue – in addition to any new business that might drop in.
• A recurring revenue model helps build customer relationships. In a recurring revenue model, you’ll frequently interact with the same people. This communication level will help you build and grow customer relationships while gaining the knowledge and tools to provide excellent customer service.
• A recurring revenue model boosts customer retention. If a customer tries your service once and leaves, you have little chance of fostering customer loyalty. In contrast, a recurring revenue model can increase customer retention – as long as you continue to provide value.
• A recurring revenue model can boost cash flow. Operating in a recurring revenue model can help solve cash flow problems. Membership payments are typically set up automatically. You’ll receive that revenue whether or not the customer takes advantage of the services offered.
• A recurring revenue model can increase profits. A recurring revenue setup requires no additional expense outlays. You receive money in a timely fashion whether or not customers avail themselves of your services.
• A recurring revenue model can increase marketing effectiveness. Once you know the percentage of customers in your recurring revenue model, how many will continue in the program and how much profit you’ll gain through them, you can outspend your competitors in advertising. For example, say you have a product or service you sell for $10 upfront or $20 monthly. At least 30 percent of your customers take the recurring offer, and the average membership lifespan is four months. Your average customer lifetime value is $34. However, your competitor offers the same product without a recurring model, making only $10 per sale. You know you can outspend the competition in advertising by 3.4 percent per customer – enough to dominate any market.

• A recurring revenue model is easy to scale. Scaling is easy with a recurring revenue model. Non-using members finance marketing to more customers, and non-use by some allows use by more. For example, a gym may have 500 members, but only a fraction of them use the equipment at any one time.

Tip

Like recurring revenue models, repeat business – when a customer shops with your company regularly – fosters customer loyalty, brand trust and increased sales.

How to earn recurring revenue in your business

Don’t think your company has a product conducive to the recurring revenue model? You might be surprised. With a little creativity, any company can implement this model. Here are a few examples in various industries:

• Membership rewards: In a membership rewards scenario, a business provides value and engenders loyalty and repeat business. For example, a gas station offers gas rewards or discounts to any customer who signs up for a $5 to $10 monthly membership. In this scenario, loyalty will generate significant money for the business. A non-member will go to any station, but a gas club member will ensure they fill up at your gas station. Grocery stores, partnering with gas stations, are implementing this model nationwide.
• Legal information packages: Small businesses often need advice and help from a business lawyer. However, paying an expensive lawyer’s retainer fee may not be appealing or cost-effective. As a solution, a law firm could offer four 30-minute sessions with a junior attorney for $150. Customers can use the arrangement to get their questions answered. Moreover, they’ll be more likely to turn to that law firm when bigger issues arise. The law firm enjoys steady income and loyal clients.
• Retail frequent buyers’ programs: Retail stores can offer memberships or customer loyalty programs that give customers discounts on specific products or services. Customers are incentivized to save money and gain rewards, while the store enjoys customer loyalty and the potential for repeat business. For example, Petco has a program that offers discounts on grooming and monthly cash-back incentives for in-store use. Additionally, Costco uses a straight membership model that allows customers to shop at its discount warehouse exclusively.
• SaaS models: SaaS stands for “software as a service.” Software companies use cloud computing to implement a SaaS recurring revenue sales model for software usage. For example, businesses and individuals use Microsoft 365 and QuickBooks online via a SaaS model. 
• Streaming entertainment: Entertainment companies like Spotify and Netflix use a recurring revenue model to allow customers to access streaming content.
• Online courses: Education and training businesses use a recurring revenue model to give customers access to online courses for a monthly fee.

People are inundated with choices and exhausted by the numerous options available in today’s product and service landscape. A recurring revenue model makes the customer’s life easier by simplifying and limiting choices and providing unique value. Businesses gain loyal customers and increase revenue. A recurring revenue model, when implemented correctly, is a win-win. 

The type of program you create will depend on your business model and niche. “Tailor it to your customers and make sure the incentives add value for them,” says Sonaly. “Some groups might like perks such as free 2-day shipping, while others may crave early access to seasonal products.”

Communicate frequently to bolster customer satisfaction

To stay top of mind and be there when people are ready to buy again, you need to stay in touch with personalized communications. Email messages that show your customers you understand what they care about and need is one of the most effective ways to foster this engagement.

Marketing automation can help you create and send email messages that are triggered based on customer habits and behaviors. Use automation to ensure your website is the destination on your customer's journey to purchase.

• Promote popular products. Draw attention to your bestsellers and new arrivals with emails highlighting products customers might enjoy.
• Welcome new customers. A welcome email series can help connect your followers to your business and direct them back to your website to read more.
• Always thank new and repeat customers. Follow-up emails after purchases show people that you appreciate their business. They're also an easy way to request reviews or recommend other products.
• Send reminders. Abandoned cart emails can help you nudge customers to complete their purchases.
• Celebrate special occasions. Birthday or anniversary messages—possibly including a discount or offer—can make people feel special and encourage them to shop again.
• Motivate your repeat customers. Re-engagement emails can bring back customers who haven't shopped recently. Include new products or a welcome-back offer or discount.

Offer incentives to drive repeat customers

Encourage repeat purchases with special offers or promotions. These could be based on spending level or type of product previously purchased. “Consider what will make your audience more inclined to buy again,” says Sonaly.

Many types of incentives can prompt your customers to purchase.

• Promotions. Buy one, get one (BOGO) offers or percentage-off discounts can be very effective in encouraging people to purchase again. Test different offers to see what your audience responds to.
• Free shipping. The National Retail Federation reports that 65% of consumers look up a business's free shipping threshold before adding items to their carts, making it a powerful way to get people to shop on your website.
• Free returns. Not being able to see or touch an item before purchasing is a deterrent for some shoppers; “In a study of 2,000 UK consumers, 78% said they're likely to buy more from an online retailer if returns are free.
• Surprise and delight. Everyone (well, almost everyone) loves surprises. Rewarding your top customers with a surprise-and-delight gift will make your brand memorable and strengthen their loyalty.

Items offered as incentives don't have to break the bank. “It could be an appealing low-to-mid-priced item that you have a surplus of in your inventory,” says Deana. “And you can encourage customers to share their surprise with a special hashtag, boosting your social presence as well as your sales.”

Ask for customer feedback from loyal customers

Customers are more inclined to buy from you again and remain loyal if they feel you understand their needs and value their business. While you can always use your own internal customer data from repeat customers, another way is to ask for their opinion.

Surveys can engage customers with your brand and help you find out what they like about your products or services, what they think about your competition, and where they think you can do better.

Creating a survey is easy, and the data you get back can help you shape future marketing campaigns.

• Ask what people want. Customers might share ideas for new products or services they'd like to see you offer.
• Get to know your customers. Use your own repeat customer data as well as details they share about themselves to define new audience segments.
• Gain competitive insight. You can learn which competitors they also shop from and why you're not getting that business.

“Surveys help you take a pulse on what is and isn't working—this is important because unless your product is unique, you have competition,” says Deana. “A survey can help you find out what makes you stand out and how you can keep your best customers loyal to your brand, which will encourage repeat sales.”

Enhance product offerings to create repeat customers

The only constant in the world of e-commerce is change. And if you're offering the same products you offered several years ago, you're missing out on a massive opportunity.

Instead, your product offerings must continue to evolve to meet the changing needs of your repeat customers.

Whether it's offering multiple variants of a particular product with different price ranges or introducing entirely new products, enhancing your product offerings can keep your brand fresh to capture repeat customers and increase customer retention. It can also help you capture fresh dollars from fresh customers: it's a win-win!

Keeping up with market trends can help attract loyal customers

One way to enhance your product is by monitoring market and industry trends. This involves tracking current trends and identifying when your products can be improved and enhanced to meet the evolving needs of your customers. Here are a few ways you can do just that:

1. Conduct market research. Whether you use surveys, focus groups, industry reports, or other methods to gather feedback from your target audience, the data can be invaluable in evolving your product.
2. Identify new customer needs. You can use your own internal customer data or external customer data as a guidepost for your product development and evolution.
3. Check out your competitor's offerings. Analyzing your competition's product offerings while identifying gaps in the market can help you devise new product strategies.
4. Monitor and evaluate product performance. After products are live, monitor their performance, gather feedback, and evaluate their success. Use this information to make further improvements or to develop new products.

Offering a variety of products

Similar to your customers, it's important for your brand to grow and evolve with the times. One way to do that is to expand your lineup by offering a variety of products. Doing so can achieve two key goals:

1. Improve customer retention by deepening the relationship with existing customers, and
2. Help attract new loyal customers.

And offering product variations can be a lot easier than you think. Consider diversifying your product lineup by these parameters:

• Sizes
• Colors
• Shapes
• Flavors
• And more

Obtaining repeat customer feedback and implementing changes

While you may think a product is amazing, your opinion doesn't always align with your target audience. You can either assume or simply ask for feedback. Here are a few core questions you can ask to garner your customer's honest feedback about your product or service:

1. What was your overall experience with the product?
2. What did you like most about the product?
3. What did you dislike about the product?
4. Was the product easy to use?
5. Was the product effective in solving your problem or meeting your needs?
6. Was the product priced fairly?
7. How would you rate the quality of the product?
8. Did you have any issues or problems with the product?
9. What features would you like to see added to the product?
10. How likely are you to recommend the product to others?
11. How does the product compare to other similar products you have used?
12. How can we improve the product or experience?
13. What was the most significant benefit you received from using the product?
14. Was the product delivered on time and in good condition?
15. How was your experience with the customer service and support related to the product?

Use social media for engagement

Many business owners assume social media is just for customer acquisition. Although social media can be an extremely powerful tool for engaging and winning new or repeat business, it's an equally powerful way to engage existing customers.

When it's done properly, you can use social media to turn repeat customers into an amplifier for your brand that is irresistible to new customers. Here are a few ways to leverage social media to improve customer lifetime value and create more loyal, repeat customers.

Creating an online community can improve customer retention

Leveraging your social media channels to engage your existing customers can be a dynamic way to create raving fans.

To get started, encourage all buyers and customers to like or follow you on social media by offering a discount or incentive.

Once you've created a community, find creative ways to engage your audience to engage by creating polls, hosting contests, requesting feedback, and asking questions. Make sure to always respond to their comments, questions, or messages in a respectful and timely manner.

Posting engaging content to drive repeat customers

No matter the social media platform, content is king. Whether it's blog posts, videos, articles, infographics, or other mediums, share content that is relevant. The content should answer their questions, solve their problems, or provide useful information.

One dynamic but underutilized is social media live streaming. You can use social media live streaming to connect to your audience in real-time to provide product demonstrations, Q&A sessions, and more. Doing so can help let your loyal customers know you are tuned into their needs. Everyone appreciates being seen and understood.

Providing customer support to improve customer retention

No matter the industry or segment, you can use social media channels to improve customer retention and drive repeat customers. Here are a few tips to use social media channels to improve customer retention and drive repeat customers:

1. Monitor your social media channels for inquiries, feedback, or complaints. You can even use social media listening tools to track brand mentions or relevant keywords.
2. Respond quickly to inquiries or requests. Because social media channels are real-time communications, make sure you always respond to complaints and inquiries as quickly as possible to prevent a small tiff from becoming a major storm. It can help improve customer retention and possibly transform an upset customer into a repeat customer.
3. Use a friendly and amiable tone to help make the experience pleasurable and create repeat customers.
4. Resolve issues publicly —when you can— to demonstrate your commitment to customer retention and show potential customers how you solve problems and resolve complaints.
5. Be ready to take conversations offline if it's a sensitive or complex issue.

Mastering customer service online can transform a problem into a repeat customer and even turn potential clients into loyal customers — when done properly.

Build relationships to develop loyal customers

Developing relationships with customers on social media is all about having a brand voice that is likable, relatable, and fun — based on your repeat customer persona. It's important your brand voice is consistent across all social channels.

Then, you can leverage social media groups in your niche or industry to demonstrate your expertise, answer questions, and provide helpful information.

Don’t settle for customers create raving fans

While it does take some work to encourage repeat sales and build customer loyalty, the benefits you reap in the long run will be worth it.

“When you encourage repeat business, you increase the lifetime value someone adds to your business,” says Deana. And Mailchimp offers an array of cutting-edge, easy-to-use tools to help you convert loyal customers into raving fans.

Ready to launch your online business? You can sell your products or book appointments directly from your own site with Mailchimp's e-commerce offerings. Our built-in marketing features give you full control over the success of your business.