That being the case, designing and implementing a plan to build customer loyalty should be at the top of the priority list for all business owners, both new and established. Increasing your customer retention rate can provide a terrific boost to both your top and bottom lines and help accelerate your growth.

To illustrate, let's use a hypothetical example with round numbers. It costs the Acme Widget Company $150 to recruit a new customer but just $25 to retain an existing one. In an average month it has 400 customers, each spending an average of $100. It currently has a customer retention rate of 70% and an average profit margin of 20%.

Your meeting with Mr. or Mrs. Banker seems to go well. Three days later you get a call from the bank. The loan committee has denied your request. What do you do? Turn immediately to another source of funds? Shrug it off and figure that you will find a way to grow without outside money? No. Go back to a bank, a different bank this time, and go prepared.

Clearly, building customer loyalty and increasing customer retention are worth a little extra effort for virtually any business.

When designing a customer retention plan, it makes sense for most businesses to focus on four areas:

2. Promoting higher end products where price is not the most important consideration in the purchase decision.

It can be 10 times as expensive to find a new customer as to keep a current one.

4. Finding ways to get customers who regularly buy just one or two products or services to make additional purchases from your business.

While offering good products and services at the right price for the market you serve goes a long way toward encouraging customer loyalty, it is not enough. You must take a long, hard look at your, existing marketing programs and see if they are helping you retain existing customers. If they are not, you must adjust them or create new ones.

For example, many businesses use direct marketing to offer new customers a special introductory price on a specific product or service. That is a proven strategy for getting new customers to give your business a try, but what about your existing customers? Not only does this approach offer them nothing, it can even risk alienating a current customer if he or she should happen to see such an offer and not be eligible for it.

USE YOUR ASSETS

Your existing customers are one of your most valuable assets. You should maintain an accurate, up to date list of key information about them names, addresses, phone numbers, most frequent purchases, shopping intervals, etc. Use that list to target those customers on a regular basis.

Some ideas you might consider include:

Extensive marketing research has demonstrated that past and current customer behavior is the most reliable indicator of future customer behavior. That is the reason direct marketing companies buy and sell lists of prospects from each other. A direct marketer in the collectible ceramic figurine business knows that the person most likely to buy that item from him is a person who has already bought a similar product from someone else.

You can use this knowledge in your customer retention efforts. Start keeping track of the customers you have lost, and look for things those customers have in common. What were they saying, how were they acting before they left your business? If you can identify some common behaviors and start looking for the same behaviors in existing customers, you may be able to prevent additional customer defections.

Maintain an accurate, up to date list of key information about your customers.

One strategy you can use to help your business retain customers is to make them feel they are in control and making smart choices when they do business with you. Promotions, special offers and incentives provide that kind of positive reinforcement, and they make customers feel good about themselves.

Marketing programs that build customer loyalty are all about maintaining relationships with customers. Think of it as having an ongoing conversation with your customers. You have certain ideas that you want to communicate to your customers, and they are reacting to those ideas in various ways.

Sometimes, that customer reaction takes the form of an actual conversation with the customer. Just as often, the reaction is wrapped up in some behavior or another piece of data. Whatever form it takes, it is vitally important that you listen to what your customer is telling you.

Comparing different customer behaviors is one way id listen to what they are telling you. For example, look at every existing customer who has made at least two purchases from your business, then calculate the number of days between the first purchase and the second. The number of days between two disparate customer transactions is called latency.

Next, take a look at your single transaction customers. How can you tell if a single transaction customer is really just a multi purchase customer in the early stages? That's where the latency number comes into play. If the average number of days between first and second purchases has been about 15, and a longer period of time has gone buy since a one-time customer made a purchase, then that person most likely really is a single-transaction customer.

HEAR THE MESSAGE

The trick now is to hear what that customer is telling you. Very possibly, he or she is saying that you did something wrong in that transaction. It could be price, level of service, merchandise assortment or something else.

Your next step should be to take a concrete action to convert that single transaction customer into a loyal customer. The most common way to do that is by offering the customer a promotion of some sort.

If you know exactly what it was that turned this customer negative toward your business, then the promotion should address that issue. In most cases, you will not have that kind of specific information, so you will need to use a broader promotional technique. Price based promotions are the most popular for the simple reason that they are the most effective. People like to get a bargain.

That is a very good argument for proactively following up with customers after a sale is made. Call them up or send them a customer satisfaction questionnaire while the experience is still fresh in their mind. Doing so will not only help you figure out what you are doing wrong, it will shine a light on those things that you are doing right. More and more companies, both big and small, are adopting this strategy.

The number of days between two disparate customer transactions is called latency.

Don't overlook the obvious in your attempts to build a loyal customer base. For instance, how do your own employees feel about your company? Your workforce is the point of contact between your company and your customers in most businesses. If you don't have a loyal workforce, it is unrealistic to expect your employees are going to instill loyalty in your customers.

Paying close attention to the attitudes and personalities of your employees can return big dividends when it comes to customer loyalty.