Saying “thank you” – why startups and small businesses should listen to mom.

In these recessionary times, all of us who operate startups and small businesses struggle to meet our bottom line, pay our monthly bills, retain our great employees, and grow our businesses in spite of the challenges presented. What to do, what to do? Well, one time-proven marketing strategy that increases customer lifetime value, cements loyalty, and drives word of mouth, is simply doing what your mom tried to teach you to do always: say “thank you.” It is a truism that it costs more to acquire a new customer than to retain an existing one, and this simple strategy goes a long way towards this.

According to a survey of small businesses by American Express, only one third of businesses gave year-end bonuses or gifts to their employees last year, down more than 10% over the prior two years. Recession, ugh. Yet many small businesses continue to build customer loyalty and increase sales by giving gifts to their customers. The gifts can be anything from swag like tee shirts and coffee mugs, to discounted services or merchandise. Studies show that this works, and the credit card industry is a good example of this. For instance, in a study by the consulting firm Maritz, credit card holders who participated in loyalty programs increased their number of transactions by 53 percent and the value of  those transactions by 51 percent!

How can your business say thank you to your customers? Experiment. That’s right – try lots of different things to see what works best. Try a loyalty program; my local pizza place does it – every time I go in they stamp my card. Ten stamps and I get a free pizza. Yum. Or try an A/B test: offer one group of your customers a discount on their next purchase, and offer the another group a tee shirt. Then track the results – which group came back more often and spent more money? Or try a different experiment; offer some customers a gift card for a successful referral of a new customer and an equal number a small cash bonus. Which group responds best? The answer to this question could define your strategy for your next round of “thank-yous.”

Here are a few tips for thinking through your approach to gifting your customers:

  • Segment. Look hard at your customer base and consider what type of incentive might be valuable to what type of customer.
  • Communicate. Ask for feedback when you give a gift or say your thank you. If you ask them what they like and why, many of them will actually answer you.
  • Analyze. Don’t just send out gifts without paying attention to the results. Track the data and be ready to dispense with the gifting that doesn’t work and beef up that which does.
  • Get buy-in. Make sure that all of your key departments or employees are involved, from the front-line customer service folk to the marketing and sales departments.
  • Provide value. If you are looking for insight into hat makes your customers tick and what increases their lifetime value, only they can tell you. And they will only tell you if the thank you provided is of value to them.
  • ROI. Make sure that the payouts you are offering are generating more than the cost. It would be silly to offer every customer a $100 gift card if the increased value of that customer were only $50. Be careful here and make sure you end up profiting on these efforts.

So, dangle the carrots and see if they nibble. And, like mom said, “Be polite. Or I’ll smack you.”


Photo credit: Michael Newman