Marketers have long known that it is much easier to sell something new to a current customer than it is to acquire a new customer;

In fact, some marketers pay dearly for new customers with all kinds of free stuff or large discounts on first orders.
 
Small and medium size businesses have long been more than a little backward, when it came to marketing. According to the 2012 report from BIA/Kelsey, small business owners favored customer acquisition over customer retention at a 7-1 ratio.

Now, for the first time, small businesses are investing more of their resources, including time and money, in strengthening relationships with existing customers, rather than acquiring new customers.

However, in this year's report "Achieving Big Customer Loyalty in a Small Business World" report by Manta and BIA/Kelsey, a new trend has emerged. Recently, 61 percent of small business owners surveyed reported that over half of their annual revenue came from repeat customers rather than new customers, and that a repeat customer spends 67 percent more than a new customer.

At the same time, small business owners described spending less time and money on customer acquisition; only 14 percent reported spending the majority of their annual marketing budgets to acquire new customers, and only 20 percent reported investing most of their time and effort to acquire new customers. This trend represents a significant shift in behavior.

But even with this shift in small business organization (SBO) behavior, business owners are not yet really taking advantage of their customer relationships. The study found that only 34 percent of SBOs have a loyalty program, while the majority does not (66 percent).

Not surprisingly, the majority is offline, so they miss the advantage of technologies that allow easy implementation and give them the advantage of deeper customer insights. Moreover, though email and social media are the most effective features, more than 50 percent of SBOs are still relying on paper-based or word-of-mouth programs.
 
Our forecast is that as the software for small and medium size businesses becomes more cost effective and user friendly, more SBOs will tap into the tremendous advantage that loyalty programs can provide. What stops many SBOs is their lack of facility with information technology. As more Millennials become business owners, expect to see a speed up in adoption.

© Copyright 1998-2014 by The Herman Group of Companies, Inc., all rights reserved. From 'The Herman Trend Alert,' by Joyce Gioia, Strategic Business Futurist. (800) 227-3566 or www.hermangroup.com

The Herman Trend Alert is a trademark of The Herman Group of Companies, Inc. Reprinted with permission.