New customer acquisition is one of the most important goals for any business — second only to retaining existing customers. While both customer groups provide revenue, keeping existing customers is typically much cheaper and easier than attracting new ones. That said, every business has to start somewhere. For newer businesses, putting in the effort to gain new customers is their only option.
It should come as little surprise, then, that older small to mid-sized businesses (SMBs) tend to have twice the amount of existing repeat customers as newer SMBs and put most of their efforts towards retaining that existing base. Newer SMBs, meanwhile, concentrate on attracting new customers and offering more sales events and promotions.
These are just some of the findings detailed in “The Customer Is Always Right: How SMBs Can Attract and Keep Customers,” a PYMNTS Intelligence exclusive report. This edition examines the different customer loyalty strategies between older and newer SMBs. It draws on insights from a survey of 527 of these businesses conducted from Dec. 7, 2024, to Dec. 17, 2024.
Older SMBs Favor Repeat Customers
SMBs that have been in business for more than 20 years have more repeat customers than newer ones.
PYMNTS Intelligence finds that more than 42% of these businesses in operation for 20 years or more report that repeat customers make up most of their customer base. In contrast, just 22% of these businesses that are less than five years old said the same. Since older SMBs have had more time to cultivate customer relationships, it makes sense that their customers make return visits.
The most popular response among both groups of these businesses was that their customer base was an even mix of one-time and repeat customers, however. Half of older SMBs reported this, as did 71% of newer ones.
With their emphasis on attracting first-time customers, newer SMBs report greater success in growing their customer base. We found that 85% of newer SMBs said their customer base has expanded in the past year. In contrast, just 64% of older ones said the same. These newer SMBs, at 33%, are much more likely than older ones, at 15%, to sell mostly online. In addition, 80% of businesses selling mostly online report expanding customer bases, as opposed to 67% of businesses that sell mostly in-store. Newer businesses are likely expanding their customer bases specifically because they sell online.
These customer growth figures are good news for the SMB space overall, however, as both segments mostly reported growth. We find that 75% of SMBs overall said their customer base expanded. Just 2.5% said it has contracted in the past year. Those selling mostly in-store could be more successful by expanding their online sales.
Customers Rely on Word of Mouth to Find New Businesses
SMBs say that word of mouth is their top factor in attracting new customers, but new sales events and promotions are also valuable.
PYMNTS Intelligence finds that 63% of SMBs that have reached new customers say word of mouth is an important factor. This is nearly twice as many SMBs as those citing the next important factor: increased demand (36%). Other important factors cited include new sales events or promotions, new products, changing advertising and new sales channels.
Older SMBs were much more likely than newer ones to report the efficacy of word of mouth. Nearly three-quarters of older SMBs with growing customer bases report that word of mouth has helped. In contrast, just 56% of these businesses in operation for less than five years said the same. While these younger SMBs report that no other factor is as effective as word of mouth, they did report other factors were more effective for them than for older ones. For example, 43% of newer SMBs with growing customer bases gained customers from new sales events or promotions. Just 27% of older ones said the same.
Varying Strategies to Maximize Customer Spend
Increasing profits requires employing different strategies depending on the level of customer loyalty.
All businesses make moves aimed at increasing revenue, but these tactics vary considerably depending on the rate of customer acquisition. PYMNTS Intelligence data finds that newer SMBs relied on tactics that would attract new customers. For example, 42% of these businesses that increased customer spending did so by offering more sales or promotions, and 51% said they offered new products or services that customers liked. In contrast, for older SMBs, just 24% and 33%, respectively, gave these reasons for increased customer spending.
Many of these businesses increased their profits by offering new payment options, although newer SMBs were more likely to do so. For example, these businesses reported a 38% increase in PayPal usage, while older ones reported just a 17% increase.
Older SMBs found the most financial success simply by increasing their prices. In fact, 61% reported increasing prices leads to higher customer spending. This strategy may work best for businesses with a larger base of reliable repeat customers. These loyal customers may be less likely to break established habits and find a new store. Among newer businesses, which have fewer repeat customers, just 38% report increased profits via higher pricing.
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Methodology
“The Customer Is Always Right: How SMBs Can Attract and Keep Customers,” a PYMNTS Intelligence report, is based on a survey of 527 SMBs conducted from Dec. 7, 2024, to Dec. 17, 2024. The report details how both older and newer SMBs attract and retain customers.