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Growth can be one of the most exciting undertakings for a business owner. Whether it’s expanding current product offerings or exploring new offerings altogether, research shows that business owners are up for the challenge. The 2024 Square Future of Retail report found that retailers are planning to expand, and 61% of them are interested in offering in-store dining options. Similarly, the 2024 Square Future of Restaurants report found that restaurateurs are also seeking expansion, with new ordering options (39%) and meal kits or subscriptions (36%) ranking high on the list.
When it comes to growing your offerings, however, there’s a lot to consider. Keeping current customers engaged while trying new things is a top concern for business owners. Forty-three percent of restaurateurs cited struggles with maintaining customer interest when branching out to new offerings, according to Square data. To understand how to retain customers as you grow, it’s important to remember the ins and outs of customer retention.
The basics of customer retention
Customer retention refers to customers who deliberately pay for your products or services more than once over a period of time, according to Forbes. Retention is crucial, considering returning customers have a higher return on investment and spend 67% more over time than first-time customers.
The customer retention rate formula [(E-N)/ S x 100] can help you understand how your current customer retention strategy stacks up over a certain period of time. E measures the number of customers at the end of a period, N measures the number of customers acquired, and S measures the number of customers at the start of the period. Using this formula before and after you settle into your expansion efforts can help paint a picture of how your new offerings are impacting the business.
Tracking other specific metrics, such as repeat customer rate and purchase frequency, can also help you understand how your customers are interacting with your business as you grow. Square Customer Directory provides helpful metrics and data around your customer engagement levels to make managing customer relationships easier, whether you have one location or several.
Understand your customers.
Understanding your customers is a key part of retaining them as you expand. Revisit components of your marketing plan, such as your target audience and your buyer persona, so you can better serve your customers evolving needs. For example, if you know your target market is interested in sustainability and relies on you to provide that, let this knowledge guide how you approach new offerings. Introducing products that aren’t sustainable or otherwise harm the environment subverts expectations of your brand and can alienate customers.
Studies show that only 29% of marketers know the pain points and challenges of their target audiences. Honing in on this challenge (difficulty finding sustainable products, perhaps) can place you one step ahead of the competition and one step closer to your customers.
Examine your competition.
Keeping an eye on your competitors can help show you what’s already being done and where there are gaps to be filled. If there are things already being done by competitors that you believe would make sense for your brand, find a way to add a unique twist that’s distinct to your business. If there’s an untapped opportunity, be sure to make it your own and emphasize it as your differentiator.
For example, Qdoba and Chipotle are both giants in the Mexican cuisine space, but they manage to keep their brands distinct in order to remain competitive. Qdoba, for instance, recently expanded its menu by offering tortilla soup and new protein options, including shrimp. Chipotle, on the other hand, is leaning heavily into their merchandise options, offering everything from napkin holders to language necklaces and imagery distinct to its brand.
By examining the landscape and leaning into the white space, both brands are able to grow in a way that makes sense for their business.
Emphasize the added value.
When introducing another offering for customers to spend their hard earned money on, be sure to emphasize the value. Emphasizing the value of merchandise, for example, might mean leaning into the functional use of what you’re selling and when you’re selling it. POP’S in Las Vegas, NV, introduced koozies during a championship football game in the winter season. Introducing these during a time when customers would need to keep drinks cool and hands warm as they flocked to its patio during a big game made the product more useful and proved its innate value.
You can also emphasize value by making your merchandise fun. Because merchandise inherently helps build a connection with your audience, think about your brand perception and how it fits into society at large. Red Bay Coffee incorporates bold statements in their merchandise, which can ultimately help them appeal to customers who may not even be familiar with the brand but relate to the messaging. Think about what you want your customers to gain from your expansion and build that into your efforts.
Ease into it.
Before you go all-in on a new offering, consider teasing it in doses and paying attention to how customers respond. According to Survey Monkey, 85% of small and medium-sized businesses have benefited from customer feedback. Customer feedback may offer insight into ways you can improve the offering or product before investing more capital in it. On the other hand, it may lead you in a new direction entirely. Remember that new offerings are a great way to bring in more revenue, but they have little value if the customer isn’t interested or the quality isn’t there.
The 2024 Square Future of Commerce report found that 48% of customers would be interested in in-store dining options if offered by a business. Consider ways you can bring this to life for your business. Once you ease customers into new offerings, remember to examine the feedback through tools such as Square Feedback to make a plan for what you should do next.
Build on what customers already love.
If you know that there’s already an existing product, offering, or service that’s driving revenue, create different iterations of it to capitalize on what’s working. Meal kits or packaged sauces can be a great way for restaurants to tap into new revenue streams because they build on what customers already love. In fact, the 2024 Square Future of Restaurants report found that 36% of restaurateurs are planning to offer meal kits over the next 12 months.
Use your Square Dashboard to examine your top-selling items to understand where your opportunities are. Be sure to also talk to customers and determine their interest level in the types of meal kits, packaged sauces, etc. they’d like to see from your business.
Understand your consumers
As you introduce new offerings at your business, retaining your existing customers is key. Read our free report on the Future of Customers in 2024 to learn how to stay on top of evolving customer trends and retain your existing customer base.
Invest in tools to adequately support your new offering.
Depending on what your new product, service, or offering is, you may have to invest in new tools to support your endeavor. Whether it’s more inventory, such as packaged sauces, or a different offering altogether, like in-store dining options, having the right tools can provide a quick and convenient customer experience, keeping customers engaged. Research shows that 74% of people will abandon a physical line before it’s their turn.
The Square Ecosystem has a number of tools to help businesses expand. From Square for Retail to Square for Restaurants to Square Appointments, there are tools at your disposal that work together to make expansion easier without losing important customer or business data. With built-in automation features, staff can make the experience for returning and first-time customers a positive and seamless one.
Create a tailored marketing campaign.
Another tip to avoid alienating customers is to be specific in your marketing. By reinforcing your value proposition or even bundling offers to give customers the new with what they already love, you can make indulging in your new offering more seamless and low-risk. Other deals, such as buy one, get one free (BOGO) or a discounted offer on the new item can also help encourage customers to try. Data shows that 66% of shoppers say they prefer BOGO, and 93% have taken advantage of BOGO offers at least once.
Regardless of the sales offer, be sure your website, social channels, and conversational commerce options are linked within your email marketing and up to date in case customers have questions or want to learn more.
