This was a progressive marketing year for small businesses. As mentioned in a previous post, we saw the tide turn in 2015 when small business wisely began to prioritize customer retention, loyalty, and engagement over acquisition efforts.

Focusing on customer retention is something many Fortune 500 companies prioritize already and continue to do so (as evidenced below). Why? Customer retention, which involves building up large databases of existing customers, results in more cost-effective, targeted, personalized marketing efforts.

The marketing shift and emphasis on retention and engagement has been more apparent than ever. Below, we highlight this evidence (worth cheering about), then dive into three marketing predictions for 2016 that’ll affect every small business.

Noteworthy marketing highlights from 2015:

• Fortune 500 companies continue to drive innovation in loyalty and customer engagement. Starbucks is leading the charge when it comes to customer loyalty. They’ve reported more than 12 million active monthly users of their loyalty mobile app. Competitors like Dunkin’ Donuts are following suit and have released a mobile app to enable loyalty program participation and ordering. American Express launched the loyalty program, Plenti (with members like Macy’s, Rite Aid, AT&T, and more), and is spending millions of dollars to popularize coalition loyalty programs.

• Loyalty programs continue to flourish; Restaurants remain the fastest growing loyalty program adopters. Colloquoy released their 2015 bi-annual loyalty census and it states that overall loyalty program memberships continue to grow (26% growth over the last 2 years). The fastest adopters of loyalty programs are restaurants, growing 107% over the last 2 years. This bodes well for all small businesses, as consumers increasingly expect all restaurants, large or small, to have a way to earn points, rewards, and stay in touch.   

• Technology options for small businesses continue to proliferate and improve. As customer retention marketing efforts increase, so do the number of advanced marketing programs available for small businesses.  These programs have increasingly become more robust and effective for retaining customers and engaging them in a more targeted, meaningful way. 

Download our free retail customer loyalty success guide to learn how to drive customers back 2x more.

What will 2016 bring? Three small business marketing predictions: 

1. Small business owners will begin to focus on the customer journey.

Here at Fivestars, we use Salesforce as our CRM (customer relationship management) tool, and it houses our entire customer database. Because Salesforce is the core customer database platform for so many companies, it’s also on the forefront of many trends in marketing and customer engagement. Salesforce often reveals these trends at their annual conference, Dreamforce. 

When attending Dreamforce this year, I paid close attention to trends that’ll eventually trickle down to small businesses over the next several years. One thing Salesforce emphasized was the idea of understanding and marketing to customers based on their “journey.”  

The journey refers to the sum of experiences someone’s had with your business. Is someone a current customer or a prospect? If someone’s a prospect, has he or she researched your business at all? If someone’s a current customer, when’s the last time he or she bought something? And, has it been some time since he/she engaged with your business? Knowing someone’s journey – whether they’re a brand new customer who’s visited once, or a regular who comes in every other week – helps you send more targeted messages or offers rather than generic ones.

Salesforce has a tool called the customer Journey Builder that allows marketers, like myself, to map out the customer journey. This allows me to send the right message to the right customer at the right time on the right channel. At Fivestars, we have a simplified version of this product for small businesses called AutoPilot. Based on a customer’s visit behavior, a different message will automatically send to encourage that customer to visit again.  

In 2016, we predict small businesses will increasingly think about customers in terms of where they are in the journey so that their messaging, content, offers, and tone of communication are more effective.

2. The Internet of Things will finally emerge.

Another trend that’ll emerge in 2016 is something called the Internet of Things. This term was coined in the late ’90s but is only becoming a reality now. It refers to a world where everything including people and physical objects are interconnected by a network of sensors and beacons.

For local businesses, this means that with technologies like bluetooth beacons, they’ll be able to identify people when they walk into stores. Customers will be able to get more in-depth information about their surroundings or products in a store, as well as discover stores around them using this same technology.

The use of sensors and beacons for local businesses will enable a whole new class of customer engagement that’s location-aware. In-store experiences will change, and new possibilities will emerge to engage customers walking by your store. Facebook has already started experimenting with this technology. We’ve also piloted beacons at a number of local stores.     

3. There will be better measurement of customer retention efficacy.

Loyalty marketing drives increased visit frequency from regulars, increased spend per transaction, and increased winbacks of lost customers. However, measuring true incremental lift from loyalty programs has been elusive because it’s not easy to measure the before and after of a loyalty program, or to do things like split-test offers amongst different customers.

I recently read an article in the New York Times about the success of one of the world’s best customer engagement loyalty programs, Amazon Prime. The article talks about a phenomenon some are calling the “Prime effect,” where Amazon Prime drives people to spend at increasing rates and amounts at Amazon over time.

At Fivestars, early tests of a product we call Prepay, which allows customers to prepay a merchant money in return for a small discount, had the same “Prime effect” phenomenon as well. As a result we’re starting to measure our efficacy with a metric we call “check-ins per user per month.” This basically measures whether we’re getting Fivestars merchants’ customers to successfully come back, and at increasing rates. It’s a high standard because it means we have to not only help our merchants build massive customer databases, but get those customers to return at increasing frequency.

In 2016, we predict there will be more transparency, and the ability to discover clarity and standardization in these measurements on the efficacy of customer retention and engagement strategies.

What do you predict will happen to your business in 2016? I hope 2015 treated you well, and that 2016 will be an even more exciting and prosperous year.