When it comes to your customers, what matters more: how many you have or how good they are? Well, you might think that your success would be built on growing the number of customers you have, but research shows that having a healthy number of good clients, who keep buying from your firm, is essential to its long-term prosperity.

Small increases in customer retention can create amazing increases in profits: in a wide-ranging industry study conducted by the customer-loyalty guru Frederick Reichheld and associates, they found that a 5% growth in customer loyalty resulted in improved profits of between 25% and 100%

What’s the reason for this jaw-dropping figure? A firm’s revenues grow as it builds repeat sales and referrals from loyal customers; its costs shrink because the expenses involved in acquiring and serving new clients goes down; while employee retention increases because they have greater pride and satisfaction in their jobs.

So how do you build a loyal customer base? Here are five tips:

Find out if your clients are happy.

This may sound obvious, but tracking customer loyalty is trickier than you might think. Facebook “likes” aren’t an accurate measure of whether your customers are happy. Neither are customer-satisfaction surveys, surprisingly enough. Between 60% and 80% of customers who defected to a rival had given glowing reviews of their previous firm in surveys conducted just before they defected, Reichheld’s research found. The only real yardstick of customer satisfaction is whether they keep coming back to buy more from you. It’s not how satisfied you keep your customers, it’s how many satisfied customers you keep!

Listen to what they tell you.

It’s tempting to ease the disappointment of losing a client by saying: “Good riddance! You weren’t a good customer anyway.” But a company that faces up to its failures can become even stronger and more profitable in future. It’s just as important to understand why clients leave you as why they stay with you. Ask accounts you’ve lost to tell you why they decided to move on. If you keep getting the same message then it’s time to start listening to what they say – even if it might be painful.

Link customer satisfaction to pay and perks.

You may be obsessed by the quality of service your firm delivers to its customers, but that means nothing if your employees have other priorities. If their annual salary and bonus is based on them hitting sales targets then that will be what they focus on. You could incorporate customer loyalty milestones within staff remuneration to ensure everyone’s goals are aligned and your vision for excellent service becomes reality.

Be innovative.

A good way of keeping clients is to offer them new products and services so they never feel the need to look elsewhere. The best way to persuade them the grass isn’t greener elsewhere is by convincing them you have the best-tended lawn around.

Set a generic target.

Let’s be clear: setting woolly goals within your business plan can be a recipe for fudging or slackening off from meeting essential targets. But every business needs an aspiration on which to hang its overall strategy. Steve Jobs didn’t have a detailed product master plan that foresaw the creation of iTunes, the iPod, iPhone or iPad. He simply set a long-term ambition that Apple should create an integrated suite of products that would meet customers’ entertainment and information needs. That overarching goal created the room for Apple staff to think up new ways to satisfy customers and – most importantly – to keep them as Apple customers.

Apple, Google and Facebook are famous for being firms that encourage their employees to think up new ideas. But you don’t need to create an outsize version of a kids’ playroom in your office to help your own staff to think outside the box. Just encourage your employees to offer new ideas that would help to serve your clients better. You could run a competition with a prize for the best one, for example.