During economic downturns, customer retention becomes even more critical. It's no longer just about acquiring new customers; it's about nurturing and retaining the ones you already have. By focusing on retaining your existing customer base, you not only safeguard your revenue streams but also establish a foundation for future growth when the economic situation improves.
In this blog post, we will explore effective strategies and tactics to help you navigate the stormy waters of an economic downturn and maintain strong customer relationships. From building resilience to a personalised customer experience, we'll delve into actionable insights and best practices that can help your business not only survive but thrive during challenging times.
The possibility of a recession on a global scale continues to make headlines throughout the world. Following events like the Russia-Ukraine war, the global pandemic, and mounting interest and inflation rates, the World Bank has lowered its prediction for the global economy's growth for this year to 3.2%. As a result of these occurrences, prices of food, energy, and petrol have skyrocketed.
One of the factors that have contributed to growing inflation in the UK has been a rise in the cost of consumer products. This increase has been driven by high demand from consumers as well as bottlenecks in the supply chain. Following the beginning of Russia's all-out invasion of Ukraine, the price of petrol skyrocketed to all-time highs and has remained elevated throughout most of 2022 as a direct result of Russia's reduced output of the commodity. The price of electricity is connected to the price of gas and has followed a similar pattern as well.
Inevitably, a great number of consumers have decided to cut down on their spending amid economic uncertainty. This is especially true among younger people in the age bracket of 18-34 years old, who appear to be feeling the effects of the cost of living crisis more keenly.
The slowdown in economic activity has had repercussions for significant portions of the global economy. Businesses are under an ever-increasing amount of pressure as a result of decreased consumer disposable income, which means that for them to survive the current economic crisis, they must win the loyalty of their customers.
How Can You Preserve Your Bottom Line During a Recession?
Maintain strong relationships with the clients you already have. It’s that simple.
Strengthening relationships with existing clients is the best strategy as opposed to seeking out new ones. When things get uncertain, customers are more prone to seek comfort in familiar products and services. There is a big opportunity for companies to engage in long-term loyalty programmes as customers crave the certainty and comfort that comes with familiarity.
According to market research, when compared to the cost of keeping an existing client, the expense of acquiring a new one can be up to 25 times higher. Existing consumers also spend two-thirds more than new ones.
Additionally, when compared to the likelihood of selling to a new client, which ranges between 5%-20%, the odds of closing deals with existing customers are between 60%-70% higher. This paints a clear picture that holding onto your current client base can make all the difference. You only need to motivate them to continue to patronise your business.
Customers can be encouraged to spend more during an economic slump by having the opportunity to spread purchase costs over longer periods via point collection and credit options for loyalty members.
Aggressive expansion efforts during a recession put your business at risk. Your best option for survival is revenue that is both sustainable and dependable. Customers are reducing their budgets and looking for ways to save as the economy continues to struggle. Consumers who are already pleased with the services they receive from your company are more likely to increase their spending or maintain their existing subscription/membership plans.
Your company's bottom line can be protected from the negative effects of a recession by maintaining steady business even while the market is in a slump. When you keep clients coming back, you build a strong relationship of loyalty with them. Doing right by your long-term clients will result in positive reviews and referrals, which can eventually bring in new sources of revenue.
Proven Customer Retention Strategies to Help You Survive a Recession
Retaining customers during a period of economic slowdown is possible; all that is required is a collaborative effort and inventive thinking. When trying to stay afloat, you shouldn’t just be concentrating on developing new strategies to expand your base of customers. And if you want to keep more of your existing consumers, then you should make every choice with their satisfaction in mind. They are the cornerstone upon which the longevity of your organisation is built.
This means you need to look out for ways to keep them for longer. So besides always on reward-based loyalty programmes, what can you do to retain your customers during a recession?
Pause, don’t cancel
Consumers may have little choice but to stop using your services if the economy continues to struggle. If you are unable to supply discounted alternatives, suggest that they take a break from their membership rather than having it cancelled entirely. When customers don’t need to endure the stressful registration or onboarding process again, they will be more receptive to returning when things change.
When the client is ready to come back, it is important to prevent misunderstanding and devise a straightforward strategy that can be followed for restoring their membership. Do not impose any time restrictions, either. When the customer is in control of their return, there is a greater chance that they will follow through.
Only reach out to clients who have issues regarding payments about a possible pause in their subscriptions. Avoid mentioning the pause to all of your customers. It is in your best interest to maintain as many active subscriptions as you possibly can; this only helps to prevent any potential loss of customers.
Keep in mind that your clients are also experiencing difficulties during a recession. Make contact with them and inquire about how the present state of the economy affects them. Customers frequently terminate their subscriptions without giving any advanced notice. If they have specific requirements, getting in touch with them first allows you to collaborate with them on finding a solution. They could be dissuaded from terminating their contract through direct communication.
Inquire as to whether or not they have altered their needs, and introduce any new or special features that your service offers that can assist the customer in satisfying said needs. A tailored experience demonstrates that you are not only thinking about money while interacting with them.
Use real-time communication, if you can. It is more difficult to conduct a meaningful conversation when email chains are broken up and information can be omitted, making it more difficult to find common ground. Customers should be allowed to organise meetings so that they can express any concerns or needs they have with their existing contracts.
Be socially conscious
It shouldn’t take a recession or economic downturn to work toward this, but it can be especially crucial in such times. Taking a strong stance on social issues shows your customers that you are dedicated to the values you claim your brand represents. In times of uncertainty and anxiety, this can help you gain life-long customers.
Over 71% of buyers believe the stance that a brand takes on social matters is crucial to securing their business. You need to show that your business stands for what is right and that your social views are aligned with that of your customers. If you want to establish a loyal client base, you need to fall in step.
However, in the context of the crisis caused by the rising cost of living and the conflict in Ukraine, being socially conscious should be about more than just keeping clients. Giving the impression that you want to support someone is quite different from genuinely aiding that person, and any potential clients you have will be able to tell the difference. If you are sincere in your efforts to improve the world around you, your clients will appreciate your efforts and reward you accordingly.
Customer Loyalty & Reward Programmes
Even though the strategy has been around for decades, the mechanics of loyalty programmes are always being updated to cater to the preferences of newer audiences, meet the requirements of the present, and deal with the ever-increasing level of competition.
Loyalty from customers can affect all of the key metrics that are essential to running a successful company. Customers who are content with the products and services they receive from a company are more likely to make additional purchases, spend more money overall, show less sensitivity to price changes, and become advocates for the company.
You can persuade your customers to become brand evangelists by developing an all-encompassing loyalty programme for your company that takes advantage of contemporary marketing strategies. Because modern consumers put more stock in the opinions of their friends and family than in advertisements, businesses need to cultivate loyal customers who will subsequently advocate on their behalf.
Although building a loyalty programme does need some effort and forethought, doing so is worthwhile and can assure the continued success of a business.
How Reward-Based Customer Loyalty Programmes Can Help Your Business During Economic Downturns
When there is an economic downturn, many businesses choose to respond by reducing their expenditure and protecting their most important assets. This is something that is occurring right now because of the precarious state of the economy in the country. It is forcing businesses to cut back on spending on things that aren't necessary. Instead, they concentrate their efforts on the bottom line to give the impression that they are reliable and consistent.
Your efforts are better focused elsewhere.
During challenging times, it’s crucial to have a solid understanding of the situation and needs of your customers. You can support your customers in weathering the storm by providing them with useful solutions, offering value, and ultimately aiding in the process of retaining customers in economic downturns.
Offering rewards not based on customer spend but to give them something of value goes a long way in fostering trust in your brand. In any economic situation, customer retention is the most important factor in the success of businesses that rely on recurring income. Therefore, every action taken to provide value is also an action taken to retain customers.
When it comes to thriving during an economic recession, these connections become even more important. Therefore, it is essential to give value proactively through customer success best practices that are effective during both prosperous times and challenging economic situations.
A business strategy that is based on the acquisition of new customers will struggle during a recession. You might be able to keep the lights on, but it will be difficult to thrive as profits disappear into sustaining acquisition efforts.
Let’s explore some of the ways that a rewards-based loyalty programme can be the spark in difficult times.
Rewards-based loyalty programmes can power your customer retention efforts!
Loyalty programmes can be the differential you need to sustain customer retention during an economic downturn. If you already have one, check to see if it's still functional. Construct a client loyalty programme that is personalised and well-defined and provides value. Adapt your offerings to meet the actual needs of your consumers.
Maintaining both your customer base and your revenue should be your primary objective. Determine what works best for your consumers to assist them while also pushing your business toward achieving its retention objectives. Relevant, reward-driven customer loyalty programmes offer loads of benefits in favourable economic situations and a recession. Furthermore brand partnerships and coalition marketing are some of the most cost effective ways of adding value to your existing customers and reaching new audiences.
Provides insights into customer behaviour
With the rise in the cost of living, businesses could see fewer customers walk through their doors, which would result in lower sales margins and less accurate demand forecasting—or excessive stock.
Therefore, for organisations to effectively control these potential expenses, they need to have a solid understanding of their target audience and what motivates them. Finding a balance between cutting costs and making strategic investments is essential to not only surviving but prospering during economic downturns.
Businesses need access to key data insights to be successful in this endeavour. This is something that can be obtained through loyalty programmes, which gather data across a variety of customer touchpoints and enable access to valuable information. This could include location data, transactional data—customers with the highest lifetime value, consumer profiles, preferred marketing channels, and popular product categories.
Using precise measures and dashboards to monitor performance, this data can help you to track your return on investment (ROI).
During times of economic uncertainty, loyalty programmes significantly aid businesses in visualising, understanding, and analysing the behaviour of their customers. You can use this data to adjust their value offer and connect with certain customer types (for instance high-spending consumers) at the appropriate time through their preferred channel.
Forms meaningful connections via personalisation
Customers are more inclined to pick your store over one of your competitors if they have the impression that their participation is appreciated. This could be because you provide them with exclusive and relevant rewards that they cannot obtain somewhere else.
When there is a spike in the cost of living, businesses must do more to protect their vulnerable customers. Take, for instance, the practice of interacting with clients, even when those clients aren't making any transactions. Customers will have a better sense that they are still a part of the community as a result of this, which may encourage them to shop again in the future when they are in a better financial position.
You can achieve this by reaching out to them. These communications serve as a gentle reminder to the customers to engage with the branded content that the business offers. Another strategy that can strengthen customer loyalty is providing clients with the opportunity to earn points even when they do not make a purchase (i.e., following business pages or sharing social content). Customers who volunteer information about themselves, such as their birth date, location, or even email address, could also be offered rewards or other perks.
Having that data will allow you to personalise the content and channels that are used for each consumer. If your clients believe that you know them, they will come to anticipate the high level of personalised attention you provide and will be more inclined to purchase from you again.
Personalisation is essential to building brand loyalty, and the more distinctive the reward, the deeper the emotional bond will be between the consumer and the brand.
Improves customer experience
Creating a positive experience for clients is essential to retaining their loyalty. A study revealed that over 86% of customers will be willing to pay extra for a positive experience. If customers have a negative experience when they interact with a certain company, they are more inclined to shop elsewhere. Nevertheless, providing customers with a good and hassle-free experience when shopping can be challenging.
The most important thing is to offer support at every stage of the customer journey. This entails making sure that various service alternatives can be accessed through every one of your company's channels, digital or physical. Your company should offer a variety of support channels, such as email, social media, and live chat so that customers have the option to pick how they prefer to communicate with you. This gives customers more control over their experience.
Loyalty programmes can help you eliminate data silos by allowing you to collect digital and in-store data to offer relevant, personalised omnichannel experiences to your customers.
In closing, we hope the insights shared in this blog post empower you to proactively approach customer retention during economic downturns. Embrace the challenges as opportunities for growth and transformation, and let customer retention be the compass guiding your business to success in any economic climate.
Remember, during an economic downturn, your existing customers are your most valuable asset. By investing in their satisfaction and building strong relationships, you not only safeguard your revenue but also position your business for future growth when the economy rebounds.