How to Retain Customers During an Economic Downturn To weather a recession, focus on your most loyal customers.
Opinions expressed by Entrepreneur contributors are their own.
Recessions typically mean reduced consumer spending. And by many accounts, we're heading into a recession this year. So, companies need to start gearing up.
The first reaction many companies have is to start cutting back on costs. While in many cases that makes sense, it can backfire if you cut investments in areas crucial to your bottom line. One area worth investing more in during an economic downturn is customer loyalty.
As we all know, customer retention costs far less than customer acquisition. When it comes to cutting costs, you can only save so much. But there's no limit to how much you can earn. So, if past recessions are any indication, the smartest strategy is to focus on your most loyal customers and super-serve them with personalized offers, experiences and rewards.
Done right, existing loyal customers will deliver the consistent sales needed to weather the storm. The question isn't so much should you have a loyalty program, but rather how to implement the best one. Here are a few tips:
1. Be rewarding
Brands that reward loyal customers are the brands that customers will return to first. It's the brand they'll refer friends and family to. So, focus your efforts on the experience of rewarding, listening and recognizing every action your customers take. Create an emotional bond that transcends price, before price becomes the deciding factor.
2. Be flexible
Give customers a choice in how they redeem loyalty rewards. Let them decide whether to convert rewards into cash, account credits or redeem them at the point of purchase. If you have multiple brands under your umbrella, allow customers to transfer rewards between them as they prefer. And don't forget to check in and ask for feedback along the way — as well as look for trends across your database — then respond. Ultimately, it's about rewarding customers first and making them feel heard.
3. Be inventive
Don't be restrained by convention. Explore new ways to reward and incentivize customers and build loyalty. Perhaps focus on product returns, and offer an incentive for customers to exchange items rather than ask for a refund. Or focus on the cart abandonment problem by offering incentives to return to the sale. Look for the frictions that exist in the customer experience, and develop loyalty systems in response. It's not just about points-for-purchase.
4. Be unique
Try personalizing loyalty program benefits to the customer based on their history with your products and their responses to the questions you've asked them. Remember, loyalty programs shouldn't focus only on monetary exchanges. It can include gamification for referrals, reviews, sweepstakes and more. Using these tactics to make loyalty programs more individually relevant will not only make each customer feel seen and valued, but it will increase the effectiveness of the loyalty campaign.
5. Be coordinated
Loyalty programs, like any marketing program, shouldn't exist in a vacuum. Sales and marketing must work together to be in lockstep when reviewing the markets, industries and opportunities with the highest success rate. Discipline, speed and experience are all key to reaching agreement on the ideal customer experience and advancing opportunities together.
6. Be responsive
If you're going to ask a customer for information, react to it immediately. Don't just store it in a database for some unknown future use. Provide a discount or a product recommendation. Demonstrate that you're not just building a profile of data on them, but that you're actually listening and actively looking for ways to provide value.
7. Be strategic
It's not enough to just throw more money at a loyalty program. It's important to know where to aim, and that means constantly monitoring the effectiveness of your efforts and adjusting as needed. Not all customers are the same. While some may respond well to receiving more emails, others may be put off. Determine which is which, and make sure to use a system capable of accommodating both at scale.
8. Be self-aware
The worst mistake you can make is failing to deliver the goods once customers engage with your site. So, be sure your house is in order before you start inviting people in. Eliminate any bottleneck in your website to ensure every customer who visits has their needs met. Make sure your recommendation engine can recognize previous visitors so you're not offering them products they've already bought. For those not ready to buy, offer wishlists that you can offer promotions on in the future. Getting people in the door is only the first step.
What do these tips have in common? They're all focused on the customer's needs and their unique interactions with your company. After all, loyalty works both ways. The best loyalty programs don't just provide customers a way to stay loyal to your brand. It gives you a way to demonstrate your loyalty to your customers.
Remember, the goal of a loyalty program isn't about generating more sales. It's about building trust. It's showing your most valuable customers that you value them in return. When you do so, you'll create an emotional connection with your customers that will last far longer than any period of economic unrest or uncertainty. It'll last a lifetime.