If you are a business that’s in it for the long haul, you need to be comfortable that at some point there will be a market downturn. Recessions are undeniable and only the most resilient businesses thrive in such difficult economic conditions. You need strategic thinking to navigate the waters of an economic slump. Customer behavior shifts in a recession because spending patterns change. Customers become choosy and are often seeking low cost substitutes or hunting for bargains. So, it’s pertinent in such times to be laser focused on customer retention and the concept of strategic loyalty. A loyal customer is your most valuable asset, and during a recession, even more so. According to the White House Office of Consumer Affairs, on average, loyal customers are worth up to ten times as much as their first purchase. They also found that it is six to seven times more expensive to acquire a new customer than it is to keep a current one. Marketing Metrics found that the probability of selling to an existing customer is 60-70%. Hence, Loyalty is your best asset during periods of market unrest.
In short, loyal customers equate to long-term, sustainable, business success. Hence when the spending drops, wallet strings tighten and a recession elicits feelings of impending doom, concentrate on protecting and growing your existing customer base and always go well beyond customer satisfaction to customer loyalty. Customer loyalty takes precedence over satisfaction during recession because loyalty is a state of unbending allegiance and it trumps just about every other purchasing factor. Customer satisfaction can promise you sustained revenues but loyal customers promote growth and propel your brand equity. If your business is performing its most fundamental task of making shopping smooth and predictable, that indicates satisfaction. You are probably aware of the customer surveys that ask customers how satisfied they are with the experience. On the other hand, loyal customers write positive reviews, refer family and friends, share positive experiences with your brand on social media, make frequent purchases and spend more per transaction than anyone else. To measure customer loyalty, you can use Net Promoter Score (NPS) that asks customers, “How likely are you to recommend our brand to a friend” or “How likely are you to buy from us again in the future.” Customer loyalty is how much value a customer can provide in the long term (Customer Lifetime Value) and their level of engagement and advocacy with your brand.
In today’s very challenging economic environment, keeping your most valuable and loyal customers in your franchise has never been more important. But in order to foster and strengthen loyalty, you need to first take an introspective look and identify:
Influence of trust and engagement on customer loyalty
Trust and engagement are highly correlated to customer loyalty. If customers trust you and engage with your business, there is a higher probability of increased cross sell, up-sell revenue as well as order sizes. Research says 83% of customers will happily recommend a brand they trust and 82% of them will continue to use their services frequently. Trust is a prerequisite for customer loyalty. To build trust, leverage the opportunity to engage customers across various touchpoints and channels. A well thought out loyalty program is a critical touchpoint in the customer journey. Engaging customers in a long-lasting journey should be your primary focus during a recession instead of wasting scarce resources trying to acquire new customers. Personalize your communication and fine tune it by embedding data driven insights as well.
Besides, you also need to understand and investigate the current level of customer trust, factors influencing their trust in decision making process, business outcomes of earning customer trust, and how to build and rebuild trust for sustainable customer relationships.
Think back to the last time you wanted to change your phone, if you’re an Apple user, it’s highly likely you will head directly to an Apple store and make your pick. Why would you consider them again? Because they have time and again exceeded your expectations and their service is great. Apple takes customer loyalty very seriously. They make promises to their customers and move heaven and earth to fulfill them. Brand Keys recognized Apple as “the best representative of customer loyalty in laptop computers, tablets, smartphones and online music” in their 2017 Customer Loyalty Engagement Index. Research also says, 87% of Apple customers are loyal to the brand, meaning they will continue to purchase from Apple.
Trust and engagement are the holy grail. They lead to a sustainable relationship, greater profits and higher advocacy.
Considerations for your customer loyalty program during recession:
During recession, loyalty is the centre of attention. But gaining customer loyalty is not a one-time thing, businesses need a focused, integrated plan to retain their best customers during recession. So, the question is not “do you need a loyalty program”, it is, “how to launch the smartest, most relevant loyalty program”. It’s one thing to have several customer loyalty program ideas, but to have the most ideal strategy in place considering various imperative factors is another.
Here are some key points to consider:
One of the biggest reasons people join loyalty programs is exclusivity. Even if the program is available to everyone, find ways to customize the rewards to make them feel unique and strengthen their bond with your brand. Loyalty programs should reflect your clear desire and commitment to retain your customer base at all times but particularly during market unrest, so make your program as captivating as possible and go beyond offering standard rewards. Make sure your loyalty program is differentiated and never make it a “transactional” relationship. Loyalty is the bond between brand and customer. In order to personalize your rewards, you need to understand their behaviors by collecting data. Now, based on the data collected, segment them on similar qualities. Tiered rewards are another great way to customize the rewards program. Case in point, Sephora, offers a wide variety of tier-based rewards within the Beauty Insider Program. Some rewards are experiential such as getting access to new merchandise before anyone else, a free professional make-over, free car detail, VIP admission to your favorite sporting event or concert, etc. This not only reaffirms the connection they have built with their loyal customers, but also entices others to get on board with the program.
Acknowledging customers’ impact in the success of your business is a sure way to keep them invested and increase loyalty during economic downturns.