Businesses and their marketing teams were already facing a host of challenges going into 2023. For many, the looming recession — or at least, the prospect of prolonged economic uncertainty — prompted a shift in customer acquisition and retention strategies. That includes cutting back on marketing spend and becoming hyper-focused on customer retention versus bringing in new business.
Focusing on customer retention is a smart move, as it can lead to significant bottom-line benefits for companies — even if they boost their rates only slightly. Oft-cited research by Frederick Reicheld, a Bain fellow and inventor of the Net Promoter Score, found that businesses that increase customer retention rates by 5% can grow profits by 25% to 95%.
It’s easy to see why that kind of growth is possible when you consider that your existing customers are more likely to buy from your business. (That’s the so-called 80/20 rule at work: 80% of your sales will come from 20% of your customer base, meaning repeat customers.)
So, if your company is eager to rein in costs amid unfavorable market conditions, focusing on customer retention strategies is a logical strategy. And you’d be far from alone in your thinking: Data from Twilio shows that more than two-thirds of companies turn their focus to a customer retention strategy from an acquisition strategy during a recession.
But here’s a thought: What if you decided not to run with the pack? Or at least, not totally? It could mean more opportunity for you to grow your business. Think about it: If your competitors have given up on their customer acquisition strategy and are willing to ease up on efforts to grow their market share, it’s a much less competitive time for your business to target new customers.
The upshot is that it may be wise to move forward with customer acquisition and retention strategies in the months ahead — with some fine-tuning, perhaps. Here’s a closer look at why both approaches can provide benefits to your business, even when the economy gets bumpy.
As noted earlier, a customer acquisition strategy is often the first to be pushed to the back burner during a recession because it’s resource-intensive. However, a better metric than customer acquisition cost (CAC) to keep in focus, according to some experts, is customer future value.
Looking down the road and past a potential recession, what will the value of a new customer be to your business? If the customer’s future value has the potential to be high, why hold off on trying to earn that customer’s business today?
That customer may be tightening their purse strings right now, of course, so an effective acquisition strategy is a must. But investing in that strategy may be well worth it in the long run. And, as mentioned earlier, you may face less competition if you pursue a customer acquisition strategy during a recession.
Customer retention is critical to the success of any business, in any economy. So, you really never want to let up on putting ample resources behind your customer retention strategies. In a challenging economy, you may want to invest even more.
Again, your existing customers are more likely to buy from you. If you can motivate them to keep on spending during a recession, this can help your business keep cash flowing when times are tight.
Another benefit of focusing on customer retention in a recession is helping your business enter the eventual recovery from a position of strength. If you can maintain a solid base of customers in a downturn, you’ll be prepared to quickly seize new growth opportunities during economic expansion.
If a recession runs deep and long, your organization may need to cut back after all on your marketing initiatives designed to attract new customers. In that case, effective customer retention strategies will become even more critical to fortifying your business resilience.
When facing economic uncertainty, customers understandably become more circumspect about buying new products or services. They become more cautious about spending, and think not just about how much things cost, but what value they can get for money.
To understand what messages are likely to resonate best with your customers in an unfavorable economy, your business needs to listen closely to the voice of the customer (VOC). Insights you glean from that process will allow you to develop effective customer acquisition and retention strategies.
These eight approaches can help as well:
Proactively communicating with customers is even more critical for your business during challenging times. If you don’t know their pain points, how can you possibly address them?
One way to gather this information quickly is through customer surveys that go beyond gauging satisfaction with your products or customer service. Reach out to your existing customers via their preferred methods of communication, such as email or text, and go straight to the crux of the issue: What are their current needs and concerns, and how can you help them?
Chances are your customers’ responses will highlight some adjustments you should make to keep them loyal to your brand and even move them forward along the customer journey.
Conversation intelligence derived from phone calls with actual customers can help you understand the VOC like nothing else. With artificial intelligence (AI)-powered solutions like Invoca’s Signal Discovery, you can automatically detect trends in phone conversations, like phrases commonly used across your target customer base. That helps you develop a clear picture of your customers’ needs and concerns.
You can also use Invoca’s conversation intelligence software within your marketing department or contact center to detect the tenor and tone of customer conversations as well as where calls are originating from. The data and insights Invoca provides can help you to continually refine your customer acquisition and retention strategies.
Call volume can spike during times of uncertainty or disruption. For example, at the start of the COVID-19 pandemic, calls into human-centered industries like financial services, healthcare and telecommunications increased dramatically. This wave of communication can provide a wealth of valuable data for companies to capture, analyze and act on, provided they have the right tools.
Invoca’s work with Spectrum Retirement Communities LLC demonstrates that. The Denver, Colorado-based company started using Invoca’s platform in 2019 and was just ramping up with our Signal AI conversation analytics solution when the COVID-19 pandemic hit in early 2020. Signal AI identifies speech and language patterns from phone conversations to automatically predict outcomes. Spectrum Retirement found these capabilities very valuable for supporting its COVID-19 response plan, which included a proactive communication strategy.
Spectrum Retirement used the Invoca platform to create 24-hour, toll-free hotlines for all of its properties. It also relied on Signal AI to identify and track COVID-19 concerns from residents and their family members who were reaching out. Spectrum Retirement created a COVID-19 phrase-spotting signal, for example, to focus on words like coronavirus and lockdown.
During the first six months of the pandemic, Spectrum Retirement routed more than 16,000 calls through the Invoca platform. Its enhanced ability to listen closely to the VOC during this critical time and respond appropriately to callers’ concerns led to a high number of positive customer reviews. And during the last six months of 2020, Spectrum Retirement saw its resident turnover rate decrease by 20%, compared with the same period in 2019.
Recessions can be tough, and some of your customers may feel the impacts of a downturn acutely. But no matter their exact circumstances, most of your customers will likely appreciate expressions of empathy from the companies they do business with.
Use your marketing content to demonstrate to customers that you respect their situation and support them. Creating relevant, useful content that can help them navigate through recessionary times will strengthen your brand and develop greater loyalty. Also, applying empathy in your messaging will increase your chances of retaining customers for the long term.
Most consumers today prefer to do business with brands that offer loyalty programs, so hopefully, your company has one. A standout loyalty program is a great way to demonstrate value for money to cost-conscious consumers during a recession. So, make sure you feature the program prominently throughout your website and promote it in all relevant communications.
Sweeten the pot for customers, including potential new customers, by introducing offerings that can help them earn compelling rewards faster. Taking too long to reach reward status is the #1 reason consumers quit rewards programs. Take a lesson from the many major airlines that temporarily relaxed their frequent flyer programs during the pandemic to allow customers to retain mileage points due to expire.
Email marketing is one of the best ways to stay in front of your customers. It’s also a budget-friendly way to generate traffic to your site when you have fewer marketing dollars to spend.
Consider boosting the frequency of email communication during a recession, especially to those customers who’ve been responsive to email outreach in the past. Just take care not to bury loyal customers in unwanted emails. Consider tactics like offering a one-time discount code or a first look at new products in return for customers opting into more frequent email distribution.
Ninety percent of marketing leaders value organic search in driving revenue, and it’s easy to see why. Last year, Google processed over 8.5 billion searches per day, and almost half of all product searches by consumers began on Google.
Boost your organic search traffic by refining your search engine optimization (SEO) strategy and reviewing your overall organic search strategy. When your paid search budget is down, a lift in organic search can help you pick up the slack on search visibility and make the most of a recessionary marketing budget.
Strong brand recognition can support you through a recession and keep customers in the fold. Sharing content on a regular basis through email, newsletters and social media is a must for good brand recognition. So is fostering a thriving community among your customer base, as companies like Apple have done successfully.
Create strong messages for your customers and emphasize your company’s values through corporate social responsibility initiatives that enhance your overall brand story and engage your customers. More consumers, especially those in younger generations, are gravitating to, and are more likely to remain loyal to, socially responsible brands.
You always want to make it as easy as possible for consumers to find your product or service and buy from you. This becomes even more important during a recession. Now is a good time to review your website and simplify the customer journey through to conversion.
If you aren’t tracking phone calls, then chances are you have “dead zone” in your conversion data. In high-stakes purchase industries, upwards of 60% of customers make a phone call to a business, even if their journey originated from an online search. Invoca’s call tracking software gives you full marketing attribution for every call — this allows you to double down on the campaigns driving high-quality phone leads and cut spend on campaigns driving non-sales related calls. As a result, you can prove your results and defend your marketing spend in a downturn.
It’s vital to make every marketing dollar go further in a recession. Doing more with less means improving the effectiveness of your customer acquisition and retention strategies and spending smarter on marketing initiatives overall. The right technology can help you do both.
Invoca’s call tracking and conversation intelligence software use AI to analyze phone calls and unlock deep insights from every conversation between your customers and your agents. These insights help marketers decrease the cost per acquisition (CPA) of new customers, boost digital conversion rates, increase sales agents’ close rates, and make contact centers more efficient — building brand loyalty all along the way.
Want to learn more? Request a personalized demo to discover how Invoca can help support your company’s customer acquisition and retention strategies during a recession — or anytime.
Want to learn more strategies for driving marketing results in turbulent economic conditions? Check out these resources:
Download our Ultimate Guide to Reducing Wasted Marketing Spend to learn how you can lower your CPA while improving marketing campaign performance.