If all the red in the stock market hasn’t clued you in yet, all signs are pointing to a looming recession. In fact, we might already be in one because the definition of a recession is a retrospective metric, indicated when two consecutive quarters finish out with a decline in GDP and rising unemployment.
In March, European retail businesses saw a sharp decline in sales and this will probably be mirrored stateside soon as inflation fears and supply chain issues put a damper on spending. And while the last recession back in 2020 was somewhat mitigated by the PPP and EIDL, businesses probably won’t get access to such easy money this time around.
This means that businesses, especially SMBs, need to start recession-proofing to weather out the economic downturn. And while there are financial steps you should be taking such as making sure your cash flow is positive, lowering debt, and cutting expenses; there are also steps you should be taking that have your customers in mind.
According to Watermark Consulting, businesses that were exceptional at the customer experience fared better during economic downturns.
This is why relying on your Customer Relationship Management (CRM) platform to bolster your relationships right now can be a panacea when the recession fully hits. Let’s examine 4 ways that you can recession-proof your retail business by leveraging the impact your business can have on the customer experience.
1. Keep on marketing Part 1: Preventing churn
According to research by Harvard Business Review, the businesses that fared the best during and coming out of recessions were the ones that could balance cutting costs while also being bold and spending on growth. Where these companies cut costs were in operations and inventory. Where they spent was on continual marketing efforts throughout the downturn.
Dollar-for-dollar, the best ROI on marketing spend is targeted, personalized communications with existing customers; especially those about to churn. During a recession, retaining your customers is almost always less expensive than acquiring new ones. The data in your CRM should be able to show you the customers likely to churn, and your team can target this group with the right promos to keep them loyal to your brand.
The signs of a potentially churning customer varies from business to business, but a key indicator is lengthening time periods between store visits or purchases. Also, an omnichannel CRM will pull in the online browsing and shopping habits of your customers as well. A drop-off of online activity can also be a red flag when it comes to churning potential.
Once you have identified the customers your business may be about to lose, enact targeted marketing campaigns to entice them back. Big discounts can work on their own, but pairing the promotion alongside products curated specifically for each customer will be even more effective. Your CRM data can show you what items customers have purchased or browsed in the past, helping you curate with more precision.
2. Keep on marketing Part 2: New customer opportunities
Another reason to continue your marketing efforts during a recession is that when competitors pull back, your brand will capture more market share due to the additional exposure. However, it’s important to conduct new market research on what your audience may want in this new economic climate.
The discretionary income of your target audience may be shifting during this time. Or they may be looking for more staples and core items, as opposed to the more luxurious products your brand may offer. But then again, they might not buy staple items either…
Ever hear of the men’s underwear index? Economists have noticed that during big recessions, men don’t buy new underwear, nor do they get it bought for them (ie. by their wives). While boxers may be a staple of a guy’s wardrobe, they’re actually thought of as a luxury item that can be, and statistically are, deferred until the economy recovers.
This is why it’s important to update your market research, in order to choose which items to push during the recession by gauging the new habits and preferences of your shoppers. You may be surprised by the new trends being exhibited by your demographic. Your CRM is a great place to start in finding updated shopping trends.
Also, by segmenting your audience in your CRM, your brand can send out much more targeted surveys to gain an even better understanding.
3. Elevate the customer experience
Another way to recession-proof your retail business is to position your brand as an ally to your customers during this tough time. According to Harvard Business Review:
Worried consumers—even in the comfortably well-off and live-for-today segments—see familiar, trusted brands and products as a safe and comforting choice in trying times. Reassuring messages that reinforce an emotional connection with the brand and demonstrate empathy (for example, by conveying a sense that “we’re going to get through this together”) are vital.
Your business doesn’t have to ignore the recession and pretend like nothing’s happening. In fact, it humanizes your brand and works to elevate the customer experience if they know you are on their side.
This is par-for-the-course for businesses that engage in clienteling. Having a personal relationship with each customer is the best way to be “sticky” in modern retail, and the very concept of clienteling embodies your brand’s personality and relatability.
For example, arm your sales associates with ideas on how to lower the cost of certain purchases, or even how to repair certain items in order to save your customer some money. Create blog posts and videos with cost-saving ideas. Offer one-on-one virtual sessions to talk through the customer’s wants that will fit into their current budget. Showing that you’re “in this together,” will bolster customer loyalty during the time your brand needs it the most.
Leverage your CRM’s capability to send targeted messages to segmented groups. An email with low-cost prom fashion ideas can go out to teens and parents. A text message campaign can go out to your high AOV customers to invite them to a one-on-one virtual styling appointment.
4. Do more with less
During harsh recessions, your business might have to enact a hiring freeze or even lay off some team members. Yet the previous three sections urge you to actually do more marketing and clienteling during downturns. Can businesses hit by the recession actually do all of the above?
With the right CRM in place, smaller teams can be empowered to do more with less by leveraging segmentation, automation, and the right set of software tools.
For example, Endear’s Shoppable Stories is a simple way to embed a visual curation of products into targeted email and SMS campaigns.
Any sales or marketing associate can create a segment of an audience in a few clicks, then curate a small selection of products to be sent together in a Story that specifically appeals to what the customer loves. And because the SMS messages are sent from the CRM, which can also receive replies, it’s much easier for a small team to actually engage in a text-chain conversation with your customers to provide that clienteling service.
A recession might very well be here already. The businesses that continue to have the best relationship with their customers will be the ones to not only survive, but potentially thrive during the downturn. A great CRM can help. Check out what Endear can do for you today.