When the economy takes a hit and shopping habits are consequently disrupted, retailers will rely more than ever on their most loyal shopping base. After all, the top 20% of shoppers account for 50% of spending in any given retail store.
Catering to customer retention in retail forces companies to think outwardly and become better service providers overall, which is the first step in creating a recession-proof strategy.
The Value of Customer Retention in Retail During a Recession
Across a wide range of industries, repeat customers generate increasing profits for every year they continue to frequent a company. In fact, just a 5% increase in customer retention has proven to be correlated with an extra 25% in profits.
Not to mention that keeping existing customers happy is more affordable than soliciting new ones. It costs at least 5x more to acquire a new customer than to maintain an existing one. One way of accomplishing customer retention in retail is through an engaging loyalty program.
Aside from the practical reasons, loyalty programs send a psychological signal to customers that retailers are interested in cultivating long-term relationships rather than “one and done” transactions. Consumers are highly motivated by rewards, and they respond by opening their wallets to the more generous brands and sharing their positive experiences with friends and family. Rewards may come in the form of point systems, fast shipping, exclusive product access, or VIP services.
It can be remarkably affordable to engage shoppers with a loyalty rewards program, especially when partnering with a third-party app that has loyalty program-specific expertise. For instance, Shopkick allows retailers and brands to incentivize shoppers for their in-aisle engagement and purchases in exchange for reward points (“kicks”) that can later be redeemed for a wide selection of gift cards. Shopkick encourages consumers to engage with retailers and brands who are genuinely interested in cultivating long-term relationships and earning their loyalty.
The exclusivity of any reward’s program creates a feeling of connectedness and community that helps people through the toughest times. When loyalty programs are combined with an omnichannel marketing experience, retailers and brands can generate buzz and excitement that sustains ongoing customer engagement within an economic recession, or not.
How to Create a Recession-Proof Retail Marketing Strategy
There are many ways to retain loyalty during an economic downturn:
#1: Stretch—Don’t Slash—the Marketing Budget.
When a recession strikes, many businesses reactively retract their marketing budgets. This causes retailers to lose a large part of their public presence, leaving gaps for competing retailers to fill. Given the unique circumstances of the COVID-19 pandemic, retailers can shift some of their meeting, conference, trade show, or event budgets to digital channels like mobile marketing, social media, newsletters, blogs, press releases, and local search. These cost-effective avenues for marketing allow businesses to stretch their budgets and resist retreating into obscurity.
#2: Maintain Regularly Scheduled Communications.
Sometimes all a loyal customer needs is a little nudge. Asking a loyal shopper for an opinion, review, or referral isn’t a bother; it’s a way of saying, “I value your thoughts and support.” Sometimes it comes in the form of a sale offer, “VIP” early access to a new product, a reminder about unused loyalty points, or an announcement detailing a new strategic partnership that reignites customer excitement. Keeping customers in the loop still works to drive business, even during a recession, because people are hardwired with the same wants, desires, and needs they had before. They may have less confidence or discretionary income to spend, but retailers demonstrating that they understand and care about the customer keeps them top of mind.
#3: Boost Inventory Reliability.
Consumers look to trusted retailers and brands to shop with during times of great uncertainty, relying on them for essential products and goods. Investing in advanced, integrated inventory management systems will help keep necessary items in stock, so shoppers won’t have to seek their goods elsewhere. Shopkick surveyed more than 25,000 consumers and found that amid the pandemic, shoppers are taking notice of items missing from shelves and check inventory before they choose where to shop. Most shoppers are heading to grocery stores and big box retailers, but 42% are picking up essentials at drug stores, 32% at dollar stores, 27% at club stores, and 20% at convenience stores, which shows a willingness to explore different avenues for the inventory they need. Now is a good time to re-evaluate supply chain strategies if current suppliers aren’t able to meet demand.
#4: Create a Cohesive Omnichannel Shopping Experience.
Customers are eager to get back to shopping at retail stores (safety permitting), but it is important to offer multiple channels as part of a modern omnichannel retail marketing strategy. Online is an important avenue for non-essential retail throughout the pandemic, favored by 67% of customers. Creating a uniform presence online and offline with the same colors, imagery, messaging, and customer service will make consumers feel more comfortable and secure when shopping, no matter which channel they decide to make a purchase through.
#5: Modernize Offerings for the Value-Conscious Consumer.
New shoppers may be interested in the lowest prices, but loyal shoppers care about value. Offering valuable services like Buy Online Pickup In Store, curbside pickup, or free home delivery can be a differentiator that helps retailers maintain the edge over competition. Whether purchases are made online or in-store, customers will expect returns to be a hassle-free experience for them, even if it creates more of a burden for the retailer.
#6: Form a Value-Driven Partnership.
Partnerships with popular mobile platforms like Shopkick can help to strengthen customer loyalty, which is extremely valuable in an economic crisis. Shopkick partnered with Visa Decision Sciences to measure Shopkick’s incrementality for partnering retailers, as well as incrementality for the Shopkick platform as a whole. Shopkick users enrolled in a linked-card program with Visa, where they earned kicks for purchases made with the linked credit card at participating merchants. Of all incremental sales driven for Shopkick retail partners, 27% came from increased loyalty of existing customers by influencing them to spend more and purchase more often.
Recessions Create Uncertainty, but a Loyal Customer Base Maintains Stability
Focusing on the most loyal and profitable customers is “best practice” for surviving an economic recession.
Since there tends to be a “recession” every four years or so, retailers should prepare for these events by learning how to shift gears and reprioritize immediate goals. Whether it’s investing in a loyalty program, bolstering back-end inventory and supply chains, or simply reaching out to touch base with shoppers, economic downturns can present opportunities for success. Consider this: Frequent Flyer Miles, Starbucks Rewards, and many credit-card-based loyalty programs were all created during recessions! Truly, the future is bright for companies willing to go the extra mile to sustain a loyal fan base.
Want more insightful ideas on how to foster customer retention in retail? Read our success stories and contact Shopkick to learn how easy it is to become a partner and kick off your first loyalty-building campaign.
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Image courtesy of Sergey Nivens