Retaining Customers In A Recession
When financial and economic times are tough, businesses struggle in both retaining customers and keeping their revenues high enough to maintain profitability. Recessionary periods test the will and resolve of most business owners because they strain the businesses model that was believed to be profitable and sustainable. Because the acquisition of new customers is typically believed to be much more expensive than retaining customers it should be noted that remaining viable during a recession should be both possible and achievable. Focusing on customer retention should be first at the front of any business owner's mind in a recession as these customers will sustain the company through the down times and prepare for greater successes in the future.
The very nature of recessions means that customer spending patterns and habits are changed. Recessions are typically described by a decrease in economic activity during a period greater than six months and thus during this period a business can expect their customer base to frequent less often and sometimes look for other competitors who may be looking to price cut your products or services. Because recessionary customer patterns assume decreased economic activity it becomes very important for you to spend your resources on retaining the valuable customers you already have.
The customer can be valued in many ways; often it is based on the frequency of visits in relation to the size of their purchases and the costs to acquire that customer. Because recessions mean that fewer revenues are coming in the door and because marketing campaigns aimed at acquiring new customers typically cost more than those campaigns where retaining customers is the primary goal, simply changing one's marketing tactics to focus on increasing customer lifetime value through retention can both save money while keeping the company competitive during lean times.
When a customer is retained their lifetime value increases because the duration of their patronage extends into the future allowing for future purchases and possible larger purchases. Conversely, if a business owner were to cope with a recession, or in a worse case a double dip recession, by trimming their expenses marketing expenses to the point where customer retention practices are hurt, by the time economic growth resumes the customer base will be depleted and the expenses of acquiring new customers becomes priority. These costs are much higher and though they are important they should not override the necessity on retaining customers which already exist.
Repeat customers are quite valuable because the relationship they develop with you and your company grows over time. Their value to your company can in extreme cases be viewed as residual income. Work was once done to acquire them and dollars were invested in nurturing the relationship and in the long-run you have a repeat customer who has a traceable spending pattern which is worth a lot to a business. Recessions test this relationship however because they change customer's spending patterns. Businesses will have to learn to cope with recessions and extended periods of economic malaise but the most efficient form of investment in customers should not be forgotten. Retaining customers is a long-term investment that pays back handsomely and much more efficiently than new customer acquisition. Though both have their place in business during recession retaining customers is key to long-term viability.
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Do a little bit more for your customers, to keep them.
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