Customer retention, in simple terms, is the practice of keeping existing customers engaged with a business, brand, or product. As long as your customers are continuing their subscriptions, re-ordering or using your services again, you have some level of successful customer retention.
During a recession, businesses in nearly every industry can be impacted by lower levels of customer retention, as consumers pull back on spending and demand decreases. With the latest inflation reports and spending data pointing to a recession on the horizon as soon as 2023 — if we’re not in one already — now is a good time to reevaluate your customer retention strategies.
In a recession, customer retention is essential to your business’ success
In both good times and downturns, loyal customers keep your business successful. In fact, according to a Harvard Business School report, improving your customer retention by just 5% can boost your profitability by 25% to 95%. That’s a significant improvement just for improving loyalty!
As the market slows, you may notice fewer and fewer new customers choosing your brand. But with the right retention strategy in place, you can maximize the loyalty of the great customers you already have, and pick up a few more referrals, great reviews and long-term stability in the process.
Keep in mind that finding customers and not keeping in touch with customers are among the common challenges that can lead to business failure — and that’s assuming a nonrecessionary environment.
Six customer retention strategies you can leverage during a recession
1. Invest in your current customers
As traditional customer loyalty programs like punch cards and referral gifts are becoming less common, highly personalized rewards programs are more valuable than ever.
Find out what rewards motivate your customers the most. Is it a discount? A gift card? A month free, or a cash-back bonus? You can run a survey to ask your customers what rewards they’d love to receive, or launch a couple rewards programs and see which performs best.
2. If you have a subscription-based service, add a pause feature
In a recession, many of your customers may experience some level of financial distress. Whether they’ve lost a job, are facing their own business revenue decline or are just feeling the inflationary pinch, they may see your service as a quick way to add a bit of margin to their budget.
It’s no surprise then that 31% of consumers plan to cancel at least one subscription service this year. That’s why adding a simple pause feature as an alternative to canceling their service entirely can be a valuable way to improve your retention.
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Rather than canceling, which completely halts their purchase, offer an option to pause their subscription for a month or two. When they’re ready to return, these customers are significantly more likely to reactivate their service with you, instead of finding another service provider.
3. Extend your free trials
There’s no question free trials are an exceptional way to generate paying customers. So why not add an extra trial or two for the customers who aren’t quite ready to make a purchase?
Especially when many of these customers, in times of recession, may need just a bit more time to prepare for the full purchase. Extending your free trial doesn’t mean offering three years of free access, but it can mean adding 30 extra days if your user attempts to cancel their trial before the automatic renewal date.
That extra bit of time, at little cost to you, can be just enough to encourage a few more customers to stick around.
4. Offer more freebies
If you aren’t able to offer a free trial, or want to add an extra layer to that strategy, consider offering more resources and benefits for free.
By removing your paywalls, you give current and potential customers more experience with your brand before they buy or upgrade. In a recession when customers are far less likely to take risks with their limited budgets, offering a bigger sneak peak can help these prospective buyers feel more comfortable making a purchase — especially for premium products and services.
5. Communicate more, faster and better
While your business is facing the negative effects of the recession, so are your customers. Take time to communicate empathetically with your customers by offering bonuses, discounts, or special gifts, extending grace periods and improving your customer service.
Not only does this above-and-beyond communication improve your brand’s perception, timely responses and extra care improve your customers’ loyalty.
6. Showcase your best, even to existing customers
Gaining new customers, especially during a recession, is timely and expensive. But offering more to your existing customers, who already use and love your brand, can be significantly easier.
Consider ways to showcase other products and services to your current customers, especially if you have a new offer they may not yet be aware of. Here are a few ways you can upsell this group:
- Host a free webinar demoing the product or service.
- Run an email campaign with demo videos, testimonials, and a special discount.
- Post tutorials of how to get the most out of your product or service, and share these on social media.
- Send personalized mailers to your best customers, sharing why they’ll love your offer.
Good customer retention today can lead to significant growth post-recession
Customer retention is especially important during a recession because it helps your business maintain your stable revenue base and valuable customer loyalty. During an economic downturn, new customers may be less likely to purchase unfamiliar products or services due to financial constraints.
But by retaining your existing customers, those who already love your brand, through targeted marketing strategies and discounts, you can ensure your business remains profitable through difficult times. And when the market does recover, all those loyal customers will only add to your supercharged growth.
Want more? Escalon has helped over 5,000 companies across a range of industries to optimize routine business functions, like taxes, accounting and HR. Talk to an expert today.
