Why Doing Nothing Costs A Lot: Customer Retention in a Volatile Market
Sometimes we think the “safe decision” in a volatile market is to do nothing. Unfortunately, when inflation is a factor, “nothing” becomes incredibly expensive.
Today, pressures come from a variety of places: inflation, pandemic aftershocks, labor costs, energy prices, supply chain disruption, political discord, etc. Combine this with the looming threat of a housing crash or talk of a recession and it can seem like austerity is the only path forward. These forces inject uncertainty into our decisions resulting in delayed action or no action whatsoever.
How Doing Nothing Affects Customer Retention In a Recession
Doing nothing or delaying an initiative until uncertainty has waned might seem like the most logical decision, but in hindsight, “nothing” is often the worst thing you can do.
This is especially true in a recession because the entire market shifts. When a recession is triggered by inflation, you can expect certain changes.
The first is an increase in unemployment. We have already seeing massive layoffs in tech, financial services and realtors.
The domino effect creates a simple reality: more strain on working families, less disposable income, a shrink in discretionary spending, a delay in major spending decisions, skipped vacations, and a shrinking economic pie.
With fewer customers making fewer purchases, the real battleground becomes retention strategies. Retaining customers is a product of delivering a good customer experience while offering value for the dollar. Retention tactics also require consistency. Even one poor customer experience can lead to churn resulting in an erosion of your customer base.
This is where analytics comes in. Real time reliable customer data can help you make intelligent decisions and take actions that are good for your bottom line.
What is the cost of delaying a decision? Considering the following metrics:
1. Fewer customer visits
Imagine the average existing customer visits once a week and spends $20 per visit. If that loyal customer makes one less visit per month, the impact is a large opportunity lost. In an environment where aggregate customer visits are down, customer churn is even more damaging.
2. Poor customer service
Misunderstanding, reacting poorly, or responding too late to changing customer behavior is incredibly costly. Considering your customer base; are you ready to meet them where they are? Are you still relevant when they need to trade down, when they consider visiting less frequently, and when they’re more likely to adjust their discretionary spending? Have you adapted in time, or have you already lost customer loyalty by not reacting?
3. Failure to meet the needs of your customer
Being blind to customer satisfaction and failing to meet their needs has a measurable cost. Are your customers looking for greater value? Do they have a heightened awareness of special offers? Are they open to loyalty programs?
4. Losing to your competitors
New customers are expensive to acquire, but every customer is easy to lose in difficult times if you fail to act quickly. Be aware of how your competitors are working for your customers. A five percent swing in share of wallet can mean a lot if your customer base is valued at hundreds of millions of dollars.
Evaluate the cost of actions and strategies to improve your business.
At Market Force, we’ll help you design a cost-effective program to improve customer retention at a “cost” you can live with to achieve your objectives and prioritize customer relationships.