If you live in the northern hemisphere, the chances are the seasons have already shifted. Days will be shorter, colder and darker. Yet, despite the lack of sunlight and unrelenting temperatures, the harsh conditions of winter will not last forever. In Finland, these conditions are not only endured, but embraced.
So, as inflation rates rise and the cost of living soars, it is important that businesses adopt the same determination that gets us through the tough conditions of winter. Given the challenges overcome during the COVID-19 pandemic, it is important that organizations recognize their resilience, and channel the same fortitude to prepare for a recession.
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While recessions affect every business differently, there are a few common truths that all sectors have to overcome. Fortunately, many businesses have worked hard over the last few years to transform their services to improve digital accessibility. These modifications will mean that when push comes to shove, businesses are more prepared than ever to keep their heads above water.
For new and old businesses, here are five strategies for dealing with the challenges associated with a recession.
1. Make Customer Retention A Priority
It is well known that attracting a new customer can cost five times more than retaining an existing one. In fact, increasing your consumer retention rates by just 5% has been shown to in some cases boost profits by 95%. With these statistics in mind, it is imperative to prioritize customer retention and nurture your relationship with your existing consumers.
In times of economic uncertainty, consumers are more likely to return to brands with whom they are familiar with. Equally, businesses should be conscious that as the cost of living rises, consumers’ expectations will shift. Businesses must therefore avoid relying on familiarity, and instead focus on delivering a positive customer experience.
2. Leverage Your Data
For decades, brands have been using technology to collect live customer feedback to better understand how they can improve their omnichannel experience. They then use this data to make informed changes to their services, ones that customers actually appreciate.
Take world-renowned furniture retailer Ikea, when they discovered customers were concerned about the size of items, they developed IKEA Place. Five years later, customers are still talking about this digital service that allows customers to preview how furniture will look in their home, via their smartphone. This ability to be responsive to customer’s needs is essential during periods of financial strain.
3. Turn Customer Experience Into Profit
In times of recession, consumers give more consideration to where their money goes. Naturally, this means that competition between businesses intensifies. With this in mind, it is more important than ever to understand and utilize the power of positive customer experiences.
Research has found that 93% of customers are likely to buy multiple times from companies that provide a quality customer experience, and that customer experience leaders perform better during a recession. It is a misconception that customer experience is something that only happens in-person. Today’s consumers have a plethora of tools available to help inform them on the best, least expensive options. It is therefore important to ensure that customer experience is being offered across all channels, physical and digital.
4. Streamline Your Workforce
When we hear the word recession, often the first thing that jumps to mind is lay-offs. During the 2008 financial crisis, it was reported that 22 million jobs were lost globally. And though short-term this does reduce running costs, this is not a long-term solution.
While it is important to manage your costs to weather the economic storm, retailers must not lose sight of the future. Therefore, rather than cutting jobs overnight, businesses should look at how they can strategically redistribute staff to add value to their customers. For example, businesses that have access to data on customer traffic can use it to better understand when and where they are understaffed and/or overstaffed, and redistribute resources more efficiently to maintain good customer service levels. Ultimately, by molding workforce levels to customers routines, businesses can simultaneously save money and jobs, and loyal customers.
5. Reimagine Your Marketing Strategy
Similarly to widespread job cuts, reducing the marketing budget in times of economic hardship may seem like the obvious choice to reduce running costs, however, this offers a unique opportunity for retailers. As many reduce their levels of advertising and marketing, it is easier than ever to cut through the noise and build brand awareness and market share.
During the 2008 recession, T.J Maxx actually increased their marketing and advertising spending by 15% to their target consumers. The following year, the company announced 75% of its customers were first-time buyers. Therefore, by using targeted and considered marketing techniques, it is easier than ever to tap into new audiences and secure, or even increase, revenue. Of course, not every business will have the luxury of continuing its marketing momentum, but it may be worth considering whether to turn of the taps completely.
There’s little doubt that tough times may lie ahead, however there is much optimism to be found in the fact that many small and medium sized businesses have been around for generations. Ultimately, businesses that combine the strategies above with a positive mindset will be the ones that cope best during periods of struggle.
