The news headlines over the past few months have been nothing but grim.
And with inflation rates and the price of consumer goods sitting at record highs, a new Bloomberg Economics model projection is effectively certain that within the next 12 months, the US will enter into a recession.
That’s a scary forecast for any business, let alone startups already battling tough odds of succeeding.
So what’s the best approach to prepare your business for economic uncertainty? Focusing on the 20% of customers that bring in 80% of profits (i.e., The 80/20 rule or The Pareto Principle).
Why? Because the probability of selling to a new customer is as low as 5%. Plus, acquiring new customers costs five times more than maintaining your existing customers.
In this post, we’ll share seven customer retention strategies that’ll reduce customer churn and generate a consistent revenue stream during economic uncertainty.
Let’s dive in.
1. Focus on improving customer experience
Don’t underestimate the power of a good customer experience. When a customer has a positive experience with your brand, 72% of these consumers will share the details with at least six other people.
So if you run an ecommerce store, focus on providing an easy-to-navigate website with compelling product descriptions, high-quality images, and a seamless checkout process. Your website is your storefront, so if you can get these things locked in, you’ll have happy customers.
The best part of all? You don’t have to break the bank to deliver this exceptional experience with your brand.
With the help of free online tools like an Ai writer, you can write detailed product descriptions in seconds. You can also choose the exact tone and language that best suits your audience.
Let’s look at a brand blowing it out of the water with a stellar online customer experience. Hims & Hers Health actively eliminates the stigma around health and wellness issues by breaking down barriers to obtaining quality healthcare.
Anyone can visit their website to learn more about antidepressants, hair loss treatments, and ED medicines.
Right off the bat, the visitor can take a quiz that provides a personal recommendation based on the inputs provided. From there, the consumer receives their treatment plan directly in their mailbox in a discrete package.
And guess what? The whole process takes place in the privacy of their home — no long waits at the doctor’s office or repeat visits to the pharmacy. Once the treatment plan is in place, the customer will receive a subscription every month in the mail.
What does that sound like from a business perspective? A loyal customer.
2. Offer a discounted rate (for life)
With an economic recession on the horizon, the best security blanket is a guaranteed flow of monthly recurring revenue. But that must be impossible to nail down, right? Not necessarily.
Have you ever received a lifetime discount from a SaaS company? You know, the kind of discount where you pay one price for the rest of your life and never worry about renewal fees or price changes.
Take a peek at this holiday promo from Copy AI. You can snag 30% off their AI writing tool for life, and you will be able to use their wide range of copywriting features for your blogs, Ads, and even boost your branding with their slogan generator.
SaaS startups often use this tactic of a “lifetime discount” to lock in loyal customers and tap into that guaranteed monthly recurring revenue.
These discounts tend to come in the first year of a customer’s contract. The goal is to ensure the customer stays with you for as long as possible and continues paying your monthly fees.
And hey, it’s not a bad idea. Does this model work for your business? What about a subscription model? Be bold and think outside the box.
3. Create a customer loyalty program
A loyalty program is a great way to keep customers coming back. It’s a marketing tactic that rewards your best customers for their repeat business and can help you attract new ones by encouraging word-of-mouth referrals.
Customers are more likely to buy from you if they have a reason to return again and again — and this is where loyalty programs come in.
This Dunkin’ Rewards offer reveals that customers can score a free medium coffee with any purchase.
So Dunkin’ Donuts isn’t giving away “free coffee.” They encourage loyal customers to come into the store to make another purchase, and then get a coffee.
You can also offer different rewards or discounts based on how often someone shops with you, what they spend when they do, or both.
Consider offering special perks like free shipping by partnering with a same-day delivery courier service or sending a gift on their birthday. The possibilities are endless.
Ulta offers a rewards membership with three different tiers. The diamond status fits those customers that spend $1,200 per year at their store.
But the perks are worth it, including the highest point-earning rate at 1.5x, a gift and $10 coupon for your birthday, and of course, a Diamond Gift and free shipping on orders over $25.
Loyalty programs effectively retain your best customers and encourage them to spend more. In fact, 62% of consumers will spend more money with a brand after signing up for their loyalty program.
4. Learn from your customers
You should always ask customers for feedback on how you can improve.
Here are a few ways to collect customer feedback:
Ask them to fill out a survey.
Ask them to write a review online.
Invite them to participate in focus groups or other similar events.
Ask them to call you with any comments or questions about your business.
Whatever method you choose, you mustn’t overlook this opportunity.
Your success depends on knowing what your customers think of your products and services, and no matter how small the business is, this input can help improve your business substantially.
Take Trader Joe’s, for example. They have a specific page on their website for product feedback. A customer can provide product kudos or suggestions. And guess what? They listen to the input.
Think of Trader Joe’s as an economic food democracy. If your local store doesn’t carry a product you found in a store in California, then your local Trader Joe’s will do its best to stock that product in the future.
The opposite also holds true. If customers no longer like certain products, they’ll discontinue them.
5. Practice authentic customer appreciation
It’s easy to forget that customers are people, too. And, as the saying goes, treat others the way you want to be treated.
Customers also appreciate it when brands show gratitude for their business.
Showing genuine appreciation for your customers can help increase loyalty and reduce churn rates in the face of economic uncertainty.
And according to research from Forrester, a 1% increase in customer retention will result in a 6% rise in earnings per share over time. The same study found that improving customer retention by just 5% increases profits by 25%.
Ben & Jerry’s has one of the best ways to say thanks to their customers and fans from around the world. Since 1979, Ben & Jerry’s has dedicated one day a year where they show appreciation to their customers by giving out a free ice cream cone.
People line the streets waiting to grab a delicious scoop of chocolate chip cookie dough or chocolate ice cream.
And the best part of all? People rarely go alone, which expands their customer reach tenfold.
6. Inspire people to join your mission
There are a variety of ways to generate a loyal customer base.
The most obvious way is through a stellar product. If you have an excellent product that solves a consumer pain point, there’s no doubt that people will continue to purchase what you have to offer.
On the other hand, you can use a mission or vision to drive customer loyalty.
Almost 70% of Gen Zers prefer brands that take a stand on social issues. And, of course, people naturally want to purchase from brands committed to helping society.
Bombas (think the sock cousin to TOMS) built a business model around giving back to those in need.
They use a “One Purchased = One Donated” policy. When a customer purchases a pair of socks, Bombas will turn around and donate a pair of socks to someone in need. So far, Bombas has donated over 75 million items, including socks, t-shirts, and underwear (the top items requested by homeless shelters).
As consumers, we’re increasingly concerned about how our buying habits affect the world. And more often than not, we’re willing to choose a brand with a mission to better the planet.
The key is figuring out what your customers care about and positioning your brand around it.
7. Try the surprise and delight method
Giving customers an unexpected gift or benefit is a great way to make them feel good about doing business with you.
And you’ll be surprised at how small gestures can go a long way.
Let’s look at Chewy, an online retailer of pet food and other pet-related products known to use the surprise-and-delight method to exceed customer expectations.
Anna Brose, a beloved dog owner, lost her sweet pup in June 2022. She reached out to Chewy to return an unopened bag of dog food. And that’s where Chewy started to shine.
Chewy gave Anna a full refund for the dog food, allowed her to donate the food, and delivered flowers to show their condolences. Well done, Chewy!
Anna’s tweet of the incident went viral on Twitter, and Chewy received stellar press and recognition for simply going above and beyond for a dog owner that lost their best friend.
Not only will Anna remain a loyal customer when she introduces a furry pal into her life, but all 729,000 people who liked this tweet will now consider Chewy for all their pet care needs.
Now that you have read a list of seven solid customer retention strategies, which one will you choose?
There’s no one-size-fits-all solution for every business, but if you keep your customers at the forefront of everything you do, they’ll be happy to purchase from you time and time again.
Remember, an economic downturn is looming on the horizon, according to Bloomberg. It’s best to take a proactive approach and implement your customer retention strategy today. You won’t regret it.