The bleak economic outlook will be causing more than a few sleepless nights across the country at the moment, but it’s not just politicians and economists who will be feeling uneasy about the current situation. The strain of this downturn is already impacting on consumers who, faced with a spiralling cost of living, might fear that there are difficult times ahead. The retail world is also starting to feel the pressure with consumer shopping habits shifting in the face of a darkening economic forecast, and many are rightly turning their attention to business practices that can help them ride out the storm, should the situation deteriorate further.
Contingency planning for uncertain economic conditions is par for the course in modern business, but as a potential recession looms large on the horizon, retailers and marketers should be starting to put plans into practice. There are several key issues that will need to be addressed in the event of a deeper slump, so retailers would be wise to prepare well in advance – ideally, no less than six months. A lot will depend on being able to anticipate how customers are going to behave and responding accordingly with the right tools and an adaptable personalised approach to customer engagement and marketing.
Interpreting data and acting on it
Data has become one of the most essential weapons in the retailer’s arsenal. Assessing the performance of each campaign to identify which of them are showing diminishing returns and which are exhibiting signs of steady growth potential should be a key priority. Certainly, a yield analysis of this kind should be conducted before any decisions are made about which budgets need to be cut. You can do this with a customer data platform (CDP). The programmes that data suggests will have the best return on investment (ROI) should be prioritised, whereas those that are faltering, should be axed. By combining data from various sources into a centralised data hub that provides a single customer view, you can ensure you make the most of every customer interaction.
Speculate to accumulate
One of the facets of the marketing mix where it can be most tempting to slash budgets is brand awareness campaigns. Retailers should resist the urge to pull back on brand investment in tools and platforms in the short term as it will only come back to bite them when, inevitably, the recession comes to an end. CDPs are a prime example. During a recession real time intelligence on customers can make all the difference. Shopping habits can constantly shift during, but also in the aftermath of economic downturn. Retailers need the right tools, such as CDPs, in place to monitor these shifts and take action as and when required.
Removing investment in the brand will remove opportunity for essential visibility during the downturn. Out of sight, out of mindmay have its merits in some situations, but very rarely from a retail perspective, particularly during a recession when brands can’t afford to stand still.
Consolidating brand position
All companies aspire to create new revenue streams but attracting new customers during a recession is no mean feat. Even in times of more certain economic conditions, acquiring new customers can cost five to 25 times more than retaining those already onboard. Focusing on keeping customers will ultimately lead to greater profits. Unfortunately, during times of economic uncertainty, shoppers are typically much more cautious and price sensitive. Understandably, they may start to assess where they are spending the most money, and the temptation of a cheaper alternative or a complete scale back of certain expenses can lead to significant decline in revenues for retailers.
In anticipation of shifting financial priorities, retailers must be ready to react and adapt as customer needs and behaviours change. This can be achieved, to a certain extent, by demonstrating the value of products or services. Understanding changing spending habits and leveraging the right digital experience platforms (DXP) to measure and optimise your interactions will be critical. In doing so, retailers can create more personalised campaigns to show customers the value that products or services add to their lives, consolidating the brand’s position and boosting the likelihood that the customer will remain loyal despite increased anxiety around the economic downturn.
Fostering the fanbase
Retailers should also seek to nurture its customer community through engagement on social media platforms and establish a customer or product advisory board. Not only will this enable marketers to better understand customer needs, but it also develops a network through which a brand’s audience can find value through peers. The brand itself also proves value by facilitating connections and insights. In a similar vein, retailers must also generate conversation about the brand amongst its customer base. In doing so, opportunities for word-of-mouth advertising are created. For example, encouraging a customer to leave a review.
Recession brings with it a great deal of uncertainty. However, there are several key considerations that retailers should take to set a course that will see them through troubled waters. Listen to what the data tells you about marketing performance, keep investing in the right tools, and focus on customer retention and community. It is these factors that will define how well businesses are able to ride out the looming economic downturn in the months to come.
Tom Bianchi is EMEA CMO at Acquia