The Urgency of Customer Loyalty in a Downturn
How building customer loyalty is the key to thriving in tough times. Discover proven strategies to retain loyal customers, boost profits and create a competitive edge during and beyond a downturn.
Heading into the final quarter of 2022, e-commerce brands faced a grim reality as the tailwinds of COVID fully subsided and the consequences of massive interest rate hikes started to set in. But that was just the tip of the iceberg. The truth is, brands didn’t need a downturn to start ringing alarm bells. Here’s a quick set of issues (not related to the current downturn) that brands are facing today:
CPMs are up nearly 200% YoY
CAC continues its rapid trajectory upwards, doubling over the last 5 years
Fierce competition in the early stage e-commerce space as the barriers to starting and scaling a business evaporate
Cookie apocalypse (no, not those cookies 🍪—link)
A banking collapse coupled with a nearly complete halt in early-stage investing
When we combine these headwinds with recessionary speak, customer loyalty doesn’t just become important, it becomes necessary. With loyal customers spending an average of 67% more than new customers, brands must retain and engage existing customers to survive the trough. A recent study by Bain & Company found that increasing customer retention rates by just 5% can increase profits by 25% to 95%. If cash is king, and times are tough, retention should be your weapon of choice.
Unlike increasing sales or improving conversion rates, driving loyalty and retention is a more opaque exercise. You can’t scramble to drive loyalty and retention over the course of a few days. It’s a process that starts slow and grows with every customer engagement, and every interaction, big or small. In other words: you can’t use discounts and promotions to win over the hearts and minds of your customers.
So, where do you start?
Communicate your why.
Fostering a shared sense of purpose with your customers is a foundational element of loyalty. Share your founding story, your principles, your manifesto, your mission.
Create personal touch points.
Whether it’s a handwritten note, or a personalized email, find ways to create authentic engagements with your best customers.
Build tight feedback loops.
Ask your customers for feedback and implement those ideas. Show them that their ideas and insights matter to you. If feedback-based activations are slow on the uptake, try incentivizing your customer with a reward for participating.
Surprise and delight.
Everyone loves a surprise. An exclusive discount, product or access to a limited edition drop.
Imbue a sense of exclusivity.
Give your best customers status. Make them part of an exclusive club or membership with special benefits, access and/or rewards.
Need some more inspiration on crafting loyalty and engagement strategies? Make sure you’re subscribed to gain access to our Breakdown series, where we unpack how (established and up-and-coming) brands build sticky communities and loyal customers.