Economists are growing increasingly concerned about the possibility of the U.S. slipping into a recession in the next 12 months. The latest Bloomberg survey puts the likelihood of an economic downturn at 48%, up from 30% in June. Given this forecast, retailers are understandably concerned. Sales typically slump when times are tough, especially for luxury items. Consumers also stick with familiar brands and products rather than take any chances with products they’ve never used. This is true for both brick-and-mortar and online shopping.
Fortunately, retailers can insulate themselves to some extent during recessions. Some have been preparing for months – both Walmart and Target reported during Q1 earnings calls that they are searching hard for ways to maximize efficiency and cut costs. Others are following recession “playbooks” that recommend scaling automation, pursuing M&A opportunities, and sustaining customer relationships. While the first two options might not be possible for all retailers, the third is essential.
Focus on people who already trust you
Loyal customers are the lifeblood of any retailer. Brands need people who come back time and time again and advocate on their behalf in the public sphere (i.e., drive Net Promoter Scores up). These individuals become an extension of the marketing team, except they don’t need any salary or benefits. This is exactly the type of ROI retailers look for when prospects are grim.
However, nurturing customer relationships isn’t so simple – it requires understanding the consumer mindset. During recessions, people aren’t as interested in shopping around. Instead, they fall back on retailers they trust and purchase items they know they like. Therefore, winning new business or market share, although still needed, becomes more expensive for retailers.
They have to spend more money to pull people away from competitors, even when using the latest retargeting techniques. Plus, retargeting is getting harder, as privacy rules grow more stringent, which is why it might not be the best solution for combating this particular downturn.
The good news is that retailers don’t necessarily have to grow market share to survive economic recessions. They simply have to keep their existing customers happy. Brands who reward loyal customers and deliver exceptional shopping experiences reap benefits over the short term and long term. Why? Because customer retention has a compounding effect – according to Bain, a 5% increase in customer retention can lead to 25%+ increase in profits.
To be fair, the notion that customer retention is as or more valuable than customer acquisition is not a new concept. But it’s important to keep in mind that returning customers make more purchases over time. So, retailers who keep existing customers engaged during a 2022-2023 recession will profit for years to come.
Prioritize the right metrics With this in mind, it’s essential for brands to focus on the right success metrics. During recessions, these metrics include customer churn, lifetime value, and repurchase rates. Marketing teams should dig into why people are disengaging, if at all, from the business:
What obstacles are shoppers facing?
What are consumers asking for?
What are competitors doing better?
For retailers that haven’t gathered feedback from customers recently, now is a great time to have some honest conversations. The goal here is to uncover what needs people have that are not being met. Addressing any issues significantly reduces the risk of shoppers churning at a time when churn is not an option.
If lifetime value has been declining steadily, it can also make sense to figure out ways to get long-time patrons excited again about the business. Even a small gesture, like offering a personalized discount or small gift, can reinvigorate people.
Finally, are there ways to encourage shoppers to repurchase goods with higher frequency or add certain items to their repurchasing habits? When it comes to repurchasing, one of the best things retailers can do is make it as easy as possible for customers to complete a transaction. This is where next-gen voice shopping technology comes into play.
How voice shopping technology can help retailers succeed during recessions Modern voice technology offers many benefits for retailers in an economic recession. Voice shopping removes friction and maximizes convenience, especially for repeat purchases. It enables people to fulfill their shopping intent in real time and buy items quickly, which is ideal when consumers know what they want. This is perfect for recessionary times when people are more likely to stick with the known versus the unknown.
Using voice assistants is also still a differentiator for brands today. Those who deliver seamless voice shopping experiences stand out from the crowd and keep consumers from jumping to competitors. Furthermore, voice facilitates non-purchase-related activities and increases order transparency, which are common pain points for customers.
Rather than have to look up order details or manage subscriptions manually, sophisticated voice applications allow people to perform these tasks entirely through spoken word. Users can also receive proactive notifications when orders are out for delivery, hear answers to frequently asked questions, and do things like skip future subscription deliveries if they will be out on vacation.
Finally, voice technology is the fastest growing communication channel right now. Any investments in the technology will still matter on the other side of a recession. In fact, voice technology will be the reason why some retailers thrive, rather than merely survive in the coming year.
Want to learn more about how Blutag can help build your voice commerce solution? Request a demo here.