Recessions impact consumers in different ways, depending on their financial circumstances. In most cases, though, economic downturns do some harm to consumers’ pocketbooks. At the very least, signs of a slowing economy lead to changes in spending habits and priorities. With consumer spending making up two-thirds of U.S. economic activity, penny-pinching makes business leaders start to worry. They know recessions can shrink corporate budgets as cash flows turn into a trickle. Like well-off consumers, larger companies may not be as hard hit. Those most at risk are firms toward the other end of the spectrum, including smaller businesses without substantial financial reserves. But just because consumers are cutting back doesn’t mean they aren’t spending at all. Well-positioned brands and offerings can still win over customers when times are tough. Yes, it’s possible to grow a business during a recession. Keep reading to find out how. 1. Reinforce Brand Value When people see their paychecks aren’t keeping up with inflation, they can go into survival mode. Layoffs and reorganizations can prompt the same reaction. Anxiety and fear may surface, driving shifts in shopping behaviors. Someone who used to refuse to go to the dollar store might have a sudden change of heart. It becomes a game of the survival of the fittest, with more consumers strategizing rather than buying impulsively. Business leaders usually find it best to adopt a like-minded approach during recessions. This isn’t the time to abandon brand strategy in favor of piecemeal marketing ploys. Because what doesn’t change is consumers’ emotional connections with strong brands. Sure, people are looking for lower prices. But they’re also seeking quality and value when the road ahead seems rocky. Shoppers are more likely to reach for brands that comfort them and deliver on promises. While conventional wisdom says recessions can erode brand loyalty, it doesn’t always happen if there’s enough perceived value. It’s an approach workwear retailer Dungarees used to expand its business as technology changed shoppers’ habits. The company focused on positioning the brand as the go-to destination for hard-working, budget-minded consumers. Whether people shopped in-store or online, Dungarees reinforced its brand promise of exceptional customer experience, quality products, and value, as Mike McClung, Dungarees CEO, recently told me in an email: “When consumers start paying closer attention to the time value of their hard-earned dollars and focus on longer-term budgets, brands of higher quality start to win the buying decisions. Buying one pair of pants that lasts twice as long for $50 wins over buying two cheaper pairs for $35.” 2. Prioritize Loyal Customers The definition of growth isn’t limited to acquiring additional customers. Businesses can also expand by leveraging relationships with existing clientele. Even in times of prosperity, the probability of converting current customers is substantially higher than new ones. Companies stand a 60% to 70% chance of conversion with existing clients versus a 5% to 20% chance with brand-new customers. It goes back to trust and familiarity. People who know what a brand offers see choosing it as less risky. When businesses reward their behaviors, it becomes more of a no-brainer. Take Starbucks as an example. The company’s profits fell 28% during the 2008 recession, prompting a refocus on customer-centric experiences. Although the coffee giant’s focus back then was gathering feedback and streamlining operations, it’s taking a parallel approach this time. The company’s current emphasis is on making it easier for rewards members to keep buying. This may take the form of 50% discounts on drinks for an extended weekend or extra rewards for repeat purchases. Regardless, existing customers feel as though they’re getting a personalized treat. By growing client relationships, businesses can expand sales even when overall consumer spending is down. 3. Become a Brand Partner The likelihood of slower sales can be enough to tempt business leaders to slash marketing budgets. However, cutting spending in this category isn’t always a good idea. Nielsen research shows 10% to 35% of brand equity is marketing. And brands that go radio silent typically lose 2% in long-term revenues every quarter. It can also take three to five years to recover those losses if companies restore marketing spend levels when conditions improve. In challenging economic times, a wiser tactic is to reallocate advertising and promotion dollars to well-performing channels. Some of those channels can be brand partnerships and sponsorships of nonprofit organizations. Companies can get more returns from partnerships that build credibility and extend reach. In the same way, sponsorships of nonprofits boost a business’s visibility while giving consumers a feel-good reason to support the brand. One example is Panera Bread’s Day-End Dough-Nation program, through which it partners with nonprofits nationwide. Instead of throwing away unsold baked goods, Panera locations donate them to local organizations such as food banks and homeless shelters. “Some other companies may sell their day-old products the next day at a discount,” Udo Freyhofer, Florida cafe manager, said in a statement. “We don’t. I feel good about having fresh items available for our customers while helping out those in need in our community.” The value of those donations was nearly $100 million during 2021. The program is only one of the company’s community-oriented partnerships, but it is instrumental to the brand’s identity and encourages customer loyalty. Growth in the Face of Adversity When consumers slash their budgets, business leaders can feel like the deck is stacked against them. How can they possibly grow sales when economic figures show spending is slowing down? The fact is, recessions usually signal a shift in shoppers’ priorities instead of a complete shutdown. As long as brands can appeal to those needs in cost-effective ways, sustaining growth is possible. Source: https://www.forbes.com Image Credit: Getty
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The following is a simple question for business owners. Why do your customers buy from you? I told you the question was simple, but an accurate answer, on the other hand, can be far more complex and perhaps even elusive. To achieve long-term, sustainable success, your understanding of why your customers choose to do business with your company needs to be both correct and substantial. Many business owners develop a customer value proposition (CVP) alongside their company mission and vision statements. The brief declaration is supposed to document why a customer would opt to buy your product or service over the competition. While developing a CVP is commendable in its customer-centric approach, it often falls short of its intended purpose due to ambiguity, a lack of self-reflection and sometimes even outright insincerity. Dollars to doughnuts, there is not a single CVP out there that reads, "Our customers turn to us because we deliver lackluster service and a marginally good product." I would also assume that there are many businesses whose CVPs portray an exaggerated sense of the company's true customer value. CVPs should never be created based on hype or manufactured mantras; instead built from sincere, astute insight. Bravado and disingenuousness are not the only ways business owners are misguided in their understanding of customer engagement and loyalty. The following are common misconceptions related to the question of why customers buy from you. "We are the cheapest" Sure, this value statement might be dressed up as "We deliver the best value," "We are the low-price leaders," or some other cost-based differentiator. But when I hear any form of "My customers buy from us because we are the cheapest," I cringe. Competing on price alone is simply not a good model and is often unsustainable. There is always some other business owner who is willing to run out of cash faster than you are. Most customers – both B2B and B2C – understand the balance between cost and value. They walk that tightrope in every purchase they make. Contending that cheapest is the key attribute that keeps them coming back shortchanges both your business and your customers. "We have the best employees" Forgive me for being a bit skeptical about this assertion as well. Sure, your business may have good employees; but are they really the best? You may provide excellent service, but your competitors probably do as well. Is it truly your employees that keep your customers coming back? With the rare exception of that ultra-charismatic salesperson who charms the socks of buyers, the answer in all likeliness is a resounding no. That is not to say that hiring for personality and alignment with company values is unimportant. It most definitely is. But to put the onus of success and customer loyalty squarely on the shoulders of your employees is shortsighted. "We've got the best product on the market" While possessing a corner on the market is a great position to be in, it does not account for innovations in the marketplace and often fickle changes in consumer preferences. Evolving customer motivations and expectations, coupled with aging business models, have been the downfall of even some of the most successful industry titans. Consider Blockbuster, that for more than 20 years, was the largest and most successful video rental company in the U.S. Then industry innovators like Netflix and Redbox entered the arena with new and improved ways to provide the same service and completely changed the playing field. While the business's products and services may have been "the best" in their heyday, innovators with more modern and sustainable business models came along and essentially put the video rental titan out of business. Suffice it to say even the best products and services on the market have competitors nipping at their heels. So why do your customers really keep coming back? What you are selling vs. what they are buying In considering why your customers continue to purchase from you, it is important to understand the difference between what you are selling and what they are buying. This is such a crucial distinction. As Harvard Business School professor and economist Theodore Levitt famously said, "People don't want to buy a quarter-inch drill. They want a quarter-inch hole!" An accounting firm may see itself as selling tax preparation services, but its customers are seeking peace of mind. Apple offers not just its technology but a modern retail experience. A mechanic sells an engine tune-up, but the customer is purchasing a quieter and safer ride. As a customer-conscious business, it is essential to sell the hole, not the drill. Understanding customer loyalty How do you identify the true reasons why customers buy from you? Get ready for a shocker. You ask them. While this may sound flippant, you might be amazed by how many business owners never ask the right questions or truly listen to what their customers have to say. HubSpot recently reported that 42% of businesses do not survey their customers or collect any sort of customer feedback. Those that do elicit feedback often do not ask the right questions. And even fewer business owners take any action based on the responses they receive. Performing a customer survey can be a real competitive advantage for you. You can communicate by phone, on your website, in an email campaign or in person. The platform matters less than posing smart questions that evoke insightful answers. How important do they consider price? How would they rate your customer service? Why do they prefer you over the competition? Create a system for recording the answers you receive, which might be as basic as a spreadsheet or as comprehensive as entering responses into your CRM or other sales and marketing tools. Feedback should not be a one-and-done; make it a habit to speak to your customers regularly. Then the next time somebody like me enquires about why your customers buy from you, your answer will accurately reflect the true value your business brings to the marketplace. Source: Entrepreneur.com
Innovation is as much about understanding customer needs as it is about passion, and customer feedback is essential to entrepreneurs. Here are four ways to use customer feedback to improve businesses. A common word of advice for entrepreneurs is to build what they personally want, but this can prove to be a path to failure. After all, it's said that 90% of startups fail, and the number one cause of those failures is that there's no market need. From Facebook's metaverse folly to the downfall of Juicero, the story of failed projects is littered with tales of companies that just didn't understand their markets well enough. While passion is, in the words of the late Steve Jobs, "the only thing that keeps you going" when it comes to the long journey of entrepreneurship, it isn't enough. It's equally important to understand the wants and needs of your customer base. This means that customer feedback is essential for entrepreneurs. With in-depth customer feedback, entrepreneurs can better understand their markets and innovate smarter. It can help them develop products that customers actually want and need, rather than products that founders think they need. Here are four ways that entrepreneurs can use customer feedback to improve their businesses: 1. Use customer feedback to inform product development It's also important to use customer feedback to inform product development. This means that entrepreneurs need to take the time to read customer feedback and implement changes where necessary. For instance, Robinhood CEO Vlad Tenev said that many of the company's product priorities are based on customer feedback. This means that the team is actively listening to customers and making changes based on their feedback. One early feature that helped Robinhood differentiate itself was a "Fractional Shares" option, which allows customers to buy partial shares of stocks. Another more recent example is Robinhood's decision to provide up to a 4% interest rate on customers' uninvested cash deposited in their accounts. This was based on customer concerns about the impact of inflation on their investments. By actively listening to customer feedback and incorporating it into product development, entrepreneurs can ensure that their products remain competitive and meet customer needs. 2. Leverage communities for direct communication An obvious question for entrepreneurs is how to collect customer feedback and hone in on what's important. Social media platforms like Reddit, Twitter and LinkedIn can be great places to start. For instance, Twitter Spaces is a feature that allows users to create a chatroom-like environment with a group of people. This serves as a great way to get feedback from users. Entrepreneurs from Elon Musk to Neil Patel have leveraged such communities to get feedback from their customers. However, entrepreneurs can go further by establishing their own dedicated communities. One strategy is to build a Discord server, which is a chat application perfect for connecting with customers and building a community. This works especially well for games and software products, as the format makes it easy for customers to provide feedback. This was the approach taken by Utkarsh Sinha and Siddharth Jain, the co-founders of Martian, a Web3 firm that recently raised $3 million. Sinha notes that their Discord server has more than 150,000 members who are providing valuable feedback. Another strategy is to host online events, such as webinars. This allows entrepreneurs to get feedback from customers in real time, as well as to showcase their products and services. One challenge with this approach is the relatively smaller size of the potential audience, but it can be a great way to build a loyal customer base. Even if the turnout isn't huge, the feedback received can be invaluable. 3. Quickly ship products based on feedback Another important way to use customer feedback is to ship products quickly. By moving quickly, entrepreneurs can get feedback from customers about their products and make necessary changes or improvements. If your business is taking in that valuable customer feedback, but failing to act on it quickly, you might be missing out on a big opportunity. This was something that was highlighted by Siddharth Jain. Jain said that working closely with an engineering team was a big advantage for the firm, as it allowed them to quickly ship products and features whenever customer feedback was received. In other words, while your sales and marketing or customer support teams may be more closely in touch with customers and their feedback, the engineering team needs to be able to act on that feedback in order to make real change. 4. Use customer feedback to pivot Customer feedback can also be used to pivot. Pivoting is a term used to describe the process of changing the direction of a business. It's a strategy that some entrepreneurs use when their original product or service isn't succeeding as expected. For example, when the team behind the video game Fortnite found they weren't getting the traction they wanted, they used customer feedback to pivot. They created a version of the game that was free to play, and the rest is history. Today, Fortnite is one of the most popular video games of all time. The lesson here is that customer feedback can be used to pivot a business, and it's important for entrepreneurs to be open to using it. That doesn't mean blindly following customer feedback, though; it's still important to use your own judgment and expertise to make the best decisions for your business. Customer feedback should be an essential part of any business's innovation process. By understanding customer feedback and using it to inform product development, leveraging communities for direct communication, shipping products quickly and pivoting when necessary, entrepreneurs can create products that customers actually want and need. This can lead to greater success for the business in the long term. Source: https://www.entrepreneur.com
Cash may be losing its luster as a payment tender, but it's a 'must have' when it comes to rewards program benefits and will be for the foreseeable future. Cash as a payment tender may no longer be king, especially with the rapid shift toward online shopping and digital wallets. Nevertheless, today's consumers clearly prefer cashback rewards as their loyalty program currency. At the same time, cashback and coupon rewards programs are becoming more critical to consumers: when times are good, saving money is a nice-to-have, but with an uncertain economy and high inflation, cashback rewards and discounts are essential for most consumers. Rewards for shopping are now expected on everything from groceries to financial services and travel. At the same time, customers seek expediency and frictionless shopping while immersed in their online experience. However, not all reward programs are created equal or meet consumers' preferences. For one, they want simple, user-friendly experiences. They also want rewards embedded seamlessly within their shopping experience, and discounts automatically applied at checkout. What they don't want is to detour from their shopping experience or search through a directory of brands to "turn on" an offer. Long story short: the easier it is to obtain rewards from a loyalty program, the better. Retailers and payment enablers (financial institutions and card issuers) who make their rewards programs naturally accessible and seamless within the shopping journey will achieve the most success in inviting — and sustaining — prized consumer relationships. The growth of loyalty and rewards programs Loyalty programs are a win-win for both retailers and consumers. Brands offering rewards programs usually see stronger brand loyalty, better customer retention, lower user acquisition cost, and increased revenue. Consumers, in turn, benefit from lower prices and ease of use, including earning cashback on purchases and using coupons as they check out. In industry surveys, roughly 83% of consumers say that they are more likely to do repeat business where a rewards program is present than a comparable business without a rewards program, TidalCommerce reported. Almost 2/3 of internet users believe that earning rewards and loyalty points is one of the most valued aspects of the shopping experience. Consumer expectations for rewards programs, and their online shopping behavior, have evolved to the point they now help drive retail loyalty. While consumers will always find ways to shop, many in the current economic climate now seek more ways to stretch their budgets by participating in loyalty and shopping rewards programs to earn discounts and cashback rewards. In a recent survey commissioned by Wildfire, 90% of consumers say that, because of rising prices, they are more interested in getting discounts, using coupons and earning cashback rewards when they shop. In effect, shoppers consider rewards to be a key part of their shopping experience, whether directly through a retailer's program, credit card company or even through a third-party program. Third-party programs, including online shopping companions such as PayPal's Honey, Capital One Shopping, the Acorns Earn program and even built-in discount alerts offered by the Microsoft Edge browser and Bing search engine, have gained in popularity. These help direct consumers to coupons, discounts and cashback rewards right as they shop. What makes using these programs even more appealing to consumers is that they are embedded within the buying process and activated within the natural flow of users' online shopping experience. Another data point from Wildfire's survey indicated that most consumers expect coupons to be applied automatically at checkout during the natural flow of the shopping experience. They also prefer cashback rewards via direct payment, with about half of the consumers choosing it as a credit to their banking account or credit card and about 30% of customers preferring to receive it through a service such as PayPal, Venmo or Cash App. Cash as reward currency — offered simply Speaking of coupons, discounts and points, while those shopper incentives might be nice, most consumers prefer cash as their reward currency. In Wildfire's consumer survey, eight out of ten consumers surveyed indicated they prefer rewards in the form of cashback rather than points, miles, or other types of credit. Many retailers have realized that offering incentives — such as cashback, coupons and shopping rewards — can influence consumer purchase behavior, sales conversion, and even where consumers choose to shop. Over 80% of the consumers we surveyed report they'd be more likely to shop at a store where they could earn a cashback reward on their purchases vs. one that doesn't, and 79% are more likely to complete a purchase when they can earn a reward. The good news is that many retailers are starting to listen to customers, as indicated by a recent report from Comarch, which shows that almost half of the direct-to-customer retailers currently, or intend to, offer cashback rewards as part of their loyalty program. How to implement cashback in your loyalty program What are the takeaways for online businesses seeking to capitalize on the consumer demand for cashback rewards?
The bottom line? Cashback rewards programs drive both top-of-funnel shopper visits and bottom-of-the-funnel sales conversion. Source: https://www.entrepreneur.com
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