Why Customer Retention is the Key to Thriving in a Tough Economy


The decrease in purchasing power during recessions makes it more challenging to acquire new customers. Most people are trying to minimize their spending to maximize their savings. Unless your business has zero competition, which is unlikely, chances are your prospects will turn to cheaper alternatives.

In this situation, it won’t make much sense to keep targeting new customers anymore. So instead of focusing solely on converting prospects, consider steering your marketing campaigns toward customer retention. Ensure that your loyal patrons keep coming back to you.

Don’t fret if you have no experience measuring customer retention rates. We’ll discuss its significance during a recession, plus what you can do to attract more repeat buyers to your business.

The importance of improving your customer retention rates during a recession

We understand the challenges of making major business changes during a recession. Retargeting ad campaigns while your daily sales are slowing down and your overhead is piling up seems too risky. Most business owners in this situation would actually decrease their ad spend.

Although suddenly zeroing in on customer retention is costly, you shouldn’t dismiss the idea altogether. Reusing old strategies that don’t yield results only wastes money. Alternatively, optimizing your business for customer retention gives you better chances at increasing your sales and maintaining healthy profit margins.

Here are the advantages of prioritizing customer retention over acquisition during a recession.

Customer retention rates directly affect customer lifetime values

Acquiring new customers costs exponentially more than retaining current ones. Greg Heilers, VP of Jolly SEO, emphasizes that his company’s subscription-based business model wouldn’t survive—let alone thrive—if it had poor client retention rates. He says, “Although repeat buyers are important for every business, they are the backbone of companies that offer subscription-based services. We prioritize increasing every client’s lifetime value instead of amassing one-time sales.”

Some companies even lose money when spent on customer acquisition. They offer massive discounts or remove registration fees to convert leads, but they compensate for their losses through recurring charges and purchases.

Get better ROAS on repeat buyers

Since converting new prospects costs more than retaining existing customers, ad campaigns geared toward customer acquisition typically cost more. They require a higher budget. And since cold lead conversion takes time, you’ll also get a much lower return on your ad spend per campaign.

Let’s say it takes five emails before a cold lead sends an email. If you could use the budget for those five emails to entice three repeat buyers, you’ll get more value for your money. Use prospecting strategies to grow your client base. However, once you’ve boosted your brand awareness, you should focus on encouraging your existing clients to support your brand continuously.

Customer loyalty is vital during a recession

Recessions make customer acquisition more challenging because consumers are more careful about their money. Most can barely afford essential items. Your buyers will only purchase your products if they have underlying motives or incentives, like brand loyalty. 

Take the pandemic as an example. Ben Michael, practicing lawyer and founder of Michael & Associates, shares that most of his cases during the pandemic were from repeat clients. He says, “New prospects couldn’t justify our rates at the time. Repeat clients and loyal patrons also experienced the same economic distress. However, since they already knew the value of our firm, they weren’t against paying for our professional legal services.”

Repeat customer sales are more predictable

As you execute different marketing campaigns, you’ll find it more challenging to predict ones geared toward prospects. Every business has an ideal buyer persona. However, external factors, like economic distress and recessions, muddle the indicators differentiating warm and cold leads. Crises limit your target market.

Instead of testing different markets, focus on the ones wherein your brand performs well. Repeat buyers are easier to predict. They share similar pain points and motives, which you could use to further incentivize them into staying loyal patrons.

Let’s say 90% of your repeat buyers come from two cities. You could prioritize local service ads on Google over nationwide campaigns to minimize your ad spending without compromising your sales.

Loyal patrons refer new customers

Don’t underestimate word-of-mouth (WOM) marketing strategies. Michael Nemeroff, CEO & Co-Founder of Rush Order Tees, states that WOM marketing plays a crucial role in his business success. He says, “Consumers recognize and reward quality. Once you earn their trust, they’ll be more likely to refer your business to their coworkers, peers, friends, and family members. And remember: it’s easier to close referrals versus cold leads.”

To further encourage referrals, create incentives and rewards. For instance, you could offer customers discounts whenever they bring new customers to your business. You’ll lose a few bucks at first. However, your brand recognition and awareness rates could skyrocket if you properly execute your referral system.

Steady sales create a stable income stream

Many businesses struggle with income fluctuations. Whether you own a small roadside boutique or a mid-level enterprise, you can’t guarantee a stable monthly income during your early years. You’ll need enough funds to ride out your initial losses.

There are several ways to stabilize your business income, and one of the most effective methods is to focus on customer retention. Analyze how you can keep repeat buyers coming back more frequently. You could run loyalty programs, follow subscription-based business models, or offer discounts on repeat purchases. Overall, strive for frequent, predictable sales.

Repeat buyers help you reach your ROI 

Although many startups take nearly five years before getting a return on their initial investment, maintaining healthy customer retention rates speeds up the process. Your sales cycle heavily affects your ROI. If you successfully build a loyal customer base, your business could start generating profits more quickly. Strive for repeat buyers for frequent, steady sales.

Alternatively, neglecting customer retention rates could lead to the demise of your business. Colin Palfrey, CMO of Crediful, says that he has encountered dozens of SMBs that went belly up after blindly focusing on customer acquisition. He says, “You need repeat buyers to get a return on your investment. No matter how many leads your marketing strategy initially converts, you’ll eventually exhaust your market. At some point, you’ll have to switch from customer acquisition to retention.”

How to improve customer retention during a recession

Optimizing your business for customer retention doesn’t necessarily require a sizable upfront investment. Adjust your campaigns one step at a time. Instead of dumping your ad spend on a new set of ads, gradually integrate these techniques into your marketing strategies.

Routinely assess campaign insights

We can’t emphasize the importance of tracking campaign results. Ad results rarely align with initial projections, so you must constantly assess campaign data to minimize the gap moving forward. Eliminate any guesswork involved with your marketing.

When assessing campaign insights, make sure to focus on relevant factors—which in this case, are your customer retention rates. Monitor your repeat buyers. Determine what products they get, how often they return, and why they support your brand. 

Once you have the answers to these questions, integrate them into your upcoming campaigns. Constantly study your loyal patrons. Ensure you optimize your shop, marketing strategies, and product releases to suit their demands.

Redefine your ideal buyer persona for relevance

Your ideal buyer persona represents your target market, but it shouldn’t wholly stop you from pursuing other demographics. As your business progresses, your supposed prospects will also change. If you limit yourself to specific demographic information despite not producing results, you’ll miss out on more lucrative markets.

Moreover, Anthony Martin, founder and CEO of Choice Mutual, says that ideal buyer personas aren’t evergreen. He advises, “Business owners should routinely assess their target market. As industry trends evolve, the driving factors pushing your consumers to buy will also change. You must adapt. Otherwise, you’ll lose your existing clients to more updated competitors that offer modern, relevant products.”

Engage with your audience on social media

One of the golden rules of social media marketing is to engage with your audience. The users interacting with your posts likely showed interest in your brand; you’d do well to acknowledge them. Thank your loyal patrons and address the concerns of disgruntled customers.

With that said, you should also know when to ignore comments. Leaving spam or irrelevant threads on your posts will only hurt your brand’s reputation, so delete them altogether. You can still respond to hate comments. Just make sure to maintain professionalism and phrase your replies with a calm, collected tone.

Answer customer queries and address complaints promptly

Although hurtful, most complaints you’ll receive will come from real-life customers who paid for your services/products. They’re sharing their experience from their point of view. If they were dissatisfied with your brand, the least you could do to compensate them is to address their primary concerns.

Strive to eliminate recurring issues. One or two mistakes are forgivable, but unresolved long-term errors indicate poor business management, which will make it harder to retain clients. Customer acquisition yields negligible results if you don’t provide quality service.

Pro Tip: Make it easier for clients to contact you. Apart from actively monitoring your social media and email accounts, set up a business number so that clients can call you in real-time.

Listen to your customer’s demands

Unlike customer acquisition, retention involves accurate, real-life insights involving your actual target market. You no longer have to follow theorized ideal buyer personas. Instead, you could pull data from your previous ad campaigns, sales, cart abandonment rates, site visits, and social media engagement.

For more accurate insights, consider crowdsourcing. Ask some questions or post polls on your social media pages, encourage your audience to answer, then analyze the results. Give your repeat customers a chance to voice their demands.

Streamline the checkout process

Make it as easy as possible for customers to purchase your products and services. For instance, in-store merchants could invest in a new point-of-sale (POS) system that accommodates multiple payment options. Consumers rarely carry cash nowadays. You should always have several payment alternatives ready in case repeat buyers make spontaneous purchases.

As for e-commerce merchants, analyze your abandoned cart rates. See the most common reason why your supposed customers change their minds at the last minute. They’re already at the end of the sales funnel, after all. Assess the loading speed of your payment processor, checkout page, and buyer information sheets.

Improve website navigability

Interested prospects and repeat buyers will likely visit your website to learn more about your products, so ensure proper navigability. Bad navigation will turn away site visitors. Your bounce rates will skyrocket if you have poorly made site layouts, slow-loading pages, and outdated contact pages.

To improve traffic generation, incorporate SEO best practices into your site-building process. Strive for your pages to rank. Repeat buyers who recognize your brand are more likely to visit your site if they see it on the first Google SERP.

Personalize ad campaigns based on your new target market

Stop targeting cold leads. Once you’ve identified the similarities between your repeat buyers, curate your succeeding ad campaigns based on them. 

Of course, you don’t have to overhaul your entire strategy right from the get-go. Start small by adjusting the relevant keywords and demographic information you use when running social media ads. Frequently assess how your new market reacts.

Afterward, optimize your landing pages and sales emails using your new ideal buyer persona. Write a fresh copy and change your graphics. You might even have to create different offers based on the most prominent trends among your repeat buyers.

Driving customer retention rates despite the current recession

Overall, high customer retention rates play a crucial role in achieving business success during turbulent times. Attracting new buyers takes much time and effort. And in a recession, you’d have to keep track of your ad spend more closely because new prospects won’t be as easy to convert. Ensure that you still get a positive ROI on your ads.

If restructuring your campaigns seems overwhelming, jumpstart the process by analyzing your customer’s shopping habits. Keep track of your repeat buyers. Assess how often they visit your store, what products they typically get, and why they support your brand. Reading this data should give you a solid starting point.

Marketing Advice
Lead Generation
Written by Anthony Martin
Anthony Martin is the founder, CEO, and owner of Choice Mutual. He has been a licensed insurance agent since 2010. Currently, Anthony holds an active insurance license in all 50 US states, including DC.‍

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