Today’s uncertain economic landscape is plagued with high inflation and continued supply chain issues, and experts predict a 70 percent likelihood of a U.S. recession in 2023. With a potential downturn on the horizon, a reported 62 percent of consumers have stated they’re cutting back on their spending or looking for additional ways to save. In some cases, this could mean switching to cheaper alternatives or cutting out nonessential items altogether. In order for retailers to navigate this uncertainty, it’s essential to fine-tune loyalty programs now. Here are three factors that retailers should consider to stay connected to customers during a financially uncertain time:
1. Leverage data to understand what customers want and need.
Data is one of the best ways to fully understand your customers and what’s important to them. Do a deep dive into your customer data before a recession hits to understand your customers’ motivations, spending behavior, pain points, preferences, and how inflation and other economic uncertainties are currently affecting them. With that information in hand, you can fine-tune your loyalty program to meet them where they’re at with the content and benefits they’ll value the most if the economy declines. Go beyond standard demographic data to consider how psychographics — i.e., a person’s interests, values and opinions — impact your customers during a recession. From there, consider your value proposition and how you can improve customer engagement. Customer data is the fuel for meaningful interactions with your brand and will help continuously fine-tune your customer loyalty program to focus on relevant communication and experiences.
2. Prepare to meet customers’ emotional and rational needs.
During a financially challenging time, while it’s important to still offer loyalty rewards, discounts or special offers that appeal to your customers’ rational needs, it’s crucially important to maintain an emotional connection with your customers as well. Do this by leading with empathy and grace in your messaging and policies, and by acknowledging that your customers may be facing difficult times. Some examples may include extending expiration dates on earned rewards or allowing members to maintain status levels for an extra year. Additionally, you can surprise members with unexpected perks such as shipping upgrades or extra bonus points. These small gestures can solidify both emotional and rational bonds to strengthen your connection with your customers and build lasting loyalty.
3. Maintain engagement with a motivating mix of benefits.
Reward points are another form of currency when money is tight, so remind your customers to redeem their accrued points and rewards. Redeeming points helps members treat themselves to little luxuries they may otherwise be giving up. This can provide an emotional lift while maintaining positive engagement with your brand. In fact, according to a McKinsey study, members who redeem rewards spend 25 percent more than enrolled but inactive members. Currency or point redemption accelerates the loyalty loop as customers are incentivized to earn more rewards and benefits. A win-win.
Recessions are unpredictable for both consumers and companies. Now is the time to ensure your brand’s loyalty program offers the right mix of emotional connection, relevant experiences and rational benefits to keep customers close during tough times and to create long-lasting customer loyalty.
Mary English is senior director, strategic services at the Lacek Group, an accomplished global leader in CRM-driven loyalty marketing and customer experience.
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