Retaining Customers and Revenue through the Covid-19 Recovery
“When you come to the end of your rope, tie a knot and hang on.”
-Franklin D. Roosevelt, 32nd US president who led the nation through the great depression
The Coronavirus outbreak has rendered the 2020 and 2021 revenue and sales forecasts out dated. All industries have seen their top line plummet except a few such as critical goods, groceries and online collaboration tools. Businesses will need to realign their sales & marketing strategies and reevaluate their sales forecasts as they navigate this downturn.
The old adage of “cash flow is king” couldn’t be more relevant in this economic downturn. Businesses need to prioritize customers and services / products offered during these times to effectively deliver services remotely, retain customers and sustain revenue.
A data driven approach to take stock of
- Expected revenue pipeline
- Changing customer behavior
- At risk products
Can help business realign their priorities.
Customer psychology in a downturn
During a buoyant economy, purchases depend on customers having disposable income, feeling confident about their future, trusting in business and the economy. However in a downturn customers are more cautious with their spending and will curtail or cancel anything deemed non-essential.
The Covid-19 crisis has dealt a major shock to economies worldwide and in the next few months and the coming year, many customers will be forced to change how they spend their money.
After years of economic stability, in which many companies were able to achieve steady growth in sales and in their customer bases, customers now face a crisis of customer decline, eroding revenue and threat to existence.
Customer retention during this crisis is the most critical focus area for marketers and is an area where advanced techniques and strategies are being rapidly adopted.
The cost of acquiring a new customer can be high and so existing customers need to be retained to maintain healthy profitability. Customer retention can be achieved through straightforward customer service, marketing strategies and tactics, using data on customers’ interactions with the company and value to the company
Firms that practice relationship marketing should consider customer retention as the primary goal because customer retention yields several economic values.
Customer retention strategies and tactics
Segmenting customers:
In the meltdown following the Covid-19 crisis, customers themselves face piles of bills, stagnant or falling incomes, and shrinking assets. Customers look to reduce costs while trying to stay operational.
These combined effect of these challenges makes it a difficult for marketers to prioritize focus areas and realign their sales and marketing strategy, not only during the economic slump but also in the recovery that will eventually follow. The first step in such a scenario must be to define the new customer segments that would develop in a downturn and prioritize your focus areas.
Customer are typical segmented based on demographics, size, revenue, industry, etc… In a downturn such segmentation may prove to be less relevant than a psychological segmentation based on consumers’ behavioral reactions to the economic downturn. We consider Harvard Business Review’s 2009 report on customer behavior segments and adapt them map churn risks during current Covid-19 crisis.
Defining customer persona based on their situation: —
- Vulnerable: these customers are the hardest hit financially and they will reduce all types of spending
- Troubled but resilient: These customers have seen a material decline in finances, but have wide range of income levels and can hold on to weather the downturn.
- Comfortable but cautious: These customers feel financially secure and are cautiously optimistic about their ability to ride out the current downturn.
- Surging: These customers are doing well during the downturn and have seen their business grow and are looking for resources to keep up with the growth. Eg: FMCG retailers, online collaboration tools.
Needs based classification of products:
- Essentials: These goods and/or services are necessary for survival and essential for the business to keep lights on.
- Deferrable: These goods are needed to run the business, but can be reasonably postponed till later.
- Dispensable: These are good and or services that are perceived as unnecessary or not justified.
- Indulgence: These are goods that can be considered luxury items, whose purchase can be justified if purchased at a discount
With the customers classified into segments based on their behavioral reaction, businesses will need to take stock of inventory of expected revenue and products at risk.
Revenue from contractual subscriptions can be considered secure. But revenue expected from commitments, but no contracts will be at risk. Revenue from one-off products will take a significant hit especially in the vulnerable and pained customers segments as these customers put a brake on new purchases whereas relatively comfortable customers will try to negotiate prices down.
Review your products against competitor products or substitutes
Assess the revenues from products you had expected this year and sort them into simple categories.
When analyzing products also consider competitor alternatives as they will be prime candidate for switching during down turn. Significant market share shift often occur during downturns as competing businesses try to acquire customer with discounts and
The benefits of customer retention are more pronounced in an economic downturn. During any downturn loyal customers are the primary, enduring source of much needed cash flow and organic growth. When customers cut down spending, they focus spending on partners they trust.
Businesses should avoid the trap of chasing revenues by trying to appeal to every potential customer, often through aggressive price discounting. New customers acquired with lower prices will often fail to buy more when the downturn is over and prices recover.
In every crisis there are hidden and significant opportunities surrounded by all the bad economic news. Data driven strategies and planned sales execution can help you uncover these opportunities.
