There is hope and lots of opportunity, even during a recession; you just have to know where to look for it.
Recessions have a strange habit of changing rational behavior into frenzies of desperation. While markets adjust, the fundamental tools of economics “supply and demand” remain busy making amends for prior excess and greed. Many marketers have never been exposed to a market that does not conform to conventional wisdom. Now they have to re-adapt in order to succeed.
The recent hike in oil prices is a clear demonstration of the effects of market manipulation. As oil prices dropped OPEC reduced production in the hope of increasing prices. However the market did the complete opposite and prices fell further, contrary to OPEC’s intent.
The point I am making is that customers are like markets; they cannot be controlled or manipulated over a sustainable period. The panic and fear that the current recession is producing is ravishing the reasoning faculty of many brands marketers. Why you might ask? Because many of them believe slashing prices in order to maintain share is the best strategy in a downturn. Just as the Black Knight in Monty Python’s Holy Grail believed he was invisible, he was unrepentant even with the loss of all his limbs.
The same type of reckless behavior is also prevalent with panicked discounters slashing prices, believing that what worked in the past is sure to produce improved results in the future. If you want to see how fast the world is changing check out these stats.
Continuous discounting is not fiscally maintainable, even brands with the deepest pockets use it sparingly as a short term tactical event. So what’s the alternative, a loyalty program that has been designed to engage customers at a much lower cost when compared to discounting. Besides from choosing their individual reward (which is a key motivation factor) customers now tell most of their close network just how cool the reward program is and become WOM (word of mouth/mouse) brand advocates.
The rich and relevant data produced from an interactive loyalty structure contextual offers which can be specifically targeted at select customers. This strategy maximizes benefits and efficiencies for both members and the marketer. We refer to highly engaged customers as “Alpha” customers, engaged consumes as “Beta” and active customers as “Omegas”. Alpha customers spend 20 times more than a regular customers, Beta 10 times and Omegas 5 times.
So if you are looking to increase sales in the near future, identify your most profitable customers and then maximize your share of their purse by offering meaningful rewards that build lasting relationships.