Retention Marketing in an Economic Slowdown

Consumer confidence is down.? Earnings reports are disappointing. Layoffs are proliferating.? And budgets are tight.? So now is the time to pare back spending on loyalty initiatives, right?? WRONG!? In fact, putting budget dollars against the segment that drives majority of your profit - your high value customers - is even more critical during an economic slowdown.

Why continue to spend on loyalty initiatives?

3 main reasons to continue spending on loyalty initiatives.

1. Retention and cross-selling is cheaper than new customer acquisition.? An old saw, but true.? During boom times, companies can afford to invest heavily in acquisition and retention efforts.? In downturn,, spending against existing customers is more cost-effective. Existing customers in general, and high value customers in particular, are more targeted and have already shown a propensity for your brand.? Retaining your best customers and growing existing high-potential customers provide the biggest bang for your marketing buck. Additionally, cultivating existing customer relationships help insulates the brand from price competition which is more prevalent during economic slowdowns.

2. Loyalty efforts can be implemented budget-neutral.? Budgets can be maintained or even lowered by shifting budget dollars from mass advertising (awareness) to direct marketing (retention and loyalty). Mass advertising by its nature is less targeted. And direct marketing is accountable.? The measurability of direct marketing ensures that budget expenditures will generate a return because only those programs that are tested and are proven to generate ROI will be launched.? Conversely, mass advertising does not have specific metrics tying a brand-building campaign to a specific return on investment.? By shifting dollars, loyalty efforts do not require additional budget.

3. Loyalty-building is strategic. In addition to short-term results, loyalty initiatives yield long-term benefits.? Loyalty efforts will not only pay dividends now, to help weather the storm, but also in the future, when the economy rebounds.? In contrast, reducing resources spent on existing customers will leave you vulnerable to competitors and customer attrition.? Once lost, those customers are difficult to reacquire.

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