How to retain clients in the face of declining purchasing power

A decline in purchasing power is a chronic condition of the market. How to retain customers, how to maintain customer flows and ensure business sustainability?
How To Retain Clients In The Face Of Declining Purchasing Power

The decline of purchasing power is a chronic condition of the market. So we must have quality tools to maintain the flow of customers. And apply them when the next crisis comes. Let us look at the most effective ones.

Fast adaptation to customer needs

Need. Customer need tends to change. In this case, its basic component “it’s necessary to solve the problem” is relatively static. And the wrapper (the manifestation of the need and the requirements for the product the customer is willing to buy) changes frequently. Here are some of the factors that influence changes in need:

  • an acute lack of time;
  • lack of money or the need to reallocate the money;
  • offers from competitors.

Our task is to identify the change in demand in time.

Example. The studio produces B2B product presentations for large retailers. The service is purchased to place their goods on the shelves of retail chains.

The basic part of the need doesn’t change. What changes is the wrapper: the rules for creating a presentation, providing a finished work in different formats that can be used for different purposes, the need to add animation elements.

So we find out what the client needs today. How to do that?

I’d like to warn you about surveys right at the beginning. It’ is a dangerous thing to conduct surveys according to a prefabricated algorithm. The probability of getting the wrong data and then putting it into practice is high.

Philip Graves – an American expert in consumer behaviour analysis – addresses this issue in his book “Customer Intelligence. What your customers really want. The basic argument: customers say what you want to hear, or what they “generally” think,” or what would be “ideal.

It is important for us to know the customers thoughts directly at the stage of search, evaluation and purchase, when the need is strongest and can be accurately described.

So I recommend you talk to your customers more often. Preferably in the form of a light conversation between customer and employee. Eliminating formalism in the conversation will allow the customer to relax and state the real problems and motives for the purchase.

The goal of the conversation is to find out which product parameters are important right now and why.

Important: We constantly monitor the demand so that we do not miss the moment of change. The manager should make it a habit to record everything the customer says about his situation and problem.

Marketing links the need with the product configuration and the offer. It is a closed system: need – product – need. Changes in one element lead to changes in the other. And so it goes in a circle. In the following we will look at the product and the offer.

Not every “want” of the customer has to be immediately incorporated into the product. The customer may want concubines with lampshades in the waiting area, but that will not affect sales. Weighty wishes do:

  • the same “wish” expressed by different customers;
  • the questions they ask (is it possible to deliver at the exact time?);
  • wishes that seem reasonable to you;
  • customer complaints, even from competitors.

Customize the semantic “packaging” of the product

Product. In the offer we tend to show not the product itself, which everyone knows, but its “packaging”. Of course, it is not a cardboard box, but a description of the advantages of buying from you.

As the authoritative marketing classicist Philip Kotler said: products are in fact packages of benefits, and people choose the products that give them the best value for their money (“Marketing basics. A short course.” – M., 2015).

Each product has a variety of features. Different people want different amounts of those features. Meaningful “packaging” is needed to show each customer group a package specifically designed for their needs.

A simple example is the ballpoint pen. Thin bar, good writing style, blue ink, no drip, low cost, interchangeable bars, standard bars, made of recycled plastic, soft rubber band at the point of contact with fingers.

Customer A buys only low-cost stationery. Its features: interchangeable pens, standard pens, low price. Customer B buys something that is environmentally friendly. Its features: made of recycled plastic, interchangeable sticks, standard sticks. Customer C buys anything that is reliable, comfortable and safe. Its features: writes well, ink does not spill, soft rubber band at the point of contact with fingers. Customer B does not care what the pen is made of, and does not mind the presence of a soft rubber band and the cost.

A “package” is a wrapper that adapts to the need and contains a list of features that are important to the consumer in the here and now.

We learned this during the conversation and immediately adjusted the offer. We changed the product configuration as needed. We brought the benefits to the customer. After that, the sale is a matter of engineering.

Do you remember the example of B2B presentations? Well, the presentations are the same, but we now make them available in PDF, pptx and more – through a link. That’s the wrapper. And we can create animated presentations – changes in product configuration.

To properly design a product offering, we need to separate the product itself and the wrapper.

The wrapper contains:

  • delivery;
  • use;
  • maintenance;
  • disposal;
  • upgrade;
  • service.

What does the need we have identified relate to? To the product or the wrapper? We make changes to this part and adjust the proposal.

When you work with such an algorithm, you can make a clear and understandable offer to the customer. “Now delivery within 2 hours” instead of the vague “fast delivery”.

Customer service work

Service. Falling purchasing power for companies means lower prices. Reality demands that they go up and customer rejection goes down. Competition for sales in the “who has the lowest discount” format is intensifying.

Customer service will help keep prices down and sales up. And this is where it’ gets really serious – “a polite smile + how can I help you” is no longer enough.

“When a customer is disappointed, it is one of the most unpleasant situations for the company. It is unlikely that such a customer will become loyal. Most often it is the service that causes the disappointment,” authors Mikhail Levandovsky and Maxim Potashev of The Age of the Customer teach us. They are right. A disappointed customer is the competitor’s income. It is important that we prevent this.

Let us look at the numbers. From time to time, various companies and services conduct surveys and measurements to find out how service quality affects business performance. Here are some examples of conclusions from these studies:

  • a positive experience with a company increases the likelihood that a customer will turn to the company for a related need by 15%, while a negative experience decreases the same value by 25% (2018 study by McKinsey & Company, a global firm that works with market leaders in management consulting);
  • recommendations increase the customer’s trust index for the company to 8 out of 10 possible points (research by Data Insight in cooperation with AliExpress Russia);
  • 54% of satisfied customers buy again (2020 study conducted by the Norwegian company Zendesk);
  • the company’s profits increase by 25% to 125% if it increases the share of regular customers by 5% (research by Bowen&Chen).

How do you create an effective service? First, let us divide customers into two groups: those who buy once and those who buy regularly. For each group, a well-configured service works in its own way. The customer who buys once and stays forever can serve as an “ambassador.” He tells them about his experience, passes on discounts. Yes, we’ are talking about a “word of mouth” here.

Customers who regularly buy our product become regular customers because of the service. By the way, here a competent loyalty program will work perfectly with the service (more about this below).

How to build a service? There is a formula that describes three important touch points: Customer-Space, Customer-Time, and Customer-Employee. You can easily break your product down into these components.

Customer-Space. What can make a person uncomfortable when they walk into your office? It’ is important to put yourself in the customer’s eyes from the entrance. It’ is unpleasant to walk in with a stroller. Slippery steps (the carefully taped note “Caution, slippery” is not a service, but an honest admission of its absence). Poorly equipped waiting area. Filth. These are examples of reasons why people would choose not to visit.

Customer time. Priority. Waiting time at each stage and the utilization of that time, as well as comfort while waiting, are some important aspects to evaluate.

Customer-Employee. This is about the comfort of the interaction. Courtesy, responsiveness, keeping promises, helpfulness in an atypical situation – check if everything is okay in this regard.

An important component that is often forgotten is the employees habit of responding. Confirm agreements, respond to every question asked, not just the last one, warn about forced pauses in the conversation – this is necessary. After all, it is precisely this little thing that often causes anticipatory communication to fail.

A well-adjusted customer service roughly reflects the following reaction of the customer: I prefer to buy more expensive but here than cheaper but there.

Charity. Please do not confuse these two terms – service and charity. Service helps a business make money, not get rid of it. A business is not a free service provider. A business is a professional servant to the customer. Courteous, caring. It works for money.

Loyalty programs. Directly influence the rate of repeat purchases. The main tools are described in the book “Effective Loyalty Programs. How to attract and retain customers” (2007). We will reduce the topic to recommendations.

  1. The goal of a customer loyalty program: Ensure repeat purchases.
  2. The goal: get the customer to buy from you.

In a world where even the iron talks about discounts, this is not easy. That’s why its better to focus not on a discount, but on the benefits of system interaction. Point collections, especially “thresholds”; cashback, collected and spent once per period, are the best solutions.

With their help, we form approximately the following reaction of the customer: If I buy somewhere else, I lose… Or like this: if I buy from company B, I have to start collecting points again; and I lose the opportunity to collect points for a purchase from company A.

Accumulation is a good option for systematic purchases. Here are some examples:

  • For every third visit to the salon, you get a 15% discount.
  • If you are our regular customer, you can get 1 hour of free professional work once a year.
  • For every 1000 you buy you will receive 10 points, and after your 15th purchase you will receive 15 points. You can then use them for your next purchase.

Companies from certain sectors (ritual agencies, law firms working with citizens) cannot implement such systems. Here, purchases are of a one-time nature and have the status of undesirable. In this case, we can rely on recommendations (word of mouth). They are formed by personal discounts for the current service, free services “as a gift”. And of particular importance is the service.

The same logic applies to products with one-time purchases, such as real estate. Here you can give a “discount to go. If your service is liked, the customer can recommend you and back up the recommendation with the opportunity to save money. By the way, the more expensive, complex and global the purchase is in the average person’s life, the more likely it is to be discussed with third parties. And where there are discussions, there are recommendations.

As a result of work according to the algorithm described above, we create a new proposal for a known product. The next stage of work with it is the sale.

Improvement of the sales process

This technique distinguishes between active selling and client base work. Active selling is the task of the managers. They must listen to the customer and offer a new version of the product, highlighting the features that the customer wants.

Working with the client base. We determine the customers for whom the updated version of the offer will be relevant and plan the communication.

How to verify effectiveness? The best friends of business are numbers. In order not to act blindly, you should determine the key indicators of customer flow at the current moment, and then digitize the dynamics, compare, highlight the tools to which your customers are most sensitive, and adjust the programs. There are special formulas for these tasks.

Repeat Purchase Rate (RPR):
RPR = Q/T * 100, where Q is the number of customers who made a second or more purchases, T is the total number of customers during the reporting period.

Customer churn rate (CR):
CR = L/M * 100, where L is the number obtained by subtracting the number of customers at the end of the period from the number of customers at the beginning of the period (the difference), M is the number of customers at the end of the period.

Customer Retention Rate (CRR):
RPR = (E-N)/S * 100, where E is the number of customers at the end of the measurement period, N is the number of new customers added during the measurement period, and S is the number of customers at the beginning of the measurement period.

This is a slightly more complicated version of CR. Shows customer churn per unit time. Customer churn is a normal process in any business except monopolies. It is a concern when churn is steadily increasing and is not offset by the arrival of new customers.

It is important to remember that times of crisis are usually the time for new solutions. There are many stories where the most amazing breakthroughs were achieved precisely during difficult times. A crisis ideally stimulates an entrepreneur’s ability to work and the creative component. The only important thing is to know in which direction to think.

While your competitors are thinking about how to live on, you are making money, expanding your customer base and launching new products. In other words, anything that does not kill us makes us stronger.

Journal: Sales Management #4.2022.
Article: “How to retain clients in the face of declining purchasing power”.
Author: Konstantin Tyesov, Managing Director, Uwindi Agency.

Blog Menu:
Let's get in touch!
Send your request — we'll contact you immediately.
By submitting a request you accept the privacy policy.