The global economy is teetering on the verge of a recession, causing many organizations to retrench, either by slowing investments or aggressively cutting costs. Retrenching can be an effective protective measure for defending against inflation and slowing sales, but how can founders proactively drive growth in a recession?
Over the last few decades, many tech companies have managed to withstand, and even grow, through economic downturns by redirecting assets and focusing efforts toward creating customer value and boosting retention. New business is critical to growth, but there are no guarantees that a first-time customer will become a lifetime customer. In periods of economic uncertainty, companies cannot rely on new customers alone, and maybe not at all.
A more dependable growth strategy is managing existing customers and broadening the products and services they use over time. Profitable and mature companies with large, active customer bases are better equipped to handle downturns, especially if more than 75% of their revenue comes from existing customers.
Here are a few ways a business can shift focus to a growth-through-retention strategy that prioritizes customer experience:
Account management is not just about cross-selling or upselling — it’s also about genuinely putting long-term customer goals ahead of the company’s short-term interests.
Centralize first-party data
Customer data is first party, and businesses have access to critical information regarding the products their customers already use, their line of work, where they’re located, relevant spokespeople and decision-makers, and more. As opposed to third-party consumer data, which may be misappropriated or misinformed, first-party data is exchanged in good faith.
In other words, first-party insights presume an existing, positive relationship between a business and its customers, and those customers justifiably assume their information will be leveraged to support any future interactions and guidance from their vendor. If a company knows all the products and vendors a customer is using, it can position itself in multiple ways to save the customer money and bring more value to the table.
The challenge is that customer records rarely contain this type of information. Depending on the size of an organization, first-party data is likely stored across multiple departments and systems, including marketing, customer advocacy, sales and support.
Businesses should look into syncing their databases, automating processes and providing proper access to all relevant information on active accounts, no matter where in the organization it lives. Building rich customer profiles and establishing a culture of information sharing need to be core functions of customer-facing teams.
Identify high-value customers and appoint dedicated account managers
Using centralized first-party insights, businesses can begin segmenting customers to determine which are high-value, based on spend or location. Once identified, managers can then assign account managers for these customer segments, or reshuffle roles to serve these customers proactively.
Account management is not just about cross-selling or upselling — it’s also about genuinely putting long-term customer goals ahead of the company’s short-term interests. When retention becomes a mission, success is not measured by customer revenue but by how efforts can build long-term, sustainable customer value. This translates into higher lifetime customer value for the vendor
The longer a company keeps a customer, the more opportunities there are to drive sales and build relationships, even without product growth. Stickiness comes from proper account management. Among technology vendors, named accounts typically receive a dedicated representative as well as access to support teams and any other internal resources they may need.
There should be a philosophy and practice of rewarding loyal and high-value customers — begin by identifying those customers and give them more direct access to the people and resources that can solve problems.
Price accordingly with appropriate KPIs
Vendors may find it tempting to drop prices when the markets slump, but discounts only train customers to work with a company in one way. By researching their needs and maintaining a consistent dialogue with customers, businesses can find ways to improve value beyond the price. Upselling and cross-selling are sustainable ways to increase customer engagement in the long run. Rather than offering discounts, companies with diverse portfolios can instead promote direct access to additional support and resources, or give customers early access to new products and services. Targeted, contextual marketing (like in-product marketing) can support these efforts as well.
Remove barriers to entry
After developing a better understanding of your customers’ current situation, you should adjust your sales strategies. An effective way to do so is to avoid hard selling customers more than they need, and instead letting them add programs and functionality as they grow.
This means customers no longer have to guess how their needs will evolve because they know things can be changed down the line. This mentality lets a vendor introduce its tools to customers at a more natural cadence that meets how their budgets might be developed.
Evolve customer engagement in step with changes in customer behavior
Preserving and growing existing customers is a job for everyone at a business, not just the account teams. Frequent top-down discussions regarding the goals and constraints of customers will help align departments in service of retention.
In plain terms, customers look for value during a downturn. Corporate leaders will impose cuts in budgets and spending, but their businesses will rely even more on technology to stay afloat. The appetite for expensive and so-called “best-of-breed” vendors will recede, as these vendors are poorly positioned to increase value to their customers because they are fundamentally hampered by their high price tags.
The same is true of non-technology vendors. Companies that prioritize and appropriately price products or services essential to consumer and business survival and success will see the most growth in a down market. For that to happen, businesses first need to understand their customers’ dynamic requirements and constraints, which only comes from better outreach and engagement supported by strong customer data.