The Inflation Tsunami Is Here: How Businesses Can Use Customer Loyalty Programs to Keep Existing Customers and Overcome Sales Slumps

375 basis points. That’s how much the US Federal Reserve raised rates this year (2022), in less than a year and only six hikes, taking them from the pandemic low of 0%–0.25% to 3.75%–4%.

The Fed’s repeated claims last year (2021) that inflation was merely transitory are long forgotten. Inflation keeps hurting consumers, as well as business owners who rely on capital spending or are entering a growth phase. More worrying still, there’s no end in sight to this aggressive pace of hikes. Goldman Sachs expects it to continue into the first quarter of next year (2023), with the benchmark rate reaching 4.5%–4.75%. By comparison, the Fed raised rates only nine times during the entire 2015–2018 expansion. (One “notch,” as rate moves are counted in Taiwan, equals 0.25 percentage points; a 12-notch hike means rates rise by 3%.)

How Exactly Does Inflation Affect Business Sales?

Since the pandemic, demand fueled by low interest rates and fiscal stimulus worldwide ran into supply chain problems and rising raw material prices in 2022. The unexpected Russia–Ukraine war made matters worse, pushing the US CPI to repeated 40-year highs not seen since 1980. The latest September CPI rose 8.2% year over year, with core CPI up 6.6%.

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Such broad, rapid inflation has sharply increased businesses’ capital spending and sales costs. A joint SurveyMonkey & CNBC survey from Q2 2022 found that 75% of small and medium-sized businesses are facing higher costs. Interestingly, despite that squeeze, only 40% said they would raise prices and pass the costs on to consumers.

According to a HubSpot survey, when inflation drives up their spending, customers weigh the following factors in deciding whether to stay with the products and services they already use:

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• Product discounts or freebies
• Attractive rewards or loyalty programs
• High-quality products or services
• Excellent customer service
• Ongoing recommendations from friends and family
• None of the above

The survey suggests that many factors go into whether to raise prices. What’s clear is that in highly competitive industries, consumers have a strong incentive to switch to other products and services, which may explain why many businesses don’t dare raise prices and choose to absorb the costs for now.

Launch a Customer Loyalty Program to Keep Your Most Valuable Customers

The damage from inflation will eventually pass. A customer loyalty program isn’t just about keeping valuable customers during inflation, or avoiding losing existing customers over price changes while consumers cut back and the pool of new customers shrinks. Paired with your CRM customer database, product planning, and sales strategy, a loyalty program can create an entirely new, customer-centric business model that delivers the right products and services for each stage of the customer’s needs.

What Is Customer Loyalty? Upselling Strategies That Build Loyalty Through the Customer JourneyDid you know that acquiring a new customer costs five times as much as retaining an existing one? Brands naturally want to grow their pool of prospects and stand out from the competition. But even as customer touchpoints grow more diverse and complex, and prospect behavior becomes more fragmented and harder to track, keeping existing customers and raising their lifetime value is a priority no brand can ignore. Customer loyalty is a key strategy for understanding existing customers and maintaining those relationships.https://oakmega.com/blog/what-is-customer-loyalty

Three Keys to Launching a Customer Loyalty Program

1. Build a data strategy around first-party data: first-party data matters more than ever. As third-party cookies become less and less effective, businesses without first-party data struggle to see clear customer behavior profiles and understand customer needs.
2. Optimize touchpoint performance and extend the customer engagement journey: as mobile devices spread, consumer behavior has grown increasingly fragmented, and the customer data businesses collect ends up in isolated data silos. Social CRM helps businesses improve engagement with customers across every channel and drive conversions through real-time responses and precisely targeted broadcasts.
3. Combine product planning and sales strategy to keep helping customers succeed after the sale: as the HubSpot survey notes, customers have more and more choices. If businesses focus only on pre-sale engagement, some customers may leave because they don’t discover the value of the product or service in time. Businesses should give after-sales service equal weight, or even invest more in it, and build product planning and sales strategy into a loyalty program that boosts engagement among existing customers. For example, tie it to product discounts by rewarding existing customers once they reach a certain level of usage, or proactively share product and service resources to strengthen their loyalty to the brand.

(Further reading: 5 Ways Your SMB Can Deliver a Great Customer Experience Despite Rising Inflation)

How Social CRM Helps Brands Build Engagement Strategies for Customers at Every Lifecycle StageSocial CRM has become an essential way for brands to engage customers. Across a brand’s messaging apps, a CRM captures both data and interactions at once. When dealing with customers of different types and stages, brands that use the customer lifecycle can segment more effectively with data-driven thinking and their overall brand strategy, and craft more precise marketing and sales strategies.https://oakmega.com/blog/how-social-crm-helps-customer-lifecycle

The Worst of Times Is Also the Best of Times: Social CRM Helps Businesses Weather Inflation

OakMega Social CRM helps businesses build a first-party database inside messaging apps with a CRM system, use a marketing flywheel to extend the reach of their messages to existing customers, and optimize every touchpoint to create the customer loyalty program that fits them best.