Protecting Your Customer Base in Bad Economic TimesOctober 10th, 2008 by Matt Thomson
I had planned to write about new businesses and business concepts that I observed at the unConference last week. But given the economic meltdown that only seems to be accelerating, I thought that I’d better continue along the lines of Chris and Doug the last two days and address how multi-channel retail businesses can profit from customer analytics in an economy where consumers are wary of spending money. The truth: customer analytics will better help you protect your customer base from larger retailers who dangle lower prices.
In answering the question about why customer analytics is more important in a bad economy than a good one, we need look no further than the increased importance of your current customer base. In retail, this will be truer than anywhere else because of the perfect substitutability that exists among retail goods. I hate to get all economist on you but any economist will say that, given the existence of two similar goods, the consumer will always choose the cheaper one. So how does this matter? Well, for the most part it means that discounters and wholesalers should have the upper hand in a bad market where consumers are less willing to part with money.
In part, online and multi-channel retailers will compete with these wholesalers by slashing their own prices. After all, making your products more attractive - cost wise - in order to keep customers in-house is a good move. But is engaging in a price war the best move for small and mid-size multi-channel retailers? Not really. I’m not so naive as to suggest that smaller multi-channel retailers can get by without discounting prices at all. But I am suggesting that your price cuts might not need to be so severe if you add a heaping helping of anticipation into the mix.
That is, anticipating what your current customer base might want before they need or want it, is a great way to mitigate some of the downward price pressure. After all, with some solid predictive marketing, you will know what your customers want before your competition and can lead your customers in your direction by offering them exactly what they want at the right time. Relevant messages, as Doug mentioned the other day, are nearly as important to consumers as sale prices. This won’t change in a bad economy as long as you demonstrate your understanding that customers feel poorer than they did in, say, August. Or even last week for that matter.
Being proactive with what you offer - instead of reactive with your prices - is a great way to protect not only your customer base from larger predators but it’s a great way to keep your current customers recent in their buying.
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