When running a small business, it is super important to know your customers, their specific needs and spending patterns as well as anticipate how an uncertain economic environment can have on your business. Planning is important to anticipating certain business events, but the hardest part is anticipating how your customers, both current and future, will react to how the economy is affecting their household. When the economy is having an adverse effect on spending, consumers more than ever, rely on discounts and promotions to help mitigate the loss in their purchasing power.
The focus of this blog is understanding the consumer spending habits and behaviors and how your business can help customers through difficult times and building stronger relationships and loyalty. Engaging customers and finding out what they like most about your products or services and what they feel could be improved is always a winning strategy. Customers want to feel like they are being heard and customer retention is even more important than ever with a high inflation, high interest rates environment. Discretionary income is very important to consumers because many expenses such as mortgage/rent, food, utilities, car related must be paid first and the remainder is what is available for consumers to spend with your business. Marketing studies that currently over 86% of consumers seek a deal on their next purchase. The types of promotions and discounts you can offer during tough times can often positively affect your business and your customers perception of your business. If a consumer feels like you are trying to help them out when times are tough, they will become more loyal to your business and will often tell others about your business.
Understanding how consumers search for deals and promotions can help determine how much of a discount your business can afford to offer and what motivates a consumer to continue to buy from your business and to tell others about your business. Doing a little research can help understand how consumers seek out deals. Consumers will often use search engines like Google, Bing, etc to try to find promo codes and other ways to save. For instance, if you were a handyman or even a restaurant and offered a 15% discount on their next purchase for the referral of your business, that would be a significant amount of savings for the typical consumer. Is your product or service a necessity or a nice to have? Must have goods and services tend to not be as negatively affected when the economy takes a downturn. How long do you want to offer discounts on products and services is also another factor? Consumers want to know that your products and services are available at a discount when their income or purchasing power has been reduced is also important. Your profit margins are also important and will often dictate how much of a discount you can offer and still be able to run your business profitably.
When consumers feel like you are in their corner and want to help them get through tough times, customer loyalty often increases. If customers feel as though you might be taking advantage of them, they will often pull back on their spending with your business or even find a competitor that might offer an equivalent product or service. Providing an exceptional customer experience is critical to growing your business. I recently had an ongoing problem with an important tech provider and decided to change vendors because of their total lack of empathy and awareness of helping me solve a problem. This significantly affected my spending with this business, and I ended up finding a much better vendor whose prices were more in line with my budget as well. This company did not want to take the time to answer my questions or make me or my company feel appreciated, so I moved my business to a company that did. You can’t solve someone’s problem or issue unless you understand them or it first. My consumer behavior was significantly affected by how I felt like was being treated.
As a reminder, consumers refer businesses that they feel like understand them. Consumers are 4X more likely to refer a business when it comes from someone who they trust. Understanding consumer behavior is the key to growing your business. My business offering Dealsby, provides a web and app-based platform for small business owners and consumers to connect and for consumers to quickly and efficiently share their referrals and receive referral reward discounts. A great customer experience still has to be provided and a discount during difficult times always helps!
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