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Navigate Customer Churn: Strategies for Surviving a Recession

March 7, 2023

customer churn

With the recession looming, most companies are looking for ways to stay afloat.

One of the biggest challenges they face is customer churn – the rate at which customers leave the company and stop doing business with them. When customers leave, the revenue streams they generate also go, resulting in significant financial losses.

Fortunately, you can take many steps to minimize customer churn, even in the face of tough economic conditions. By focusing on delivering value to customers, you can build customer loyalty and lay a solid foundation for long-term success. That means understanding customer needs and preferences and tailoring your products or services to meet those needs.

Let's look at seven key strategies to avoid customer churn during a recession.

How to retain your customers amid economic uncertainty

Your customers are just as worried about the recession as you are. To retain them, show how your product or service can help them through the economic storm.

1. Target the right customers

Identify thriving and struggling customers and tailor your offerings to their different needs. Understand what pain points your product or service addresses for each customer's needs and how it’ll help them through the recession. Your why makes a big difference in your customers’ eyes, not only in good times but especially in a recession. 

Also, focus on developing and prospecting in industries less affected by the recession as a future buffer for the next inevitable downturn. In tough economic times, customers can switch to a competitor that offers them more bang for their buck, if only temporarily.

Suppose companies cut back on software, services, or products that make them more operationally efficient or provide a return on investment. If so, these companies could be worse off in the competitive environment of a recession.

When it comes time to emerge from the recession, your client's business may be in a difficult position compared to its competitors when doing more with less. Such relationships can prove ineffective over the long term, and targeting the right customer groups who remain loyal to you becomes imperative.

2. Prioritize the most valuable and identify high-risk customers

As a next step, identify the customers who deliver the most value and those at risk of churn.

Businesses know their most valuable accounts but not always their highest-risk ones. The high-risk customers can severely impact your bottom line if they start discontinuing your services en masse.

Small and medium-sized accounts are the biggest contributors to customer churn as they often don't have the same budget as larger accounts. To bring your focus back to these accounts, consider how likely they will go out of business because of the recession.

Identify and contact high-risk customers early in the fiscal year to mitigate customer churn. Discuss next year's budget and adjust your product or service to fit their budgets. This prepares you for future budget cuts.

You can also offer flexible payment terms to businesses that aren't doing well during a recession. Giving businesses flexibility in payments allows them enough time to buy from you or renew. This shows you care about your customers, which fosters loyalty and keeps them coming back to you.

3. Identify the factors that contribute to churn

Identify the factors contributing to customer churn so you can monitor them closely. Stay current with market forecasts to prepare your business for a severe economic downturn in a niche market or industry.

For example, if your biggest customer is in the tech industry, keep up to date with the most influential events, as the tech industry is more likely to be hit by a downturn.

Also, take the time to understand how your customers do business and how adeptly they handle inflation. Think about which customers are most affected by inflation and supply chain issues.

By understanding how your customers behave in different situations, you can develop an approach that resonates with them, especially in times of crisis. 

Create targeted communications for accounts dealing with negative developments in their industry. If they need to cut spending, consider temporarily allowing customers to downsize their accounts. 

For those not cutting back on spending, consider offering additional perks or adding more features to their existing packages to motivate them to stick with your product or service.

Customers who have been able to downsize their accounts during tough times stay loyal 57% longer than those not given this option.

4. Provide customers with the right support

Staying one step ahead of customer problems means anticipating and addressing potential problems before they escalate into larger issues that can affect customer relationships. By proactively identifying and resolving issues, companies can prevent customer dissatisfaction and avoid churn.

Customer support teams play a crucial role in this process as they are on the front lines of customer interaction and have first-hand knowledge of the most common and pressing issues customers face. They can help sales teams by providing insights into customer needs, pain points, and feedback that can improve product development and customer experience.

By collaborating with customer support, sales teams can proactively address issues and avoid contract renewal delays. This is because they can use the support team's insights to anticipate potential issues and offer solutions that meet customers' needs. Sales teams can also use this information to educate customers on how to avoid similar issues in the future to further improve their relationship.

5. Explore your competitive edge

Staying current with market news and having a strategy for an upcoming recession gives you an edge over your competition. Allowing your customers to downsize temporarily and offering value or perks to those who pay for your premium services can also help you stay ahead of the competition.

Understand what your business offers that others don't and get customers to turn to you. Research what your competitors offer in terms of price and value to stay competitive. Offering discounted packages, additional perks, premium services, and ongoing customer communication goes a long way in attracting new customers.

6. Position your product or service correctly 

During a recession, businesses face an environment of uncertainty, reduced consumer spending, and heightened competition. In such a scenario, it's common for less experienced executives to make impulsive decisions that can affect the company's or stakeholder's financial viability.

For example, some companies may drastically cut their budgets or lay off employees without considering the long-term impact on their business. These actions can result in reduced quality, reduced employee morale, and, ultimately, customer churn.

However, this is also an opportune time for companies to position their products or services and offer solutions that can ease customers' fears and uncertainties. By understanding the needs and concerns of their customers, companies can design targeted solutions that address their pain points and deliver value.

For example, companies can offer discounts, flexible payment plans, or alternative financing options that make their products or services more accessible to customers during tough economic times. They can also invest in marketing campaigns that focus on the value of their product or service and how they can help customers generate positive cash flow, save money, or improve their quality of life.

Additionally, businesses can focus on building long-term relationships with their customers by providing exceptional customer service and support. Businesses can build trust and loyalty by addressing customer concerns and providing personalized solutions, which can translate to repeat business and positive word of mouth.

7. Retain customers and build loyalty

Consistent customer targeting is key to building customer loyalty. Make the first contact when discussing a future budget during a recession. Also, ensure your communication channels are always open so no one is surprised when budgets change.

Educate your existing customers about the impact of the recession and how your partnership can help them weather the recession long term. This is a great time to improve customer service and avoid escalations and cancellations.

Weather the storm and emerge stronger

Revenue churn is sometimes inevitable during a recession, but customer churn doesn't have to be. Prioritize your long-term business partnerships and be flexible, understanding, and communicative in meeting their needs.

Here's a quick recap of reducing customer churn during a recession.

  • Target the right customers by understanding how your product or service is relevant to their specific situation and can help them during the recession.
  • Have proactive conversations, identify factors that increase customer churn, and create a plan unique to each customer's situation and industry.
  • Stay updated with industry news to see if an uncertainty could impact your customers.
  • Sharpen your competitive advantage, and don't take existing customers for granted.
  • Deliver great customer service and build customer loyalty by focusing on a long-term vision and partnership.
  • Prioritize high-value customers, but don't forget to look out for high-risk customers with smaller accounts.

A recession can also be an opportunity to attract new customers unhappy with their existing solutions, so make the most of the downturn.

Leading through a downturn? Learn key lessons from CMOs at Zoominfo and Lacework to navigate your business through economic uncertainty and aim for a brighter future.

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sales intelligence software Experience the power of data-driven sales

Access real-time data, insights, and analytics to identify new opportunities, track competitors, and close deals faster with sales intelligence software.

Navigate Customer Churn: Strategies for Surviving a Recession Don't let the recession hurt your business. Learn how to prevent and customer churn during a difficult economic periods.
Nahla Davies Nahla Davies is a software developer and tech writer. Before devoting her work full time to technical writing, she managed – among other intriguing things – to serve as a lead programmer at an Inc. 5,000 experiential branding organization whose clients include Samsung, Time Warner, Netflix, and Sony.

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