Marketing Framework for Customer Retention and Acquisition Through Covid-19

I posted this in my stories a few days ago and watched this episode again last night. I’ve seen a lot of commentary on this particular clip where most people agree that it was the best 2 minutes of the series.

The clip talks about how tough Michael had to be on his teammates in order to get them to execute on his level. It showed what motivated him and how he motivated his team members. You can watch the full clip here.

As an emerging investor and current entrepreneur, I’m super interested in what motivates people. I have to be. It’s how I sell to clients and pick companies to work with.

To see Michael upset here makes me think about what he sacrificed by choosing to be overly motivated by winning.

Your customers too are overly motivated by something. Do you have any idea what that is? Now imagine Covid hits and their priorities shift. How has your customer’s motivations changed?

In this article I’ll present a framework to think through your current and future marketing strategy as it pertains to recession psychology. We’ll go over customer motivations, consumer segmentation and marketing examples in hopes of helping you figure out how to continue to attract customers as we move through quarantine and into a potential recession.

Customer Motivations

As a business owner it is your responsibility to study and understand your customer’s behavior and consumption patterns. It’s especially important now as it is no secret that in times of downturn and economic uncertainty consumer behavior changes. Consequently, you’ll have to alter your strategy accordingly.

The first step to doing so is understanding why customers buy from you. From there you can understand how your customers view your products on the spectrum of essential and expendable and minimize your business risk.

According to this HBR article, all consumers no matter the economic climate sort products and services into 4 buckets:

• Essentials are necessary for survival or perceived as central to well-being.
• Treats are indulgences whose immediate purchase is considered justifiable.
• Postponables are needed or desired items whose purchase can be reasonably put off.
• Expendables are perceived as unnecessary or unjustifiable.

Where does your product fit in? Write it down and we’ll pick this back up in the next section.

There are many reasons why we make purchases and now more than any other time you’ll need to be super clear as to why someone buys from you. Think about it. How many things are you worried about right now? How many decisions have you made today? Don’t you want whatever purchase decision you make to be super easy and rewarding?

Here are common reasons why people buy. A full explanation of each can be found in this article from Biz Journals.

People buy:

1. To enhance their status.

2. To make a dream come true.

3. To make amends.

4. To be defiant

5. To feel good.

6. To feel safe.

7. To forget our problems.

8. To make a statement.

9. To feel we’re somebody.

10. To reward ourselves.

People’s motivations will be changed by Covid and as a business owner you’ll want to think through why people purchase from you so you can position your product correctly, create clear messaging and increase brand loyalty.

One of the first things to go during an economic downturn is brand loyalty as customers will look for options that are “good enough” in order to save money. Understanding the psychology of why customers buy from you will be your superpower.

Consumer Segments

According to a study by EY there are 4 consumer segments that have emerged due to Covid. I expanded on their definitions in italics.

Four Customer Segments

Save and Stockpile: Not so concerned about the pandemic, but worried about their families. Pessimistic about the long-term effects. These folks are not necessarily cutting back but are being cautious about how they spend excess money if they are spending at all.

Cut Deep: Hardest hit by the pandemic. Most pessimistic about the future. Spending less across all categories. These customers have cut back on extraneous spending due to need but also fear what’s to come. Anything not necessary to survive is gone.

Stay Calm and Carry on: Not changing their spending habits. Not directly impacted by the pandemic. Worried that others are stockpiling. These folks are still shopping and spending as usual and may be advocating for going back outside.

Hibernate and Spend: Most concerned about the pandemic. But best positioned to deal with it. Optimistic for the future. Spending more across the board. These consumers may have high paying jobs and are more financially secure.

Analyze your customer base and know where they fall. Consider things like income, age / generation and location, even political affiliation. Knowing which bucket your customer sits in could offer some hints into what their current needs are and what they find important. Your messaging should follow that.

The four customer segments are projected to evolve into these five segments post Covid:

Five consumer segments after Covid

Get back to normal: Spending largely unchanged. Daily lives were never really affected. Least concerned about the pandemic overall.

Cautiously Extravagant: Middle to high income. Very focused on health but relatively optimistic despite a strong belief that a global recession is coming. Will spend more in areas important to them.

Stay Frugal: Spending slightly less, but some deep cuts. Trying to get back on their feet. Among the most pessimistic about the future.

Keep Cutting: Least educated. Least likely to be working. Making deep spending cuts. Changing what they buy and how. The pandemic was always a huge worry.

Back with a bang: Younger and in work. Spending much more in all categories. Their daily lives were most disrupted. Now they’re the most optimistic.

Once you’ve identified your segments, here are some additional questions to ask yourself:

• How does my messaging need to change and will the strategy and cost to acquire customers change?
• Has the make up of my customer base changed?
• How has customer demand changed? How will it change post Covid?
• For B2C companies what are the key factors that changed in regards to a purchase decision?

Now remember those buckets we spoke about earlier — essentials, treats, postponables and expendables? Where a customer places your product will change based on which segment they are in. In addition to that, as customers move to post Covid segments how they bucket your product will change again. Knowing which bucket your customer sits in gives you more insight into how they view your product and whether it’s essential or expendable and your perceived business risk.

For example, cut deep customers who paid for home services like cleaning and laundry pick up may deem those same services in a downturn to be expendable and completely cut them out of the budget moving forward. Wouldn’t you want to try and anticipate that happening so that you could start offering bundling or cleaning supplies packs as an alternative?

Marketing and customer segments

So now that you’ve identified what makes your customers buy, analyzed your customer base and deduced what segments they’re in and how they view your product, it’s time to get in front of them.

For a lot of clients I’ve worked with, if we haven’t already experienced it, we are anticipating a large reduction in revenue over the next 18 months. With that being said founders are being super creative and resourceful with how they market to their customers.

Here are some cheap marketing techniques entrepreneurs I’m working with are using:

Giveaways — One of the oldest tricks in the book. As a way to build brand awareness, one of my founders just did a giveaway for a $400 stroller.

Her product also has a naturally high K factor (virality coefficient) so little things like giveaways go a long way.

Lifting the veil — Supply chains and shipping are completely backed up right now. Another founder friend (we have not worked together) decided to lift the veil on the shipping and packing process.

She demystified the shipping process by posting video products being made and packed. Super smart as it brings the customer into the process and makes them feel a part of the activities leading up to them receiving their order. Being this company makes all-natural products it was also a way to show the process from seed to bottle.

Free (or greatly reduced) — a service provider I worked with recently decided to offer free services. He teamed up with a counterpart and created a flyer (something that’s easily shared) and is consulting business owners for free.

A few things here:

1.) The easily shareable flyer is perfect for spreading the word.

2.) Offering this info for free now creates goodwill in the future.

Someone that you greatly helped will remember what you did for them and either recommend you to someone else or double back when they need your services again.

Do Good — A former client of mine provides party decoration boxes for kids. She has promised that all her profits will go to Covid relief funds. She was able to get national press from this as well.

Customers are able to attach her brand to the good work she’s done AND the amazing products she sells.

In previous recessions companies like Johnson & Johnson and Colgate Palmolive have held up against other consumer brands due to careful attention to their customers and marketing strategies.

In 2008/2009 some companies were built based on these strategies. Think of a company like Uber or Slack. These companies were built with customers and recession psychology in mind and are still thriving today.

In this article we’ve discussed the four consumer segments, five segments customers could potentially fall into post Covid, their motivations to buy and potential marketing strategies to use when marketing during this time.

If you have any questions or thoughts please reach out to me at shondra@tbc-capital.com.

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