How can businesses thrive during a recession?
During the recessions of 1980, 1990, and 2000, there were stark differences between the 17% of public companies that performed badly and the 9% of companies that flourished. On average, they outperformed competitors by at least 10% in sales and profit growth. What sets them apart? According to Walter Frick, writing in HBR, adopting the […]
During the recessions of 1980, 1990, and 2000, there were stark differences between the 17% of public companies that performed badly and the 9% of companies that flourished. On average, they outperformed competitors by at least 10% in sales and profit growth.
What sets them apart?
According to Walter Frick, writing in HBR, adopting the right technologies can help to make your business agile, flexible, and efficient enough to weather the storm. It can also help you understand your products, services, and value proposition better — providing data to help you identify areas for growth and improvement (more on this later).
Katy George, a senior partner at McKinsey, also cites cost efficiencies as another benefit of technology. She advises that companies should prioritize digital transformation projects that pay off quickly in a recession.
In its own research, McKinsey has found that companies with greater foresight into their market (challenges and opportunities) and that are responsive to this, emerge from recessions stronger and more positioned for growth.
In other words, recession-proof businesses need the following:
- Technology that makes them agile and responsive
- Technology that improves efficiency and cuts costs
- Data that drives business and market insights
One of the technologies that meet these three points is an online community. The top three advantages cited by business leaders who have invested in an online community are customer loyalty (67%), reduction in support costs (48%), and branding and awareness improvements (47%).
Making your business more agile
An online community provides your business with a readily available, engaged group of customers who can give you feedback on where the market is going, their needs and concerns, and any product or service changes you’re making. You can make pivots with a lot more confidence, having tested everything out beforehand with your community members.
Online communities are a goldmine of insights on market trends and customer needs — so you can pivot your product strategy quickly as the environment changes. You might even be able to spot the next big opportunity based on the discussions and questions your community members are posting.
Your strategic decisions can also be informed by your community, either directly through feedback from your members or based on data you’ve analyzed. The majority of organizations (88%) that have online communities say that their community is critical to their company’s mission and 4 in 5 community managers believe that the community is one of the most important strategies used by their company for development.
“The community approach is a brilliant way to foster relationships at a more strategic value and demonstrate your own thought leadership,” explains Claire Rahmatallah, Director of Marketing at Sova Assessment.
Improving efficiency and costs
In a recession, every dollar spent is scrutinized by the board. Creating cost efficiencies can improve your position in a downturn while preparing you for a strong position once the market recovers.
Online communities can create several cost efficiencies in customer support, plus customer retention and acquisition. It can also help your organization scale its services — as Springer Nature discovered. Steven Inchcoombe, Chief Publishing Officer and Board Member at Springer Nature elaborates, “Zapnito provides us with the capability to create branded expert networks for our clients and partners. We believe it is a key part of our consulting toolkit: to package our expertise in a way that isn’t dependent on our time.”
Having an effective customer success function directly impacts bottom-line growth, with 93% of customers stating that they will make repeat purchases from companies that have excellent customer service. Three in five customers say that they feel more loyal to brands that offer good customer service. And that means they are more likely to stay with your business for longer, increasing the potential for upsells, and their lifetime value. With two-thirds of members saying they are visiting community platforms more often than they did a few years ago, they are ready to engage with your brand and buy more products and services from you.
Moreover, engaged members can be encouraged to refer others to your community and brand. Referral marketing can be highly cost-effective, with referral leads converting 30% better than leads generated from other marketing channels. Referred customers also have a 16% higher lifetime value and are four times more likely to refer others. In a community, you can put your customer advocates front and center to connect them directly with prospects and increase the chances of conversion.
As Pearl Zhu, author of the “Digital Master” book series once said, “We are moving slowly into an era where big data is the starting point, not the end.” Having access to first-party data is critical in today’s information-saturated world, and yet, too many organizations are relying on channels that restrict and deny access to data. The social media platforms, for example, don’t want businesses to have access to the data from the communities hosted on there as this data is used by the social platforms to sell advertising products.
With a brand-owned community, you don’t have this issue. Instead, you can use your community data to deliver a truly personal customer experience that extends the lifetime value of your customers and increases the chances of upselling. As touched on earlier, it can be analyzed to inform your strategies, including any pivots you need to make in response to a downturn. You can also use this data to gauge how customers are responding to any changes you have made.
Community data and member feedback can be used to inform your overall business strategy, as well as sales and marketing tactics to ensure they are generating and converting as many leads as possible. Within your community membership base, you’ll hopefully have an exact replica of your target audience that you can try sales and marketing collateral on, and showcase new products and services.
Returns for days and decades
Investing in a new online community is one of the surefire things you can do to give your business the best chance of navigating a financial crisis and emerging stronger from it.
As Laura Bineviciute, Head of Content and Community at Data Leaders has found, “The community has helped us to drive 90% customer retention and net growth across our customer base!”
The average community return on investment (ROI) increases with age to 5,315% after 10 years. So your investment today won’t just pay off for this downturn, but for the growth period that comes afterward and any crises that are on the horizon.