Why Invest in an Incentive Program when Times are Tough?

Making an economic downturn work in your favor

Economic gloom…with a dash of hope
There is no getting around the fact that the current economic conditions are creating a challenging environment for business managers. The somewhat surprising truth is that recessions (and recession-like downswings) are not rarities - most large companies are never more than 24 months away from a major slowdown somewhere in their organization. The bright side is that we are simply on the down slope of a natural cycle…it will eventually reverse and there will be light at the end of the tunnel.

In 30+ years as an incentive company, Loyaltyworks has witnessed a number of recessions and downturns. We’ve helped many clients manage through tough times by creatively leveraging the capabilities of their incentive and loyalty programs. Drawing on that experience, this article highlights the most effective strategies and insights we’ve acquired on the subject.

In times like these, there’s one important fact that often goes overlooked: a recessionary market can present a strong competitive opportunity to companies astute enough to see it – and willing to seize it. This article spells out that opportunity and then outlines a variety of incentive program strategies and tips that we’ve used to help clients:

• Reduce losses when the market slows
• Recover more quickly when things turn around
• Emerge from a downturn in a stronger competitive position

Everybody’s hunkering down…
The economic downswing means that customer demand and purchase levels may be falling for all products in your category – leaving you and your competitors fighting for a slice of an ever-shrinking pie. The natural reaction by most companies is to “hunker down” – focus internally on increased efficiency, closely manage working capital and reduce costs across the board. Budgets for marketing and other customer-facing activities are often the first to go.

…but this can be your competitive opportunity
If your company is reacting to a downturn in this manner, there’s a strong chance that your competitors are doing the same and cutting back on marketing activities. But consider the net effect of these decisions: with significantly fewer marketing messages entering the marketplace, there will be less “noise” and less competition for the attention of customers. Customer mindshare is freed up by this “gap”, leaving the target audience more receptive to your messages, making them more effective. So, instead of cutting back, you can take advantage of a more attentive market by continuing to communicate with customers and prospects as competitors retrench.

Investing in selective, focused marketing efforts at a time when customers are more receptive to your messages can yield significant short and long-term returns. Doing so can cost-effectively prevent current customers from defecting, attract new customers and increase overall share of wallet - all huge wins during a down market. And studies have shown that when the market rebounds, companies that invest in customer communications during the slowdown will likely recover faster than competitors, and with increased market share.

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