An Economy of Hope
by Michael Lavoie, EVP of Client Services, Epsilon

It seems like every time we turn on the television or open a newspaper today we are reminded of the economic challenges that our country is facing. News of rising unemployment and warnings of decreased corporate earnings seem to dominate the headlines. While we can not escape the realities of our marketplace it is important to remember that economic downturns are not new or even uncommon. In fact, our economy has survived 11 recessions since World War II. Operating in an environment that presents challenges that we can not control often leads to the innovations that fuel on-going refinement and improvement in our marketing efforts.

According to Marketing News during the last recent recession in the first three quarters of 2001, those companies that maintained or increased their marketing efforts managed to boost their market share and out perform those organizations with decreased marketing by almost 250%. While we may not be able to influence consumer confidence, it is critical that we rededicate ourselves in retaining and strengthening our customer relationships while maximizing the effectiveness of every marketing dollar. When marketers think of retention they often think of loyalty programs and although these programs are effective at retention, they can contribute in the areas of revenue growth, customer acquisition and, perhaps as importantly, customer identification. The concept of loyalty marketing however, goes well beyond transaction based loyalty programs. Loyalty programs come in many different forms and can be as complex as programs like Citibank’s “Thank You”™ program that encourages brand loyalty by allowing members to earn currency through all of their relationships with Citi or as simple as a one-time message or gift intended to surprise and delight a targeted segment of customers.

So after years of pursuing new customer acquisition strategies and focusing all marketing efforts on driving a transaction how does one shift to customer retention? First, it should be said that customer retention and pursuit of loyalty isn’t a marketing strategy that is specific to recessions nor should customer acquisition initiatives cease during a recession. Even though some of the most well known loyalty programs were launched during recessions like the American Airlines AAdvantage™ program (1981) and the American Express Membership Rewards™ program (1992), building loyalty shouldn’t be a cyclical focus. Market conditions should always play a role in determining the appropriate mix within your marketing strategy but you also need to consider the make-up of your customer base when determining your strategy. Ad Age suggests that companies should understand the recession and its impact on their customers’ and then act quickly. To do this you also need to have a solid understanding of your customers. This is where all of the customer information you have been collecting for years begins to pay dividends. Understanding the current and potential value along with the attrition risk of your customers – a segmentation scheme we at Epsilon call VAP or Value-Attrition-Potential analysis– allows you to focus your marketing efforts and investments where they will generate the greatest return – both short and long term.

Determining if a loyalty program is right for your brand requires analysis and planning. Here are a few things to consider when thinking through your strategy.

A thorough analysis of data will allow you to determine if a loyalty program is right to address the marketing challenges of your brand and what format that loyalty program should take. As a provider of loyalty services to some of the most familiar brands in the marketplace, Epsilon is available to help you think through your circumstances and make recommendations on how best to proceed. For more information you can contact your account services team or call us at (800).309.0505.

Finally, here’s some good news about our economic situation. With the price of gasoline above $2 per gallon from its peak of $4 per gallon last summer, American households now have a collective $13.5B in their pockets every month that they don’t have to spend on gasoline. Are you getting or retaining your share of this money?

 Back to Top