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How to keep your customers happy during these tough times

How to keep your customers happy during these tough times

By Louise Southhall, Economist at Xero

Consumer confidence is an important economic indicator for small business owners to keep an eye on, especially those that mainly sell to households. That’s because “consumers” is really just another word for your “customers”. The more confident your customers feel, the more likely they are to spend in your small business.

Consumer confidence in Canada has been low for a while now, which isn’t surprising when you think about the cost of living pressures we have all been dealing with. The OECD’s Consumer Confidence Index has been below 100 since January 2022, which means that for the last 15 months there have been more consumers who are feeling negative about the future than feeling positive.

In slightly more positive news, consumer confidence has been getting a little better each month so far in 2023 as inflation has started to fall and the Bank of Canada has stopped raising interest rates. The latest reading (April) was 97.2 points –  back to where it was in August 2022.

But despite the modest improvements so far this year, more of your customers are still feeling negative about the future than are feeling positive, which makes it a tough environment to operate a small business in.

So what can small business owners do when their customers are feeling pessimistic and reluctant to spend?

Many small businesses have close relationships with their regular customers. This is a huge advantage over bigger business competitors. Talk to your customers about how things are going for them and use this information to think about how you can tailor your business to meet their current needs.

Some of the actions that might work for you include:

  1. Reduce your  stock  holdings and/or change your mix of offerings to better reflect your current turnover and customer wants. If you just keep buying the same amount or type of stock that you were a year ago then you risk being stuck with items that you can’t sell.
  2. Offer  loyalty discounts  to your most valuable customers or those that buy in bulk. Offers such as a “buy 2 get 1 free” deal or a loyalty card that gives a free service after someone has purchased 10 services are easy to set up and are a win-win for both you and your best customers.
  3. Have a  weekly or daily special  which allows you to move any slower selling stock while also giving customers a bargain. This will also give you a short-term edge over your competitors but without locking in an exceptionally low price point for a long period of time.
  4. Make it easier for your customers to buy from you – and pay you! – such as using  electronic payment  options like credit or debit cards.
  5. Widen your potential customer base by selling some or all of your product range  online . Many small businesses started websites during the pandemic when they were forced to close their physical stores. But that was a while ago now. It is worth reviewing your site and its analytics to see what is and isn’t working and check if it is still serving your customer’s needs.
  6. Offer customers  extra services  like same-day free delivery in your local area or free gift wrapping. Being able to offer this extra level of personalised service is potentially a low-cost way of making you stand out from your competitors.

Louise Southall, Economist at Xero

Louise joined Xero in mid-2020 as part of the Xero Small Business Insights (XSBI) team. The XSBI program uses anonymised and aggregated data from the Xero platform to inform decision-makers about the latest trends in the small business economy in order to support small businesses.

Louise has almost 30 years experience in economics and business advocacy working with multiple business organisations, councils, government agencies and charities. Her work has covered a broad range of economic and business-related policy issues, membership projects and thought-leadership research. She has a Masters of Economics from Macquarie University and a Bachelor of Economics (hons) from the University of Newcastle.

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