How to Protect Your Business When Things Get Tough

A customer-centered strategy can help vendors thrive in a recession


After several years of strong economic growth, market analysts predict that a recession is just around the corner.  A combination of rising Federal Reserve interest rates, record low unemployment, declining home sales, and accelerating inflation suggests that the country’s economic winning streak could have an abrupt end next year.  Though most businesses suspect a recession is on the horizon, the vast majority are unprepared to handle it – and they’re simply hoping for the best.


Businesses fear recessions for a few key reasons: falling stocks, credit impairment, layoffs and hiring freezes, and the threat of bankruptcy, to name a few.  But what’s most concerning during a recession, for vendors especially, are the changes in customer behavior.  Forbes contributors Marc E. Babej and Tim Pollak write, “Frugality is standard operating procedure. Every downturn prompts serious belt-tightening.”  Indeed, your customers will focus on saving money by buying less, consolidating vendors, and even breaking contracts if they can.  The less they spend with you, the less revenue your business brings in.  If this happens with multiple customers, you’ll find yourself on the raw end of the recession.


Sadly, many vendors will struggle during the downturn if they aren’t prepared.  However, others will thrive, and they’ll do so with a strategic account management program that prioritizes customer relationships.


Become a strategic partner

Though we’re 10 years removed from the great financial crisis of 2008, that period of economic turmoil is still worth analyzing for winning strategies – even more so with a new recession on the horizon.  In a recent Harvard Business Review article, writers Mark Kovac and Jamie Cleghorn examined companies that excelled in the decade following the crisis.  The differentiator for the successful companies was their preparation.  Among their best practices, these companies:

  • Rethought sales capacity: Instead of relying on backward-looking data, recession-proof companies constantly recalculated potential markets to ensure their account coverage maximized sales with their biggest customers.
  • Dropped unproductive accounts: Most companies operate using the 80/20 rule – 80% of their revenue comes from just 20% of their customer base. Recession-proof companies focused the bulk of their efforts on that 20% and dropped the customers who produced little revenue but required too much time.
  • Automated: The more account management tasks these companies automated, the more money they saved. They also gained access to a trove of analytics, which helped with customer retention.
  • Reinforced behaviors that worked: When these companies found behaviors that generated results, they trained the entire team so everyone, even poor performers, could boost productivity.


But, becoming a strategic partner for your customers is about more than streamlining your internal processes.  You have to clearly outline success, measure it, and become an indispensable part of their business.


Measuring Success

Your existing customers are the bedrock of your business.  Generally speaking, they’ll spend more with you, they’ll spend more often, and they’ll take up less of your time.  This year’s CSO Insights Sales Performance Report shows that revenue from existing customers accounts for 70% of revenue, sales cycles for existing customers take an average of 3.8 months (compared to 7.2 months for new customers), and if a customer considers your business a trusted partner, your win rate averages 59.9% (compared to 43.7% without that reputation).  Thus, in a recession, your existing customers are the ones who can make or break your business, and your time is best spent strengthening and protecting these relationships.


So, how do you measure customer success?  On average, businesses focus on three types of churn: customer churn, gross-revenue churn, and net-revenue churn.  A 2016 McKinsey & Company report showed that companies with lower net-revenue churn experienced higher growth – they continued to grow even if they didn’t acquire new customers.  But they didn’t achieve this growth by focusing on net-revenue churn.  Instead, they turned to gross-revenue churn.


Essentially, a low gross-revenue churn indicates that a business has retained existing customers and hasn’t focused on getting them to buy more or move on to higher-priced products.  They focused on maintaining the relationship, and that consistency resulted in higher growth.


Maintaining the Relationship

To maintain your existing customers, there are a few key things to remember:

  • Think about your customer’s full journey – this relationship isn’t just about getting your customer to buy a product; it’s about helping them achieve their long-term goals. Tailor your approach to their needs, which may mean maintaining their business at its current level with no expansion to other products or higher volume. That’s okay because they’ll provide consistent business for you when you need it most.
  • Dive into your analytics carefully – your data will tell you where you need to dedicate more resources and where you need to scale back.
  • Measure continuously – gross-revenue churn isn’t a metric that gets pulled once a year or even once a quarter; keep accessing the data as often as you can. Your success in a down market often depends on spotting a problem before it becomes a problem.
  • Share customer insights across the board – employees at every level of the company need to understand why customer relationships are critical to the success of the business; share the insights with them and lead your team to address customer concerns quickly, efficiently, and thoroughly.
  • Invest in customer success professionals – to handle customer relationships well, your business needs to invest in a strategic account management program.


The importance of a strategic account management program

A strategic account management program takes all of the best practices discussed here and puts them into action.  With this program in play, there’s an intense focus on a select few accounts that are truly driving your business.  These accounts are more than just customers – they are an integral part of your long-term business strategy and vice versa. Thus, the way you interact with strategic accounts differs greatly from your interactions with a regular account.  For these customers, you will:

  • Help them identify their most significant opportunities and challenges
  • Develop relationships with them in non-traditional ways (i.e. events, trade shows, etc.)
  • Consistently assess and track their satisfaction (and retool your strategy when something isn’t working)
  • Proactively bring ideas to them to address their opportunities and challenges – upsell, offer complementary services, involve them in the design of your products, etc.
  • Maintain contact even when you aren’t conducting business


Your strategic accounts are your ticket to survival in a recession. And, even during periods of rapid growth or economic stability, these are still the customers who can help you push ahead of the competition.


In a down market, there’s no margin for error.  Start working on your Strategic account Management program to avoid the pains of poor recession prep.

CEO at Kapta
Alex Raymond is the CEO of Kapta.