By Stuart Russell, Chief Strategy Officer of Planning-inc

Inflation in the UK has been rising at its highest rate in 40 years. And as a result, retail sales have plunged to a level last seen in the worst months of the pandemic. Retailers are pulling their belts a few notches tighter.

This often means the prioritisation of business survival over customer-centricity. Online fashion retailer Zalando’s management, for example, made the difficult decision to reduce its marketing budget this week. Sainsbury’s has cut multiple lines from its ‘price lock’ guarantee range. It’s a ‘batten down the hatches’ approach for most retailers.

But there is another option. While it may feel counter-intuitive, learnings from previous recessions actually show that businesses that maintain or increase their marketing spend in times of economic downturn emerge stronger than competitors who opt for cutting costs. With this in mind, retailers should redirect their spend to focus on customer-centricity, developing deep insights into consumer trends that can be activated as campaigns to drive retention and loyalty. This will allow them to defend their current market position, or perhaps come out even stronger.

Good things come to those who invest

We know that economic uncertainty has a profound effect on consumer behaviour. For example, 57% of consumers have swapped or plan to swap their most trusted brands by the end of the year, often turning to lower-cost value brands to help mitigate the effects of inflation.

While some businesses may see this as a reason to reduce marketing spend (what’s the point of trying influence customer behaviour during a period of such tumult?), this actually reveals an opportunity for marketers to capitalise on – especially for brands that can effectively leverage their first-party data.

First-party data – the data owned and collected by a company about its customers – will be the key to understanding how businesses should adapt their strategy to retain existing customers and attract new ones through effective marketing spend. When brands are able to unify and analyse customer data, they can react to changing customer behaviour with the agility that data laggards can’t.

The value of customer-centricity

Of course, the key driver behind marketing departments is sales. This can’t be ignored. However, marketers who prioritise customer-centricity over unnuanced, trade-driven marketing will see bigger, more lasting rewards, but this can only be accomplished through data and customer insight.

One way to operationalise first-party data and customer insight is to identify behaviours beyond transactions that impact the business longer-term. By analysing behaviours such as browse data, social media engagement, foot traffic or abandoned baskets, you’ll be able to identify trends unique to your customer base that will help you segment and personalise your communications moving forward.

Through effective targeting and personalisation, marketers can serve customers the campaigns that are most relevant to them, which will not only increase your sales, but will also decrease churn. No one wants to be bombarded with generic trade-driven communications, especially during times of financial uncertainty. By leveraging first-party data alongside predictive analytics and AI, you can be more nuanced about what you show each customer, thereby building healthier customer relationships.