Inflation and economic downturns impact both small businesses and large corporations alike. The last financial crisis happened in 2020 when the pandemic first broke out. In 2020, 244 large businesses sought bankruptcy protection, which was the most since 2009. Retail was one of the industry sectors hit hardest. In past recessions, retailers faced a disproportionate hit to the bottom line as sales and revenue declined. In 2022, the United States is facing its highest inflation rate in 41 years.
Yale School of Management recently published an article on the impact of inflation on consumer behavior, stating that consumers tend to look for promotions, postpone purchasing, or change buying quantities.
Is your business prepared to combat changes in consumer behaviors? Are you planning to use the crisis as an opportunity to come out ahead of your competitors?
In 2008, the economic crisis lasted over 18 months. If the current economy’s struggles last for another year, is your business prepared to overcome the challenges?
There are three ways for businesses to thrive in a global recession.
Preserve margin on your ecommerce site
Sitewide offers hurt the business if a consumer would be buying the product anyway without the extra offer. In an age where consumers are actively looking for promotions, displaying sitewide offers gives away unnecessary margin.
So how can we predict behaviors and know, at the moment a consumer shops on a site, whether they will be making the purchase right now in their shopping journey? Machine learning (ML) is this crystal ball. ML allows businesses to accurately predict buying outcomes before they happen.
Session AI’s patented in-session marketing platform predicts in real time whether a consumer will buy in that session. Within five clicks of a consumer’s visit, the machine learning model can calculate a propensity to buy that can then be used to determine whether to show or suppress an offer to a particular consumer, preventing your business from giving up profits.
A large ecommerce business, with 13 million monthly visitors to its site, has a 2% conversion rate. If a $10 discount was given to all completed orders, the business would be giving away $2.6 million in monthly profit loss. The impact is significant.
You may suggest that some of those purchases would not have closed without the $10 incentive. But which ones? This is the most important question that innovative companies are answering with machine learning.
Offers can be suppressed for the group of consumers who are “likely to buy”. These folks would’ve bought without a coupon (estimated to be roughly 200,000 consumers during that time frame), assuming a 25% conversion rate lift based on past data, this use case would save the business half a million dollars a month.
Businesses can thrive if they stop giving away margin by eliminating sitewide offers. Deliver intelligently curated experiences to ML-based segments that strategically optimize conversions based on real-time user behaviors and propensity scores.
Increase purchase conversions and revenue uplift
The second way for a business to thrive in a global recession is by increasing conversion rates on your ecommerce site. This can be most effectively done by targeting the customer segment that is most influenceable.
As previously mentioned, due to the impact of inflation, consumers are expected to postpone purchasing in many instances.
But with a machine learning model that can accurately predict one’s propensity to buy, you can know exactly which group of consumers are persuadable and can be influenced to make a purchase, perhaps by an offer or social proof. We can leverage this to increase the urgency to buy and focus resources on motivating the group that is most influenceable.
In one case study, a top 10 U.S. retailer was able to drive online conversions by leveraging predictive models based on in-session user behavior to increase the redemption rate for personalized offers by over 50% and increase incremental revenue per site visitor by 22.6%.
A/B testing to optimize online offers
The third way for a business to thrive in a global recession is to be extremely effective at optimizing offers. Some offers are inherently more attractive to consumers than others. It is not always the discount amount or dollar amount that makes a difference in a consumer’s mind.
For example, we have seen cases where a 10% offer created more incremental revenue than a 15% offer due to an auxiliary impact on average order value. Conducting robust A/B testing eliminates guesswork.
Many ecommerce companies’ IT teams are not readily equipped to build A/B testing in offers’ outcomes without major effort, or their existing framework only allows them to run rudimentary A/B testing of simple factors.
Session AI provides robust testing and optimization features out of the box as part of our end-to-end in-session marketing platform, allowing businesses to be both intentional and surgical with offer optimization.
As mentioned previously, one of the impacts recession has on consumers’ buying behavior is that consumers tend to change buying quantities: some buy less, and some buy more (thinking that buying in bulk will save money).
With robust testing and data analytics capabilities, industry leader Session AI can examine the impact of certain offers or site actions on consumers’ cart sizes, and use the most effective combination of offers or actions to motivate consumers to increase their cart sizes, for example. The idea is to use data to identify the most effective nudge to entice consumers and to identify the best-performing incentives that will bring in the most incremental revenue.
The “unlikely to buy” consumers may be looking for something very different from the “likely to buy” consumers. Session AI’s intelligent platform allows businesses to be granular in targeting different messages to different customer segments for the best outcomes so that resources are not wasted on ineffective offers or non-influenceable customer segments. All this not only leads to incredible revenue lift, but also to better overall customer experience.
Facing a looming global economic crisis, with inflation at its highest in 41 years, in order for any business to survive, or even thrive, the ability to predict and influence consumers’ buying behaviors is not a “nice to have,” but a “must have.”
Companies who want to come out ahead must proactively look for intelligent solutions to increase their edge and survival likelihood. Crises forge opportunities. History has taught us that some companies emerge stronger after a global recession as they adjust to ongoing profit and revenue impacts by investing in technology that drives operational efficiency and greater productivity.
Place your organization at a competitive advantage. Learn how Session AI can help you engage customers and predict revenue.