With inflation running at 40-year highs and no immediate relief on the horizon, the Federal Reserve will likely keep increasing interest rates until there is definite evidence the economy is starting to cool off.
Many economists agree that the so-called “soft landing” for the economy is unlikely, meaning a recession is probable later this year or sometime in 2023.
“The reality is the latest data tells us what we already knew, that inflation has persisted for way too long, and even when it cools it may not cool enough,” Diane Swonk, chief economist at Grant Thornton, said in a Washington Post article.
“Words like ‘pain’ and ‘higher unemployment’ have seeped into the Fed’s messaging,” she added, “which means they know that they will likely have to raise the unemployment rate to a level that is consistent with a recession.”
Such an economic downturn will affect companies in several different ways, including their customer experience strategies. Below are four recommendations for doing more with less during turbulent times.
Remove Inefficiencies in Customer Experience
In this type of “tightening” economy, competition for customers becomes fiercer, according to Joan Smith, Managing Director, Protiviti Digital. At the same time, customers put more thought into when and where to spend money.
“From the customers’ point of view,” said Smith, “they want experiences that are simple and relevant, meet their needs and they want to feel valued.”
Smith recommended that brands identify and remove inefficiencies in their customers’ experiences — such as focusing on removing issues impacting customer satisfaction, net promoter score (NPS) or lifetime value. Companies should also focus on resources that retain high-value customers rather than those likely to switch to competitors for small discounts.
“When launching new products that need to find an audience, brands should prioritize initiatives that will help quickly prove hypotheses around the optimal experiences for their target audience(s),” Smith added. “This can be money well spent in terms of avoiding potential lost revenue due to delays in gaining market traction.”
Brands that focus on customer experience despite the economy’s downturn will be better positioned to weather the storm, said Smith.
Improve Service Quality and Customer Satisfaction
According to Eng Tan, Simplr founder and CEO, improving service will decrease costs.
"Good CX is always important, but it becomes a crucial value-center during economic downturns,” he explained. “The numbers support CX’s value as a revenue generator: Research from HubSpot states that 93% of customers are likely to buy multiple times from companies that provide a quality customer experience.”
Correctly answering a customer query the first time provides better CX while helping the company decrease costs, said Tan, adding that repeat customer inquiries can strain customer service budgets.
“To instill a much more efficient and predictable CX budget,” he continued, “CX leaders need to invest in implementing chatbot automation, inquiry routing procedures and agent assist tools that generate the most effective and highest quality initial interaction with the customer as possible.”
Listen Carefully to Customer Expectations
While it’s always important to listen to customers, it becomes even more so during an economic downturn, said Bill Staikos, Medallia senior vice president, evangelist and head of community engagement.
"Technology that helps your business capture and analyze multiple customer signals, not just surveys, will help your business keep a pulse on the customer, and can drive loyalty and growth through a recession,” Staikos explained.
“For example, through the Great Recession, financial services companies who paid close attention to distressed customers and helped them maintain stability now have customers for life. Similarly, during the pandemic, companies who actively listened to customers and analyzed their feedback were able to quickly pivot and deliver improved digital experiences.”
Staikos added that in addition to listening to and engaging customers, an economic downturn is a good time to re-engage your partners on CX improvements that were previously identified but never implemented.
Related Article: 2 Years Later: How Customer Service Has Changed
Leverage Customer Data Platforms
CX’s impact on profit and bottom line performance is paramount during an economic downturn, said Eric Best, SoundCommerce CEO and co-founder.
“When difficult decisions must be made to determine which programs an organization should fund or cut, a key best practice is to prioritize and view bottom line performance through the lens of profitability,” said Best.
A customer data platform (CDP) or data warehouse can help determine the customer impact and potential profitability of marketing programs and campaigns.
“Combining rich first-party marketing data with operational data provides a holistic picture of who is profitable and who is not,” explained Best. “Performing this analysis at scale requires a data platform that connects marketing data to operations data. The variable costs associated with each customer — ad spend, shipping costs, cost of goods sold, discounts — can drastically change the profit impact of any given marketing program.”
Comparing customer engagement program profitability to the profitability of acquisition programs provides insight into worthwhile customer segments, according to Best. “Data is hard to argue when focused on the top operational metric that matters most to leadership.”
Customer Experience Management During a Recession
Economists agree that a recession seems inevitable, meaning a lot of belt-tightening for businesses as well as customers. By using the four strategies above, marketing managers can address budget cutbacks while still delivering superior customer experience.