Company leaders are putting a lot of effort into a plan to recession-proof their business model as a recession hangs over the economy. However, if a proactive strategy is swiftly put into place, a recession doesn't necessarily mean that your business will slow down. A company, by making investments in the customer experience, can continue to develop its customer base and keep many of the customers it might have otherwise lost.
According to a 2020 McKinsey study, companies with the best customer experiences had total shareholder returns three times greater than those with the worst experiences.
During periods of economic uncertainty and rising stagflation fears, the urge might be to cut costs and minimize investment in all kinds of customer experience (CX) technologies that are typically thought of as "great to have." However, since profitability is strongly correlated with customer experience (CX), it is imperative to step up these efforts, particularly during difficult economic times. Instead of considering CX as an additional expense, consider it a possible source of unrealized revenue.
Great CX Makes Your Business Recession-Proof
In an economic downturn, most companies strive to become as lean as possible. However, in reality, the ability of today's CEOs to reduce costs is more constricted. Considering the ongoing awareness of income inequality and the rise in employee activism, cost-cutting measures may have unintended secondary effects, such as harm to the company's reputation, public backlash, or a decline in morale. So, slashing expenses can prove to be an ineffective instrument for earnings growth.
Instead, to boost productivity and promote growth, businesses should place more emphasis on cultivating superior CX. For instance, some businesses already employ sophisticated analytics to lower manufacturing facilities' error rates and quality concerns. Other companies use digital platforms to make it possible for customers to self-serve and streamline their buying process.
So, how highly do customers value extraordinary experiences?
86% of customers would stop buying a product or service after two bad experiences. If a firm can offer satisfied customers throughout the customer journey, 65% of respondents would stick with it over time. The value of excellent CX is exponential in a gloomy market because consumers are anticipated to be more discriminating in their spending.
Great CX Increases Customer Loyalty and Prevents Customer Churn
In a recession, providing top-notch customer service becomes even more essential. Although it may at first appear contradictory, providing excellent customer service boosts sales by raising the likelihood of repeat business, subscription renewals, and long-term loyalty. CX accounts for almost two-thirds of customer loyalty, which is greater than the sum of brand and price.
On the other hand, a bad customer service experience is likely to result in customer attrition and the accrual of longer-term "hidden" expenses. As you lose more existing ones, more money will be needed to market to and sell to new customers. Furthermore, acquiring a new customer is 6–7 times more expensive than keeping an existing one.
In fact, a 5% improvement in customer retention can boost revenue for a company by 25–95%. Moreover, customers that have been with you longer make more purchases and spend more. They return after realizing the worth of a good or service. So, your current customers are your life; you must always keep them satisfied, particularly during a recession.
CX in the Great Recession of 2009
The global market experienced one of the most significant setbacks in the 20th century during the Great Recession of 2009. To survive, many businesses were compelled to make radical adjustments. It is simple to highlight the advantages of putting customer experiences and innovation first during economic hardships, but it can be considerably more challenging to win over an entire organization.
Only a few businesses were found to have genuinely implemented strategies that gave them a position for growth at the end of the extended economic volatility period. Through proactive customer-focused approaches, they could maintain their growth and even go beyond their goals.
A Harvard Business Review study analyzed businesses with extremely high returns in 2009. It was found that:
- The first quarter of 2008 saw resilient companies reduce operating expenses by 1% compared to the same period the previous year, despite costs rising. Resilient businesses cut costs earlier than other businesses.
- Resilient businesses concentrated on preserving the loyalty of their high-value customers, which proved crucial to their sustained success.
For example, customers could return their cars under Hyundai's Assurance program if they lost their jobs. In some instances, resilient businesses forwent profits that could have been obtained through price changes.
In contrast, competitors in the same business tended to prioritize maintaining profits over all else, hastily implementing price cuts on goods and services and using contradictory marketing strategies.
So, providing excellent customer experiences not only increases the possibility that a business will emerge from a recession but also helps maintain recurring income over the long term.
5 Winning CX Actions to Recession-Proof Your Company
When the economy weakens, consumer spending typically decreases as well. This can put a strain on businesses, especially if they're not prepared for it. However, businesses that have excellent customer experience are more likely to weather the storm because they're able to retain their customers. In fact, a study by NewVoiceMedia found that businesses that prioritize customer service are 60% more likely to succeed during an economic downturn.
A focus on CX needs to be so profoundly established in the business for it to be impossible to remove for it to be recession-proof. CX serves as both the business's differentiator and core. Customers are stressed during economic difficulties, so enterprises that reassure them and provide excellent service might win their loyalty.
1. Automation Helps
It's crucial to decide which activities would boost your competitive position as you face the recession head-on. Instead of succumbing to the instinctive urge to cut costs (at any cost), you should give self-service choices top priority at all points of contact with customers.
- To permanently lower operating costs, automate processes.
- Enhance and automate tasks using artificial intelligence or robotics to cut labor costs, boost output, and free up expensive, in-demand talent to concentrate on value-creating tasks.
- Increase the production of digital goods and services that are more useful to customers and staff.
In other words, you should concentrate digitization efforts on differentiating your company's capital and cost structures. As an illustration, a strategic choice might be to offer support that is accessible 24/7/365 to increase income and make up for losses elsewhere.
2. Promote Self-Service
An investment in a self-service system yields significant financial savings over time. Immediate help via whichever channel is most convenient is what customers want most from their support interactions. Instead of contacting a live agent, more than 60% of customers look for self-service options first. Therefore, a level of self-service, like chatbots, is required for a modern consumer experience.
By using these platforms, you can keep teams concentrated on strategy while reducing the number of your support employees. Customer service leaders claim that the current self-service solutions could easily handle 20–40% of live load.
In the interest of efficiency, do not include a chatbot with a "set it and forget it" attitude. Such an approach will ultimately fail. A consistent customer experience across many consumer touchpoints is not offered.
You want to be able to simultaneously lower expenses and raise CX. Consider whether you currently have efficient self-service and knowledge management technologies available to customers and agents.
3. Data Drives Growth
"When it comes to data and analytics, brands should take the time to set up the proper data sets and track the right key performance indicators (KPIs) that drive the success of their business. They also need the talent, whether internal or a third-party partner, to take that data and tell a story with it. Data can identify pain points, customer journeys, conversion rates, and more. Talk to the retailers you are selling to and get more information from them. Partner with retailers to get the analytics on interactions with your products from the consumer standpoint. That will give you more insight on how consumers feel about your product, demographics on who is buying it, and gives you the opportunity to target the customer experience to dial in on that feedback," says Kaela Kucera, Ecommerce Manager, Pierce Manufacturing.
Brands profit from contemporary customer experiences, too. Prioritizing digital transformation before a recession is significant because better analytics can aid management in better understanding the business, how the recession is affecting it, and where operational improvements can be made.
The ability of digital technology to reduce expenses is the second justification. Businesses should prioritize transformation projects that are "self-fund," such as automating processes or implementing data-driven decision-making.
4. Focus on Cross-Selling and Product Recommendations
Cross-selling encourages customers to buy a package of goods rather than a single item by suggesting complimentary products to an existing purchase. It would raise the average order value for your company, enabling your website to enhance sales from current customers. Finding new customers becomes more complicated—and expensive—during a recession.
You can also maximize your customer service and transform your support channels into sales channels. Every interaction with a consumer is viewed as an opportunity to sell by resilient and forward-thinking businesses.
Your customer service representatives frequently interact with your consumers the most. Customers can receive product recommendations from these agents during ongoing talks.
Product recommendations can result in significant revenue gain when done correctly. For instance, 35% of Amazon's sales revenue comes from product recommendations made to customers while browsing.
5. Personalize Your Deliverables
Customers want to feel like they are making the most of every penny during a recession. Providing a personalized experience is the best way to stand apart. In fact, 91% of consumers claim they are more likely to buy from companies that make offers and suggestions that are pertinent to them when they are shopping.
Adapt your customer service to their past brand engagements. You can develop special offers pertinent to each consumer by keeping track of customer information. Simply addressing consumers by name offers an excellent first impression since it makes them feel appreciated. Personalized awards, savings, special pricing, or early product access should also be available to customers.
Make sure your personalization is available across all channels, including chat, email, social media, and mobile apps. Moreover, each customer will be more inclined to continue doing business with you if you offer advice that speaks to them.
Make Your Company Recession Proof
No one knows when the economic downturn will happen. When it does, businesses need to be prepared. Even when the economy is down, investing strategically in self-service, automation, analytics, personalization, and the overall CX is not only wise from a business standpoint; it also helps you stand out from the competition.
Excellent customer experience is one of the best ways to protect against an economic downturn because it helps businesses retain their customers and keep them happy. If you want your business to succeed during tough times, make sure you're providing outstanding customer experience every day.
Learn more on How CMOs Can Rise Up as True Leaders During A Recession