“There are so many different paths that make up the consumer journey, that it's difficult to capture all of them. Mobile, social, Digital, In-store, etc. Most brands try to tick all of those boxes however sometimes the budget doesn't allow it. It's challenging to make sure you're spending your money and efforts on the right channels that will be most relevant to your consumer.” - Sarah Leckron, Shopper Marketing Lead, Galderma.
Living in a world with economic uncertainty, it's hard to predict what will happen in the next minute; the economy can gain or crash abruptly, and the currency's value can increase or decrease at any time. Our budget for organizational activities is tied up with many internal and external factors like these.
Similarly, if there is a budget cut in the customer experience functionalities, you need to find a new plan and strategies to adjust to the lowered cost and keep producing positive results with the new budget.
It seems easier said than done. There are a set of phases you need to go through to get an optimized customer experience strategy after a budget cut. Let us check that in detail.
What Leads to a Budget Cut in CX Activities?
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Even if an organization seems healthy economically, often, they abruptly announce a budget cut due to various internal and external factors. Unfortunately, most of the time, the first area they close their wallet would be on marketing and customer experience!
2 factors lead to a budget cut in an organization; external and internal factors.
External factors
These are always out of control by the internal organization since they are scenarios developed outside the organization's environment. They can be global economic changes, new government laws, and regulations, market changes, growing competition, etc. These external factors will push the internal organization to high-stake situations like a budget downturn to cope with the current external problems.
Internal factors
In internal factors, despite the organization having control over the situations, it demands a mandatory budget cut in business operations. Internal factors can be changes in management or ownership of the organization, new product/branch/location launches, changes in business priorities, etc. As mentioned above, these situations will lead companies to reduce the budget in some departments.
Sometimes, external factors can directly impact internal factors. For example, if a coffee shop witnesses growing competition in the industry, the leadership team may prioritize its activities more around product innovation and allocate more funds to that by cutting off the funding from other departments.
Even though customer experience is one of the most critical aspects that makes a brand sustainable in the market, often, CX leaders fail to demonstrate customer experience initiatives in terms of ROI and sales conversions. This makes decision-makers cut the budget on customer experience first.
Other reasons that force a CX budget cut are:
- Implementing a highly sophisticated and advanced CX management tool/platform by reducing CX team headcount to minimize salary payments.
- C-suite board members feel the CX initiatives are unproductive and unconvinced about their long-term results.
- The CX team initiates the projects, but the next execution level does not proceed to implementation.
- Poor scores/no improvement in customer experience metrics.
- Companies' CX metric scores, such as NPS (Net Promoter Score) and CSAT (Customer Satisfaction Score), are very low compared to competitors.
- The CX initiative was put under review or paused due to the inefficiency of the CX team.
How to Identify an Upcoming Budget Cut Early?
A sudden announcement of a CX budget cut will leave leaders floundering with what to do and how to adjust to the new budget plans. So the best solution is always to be prepared and identify an upcoming budget cut by observing the early signals.
There are 2 types of signals - General and Specific.
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1. General Warning Signals
Check the general warning signal that can affect the entire organization, but there are no direct effects on customer experience. But when you see these signals, start preparing a clear plan for adjusting to the new budget.
- The current economy in which your organization belongs is struggling.
- New technologies, trends, policies, and regulations are spreading in your industry.
- Rumors about lay-offs.
- Your current industry is witnessing a slowdown or shrinks in the market.
- Significant decrease in your company’s profit and ROI.
- Vendors and employees are not getting paid or paid late.
- Your rivals capture your market share.
- Internal strategy amendments.
- New mergers and acquisitions.
- Merging 2 Customer Experience teams to 1 or reducing the team size.
- The negative perception of your brand in social media and press.
- Introducing new internal policies like asking to choose the lowest traveling option and some reimbursement changes.
2. Specific Warning Signals
Heed these below signals that are clear cues for an upcoming CX budget cut.
- Headcounts and budgets are being cut in other departments like marketing and customer service.
- Other products or projects’ funds are redirected to the CX budget.
- Pressure from top management to demonstrate the ROI and conversion rate of CX activities.
- Instructions to freeze the hiring for CX departments.
- The top-level asks to shrink CX planning duration, e.g., make plans for next month instead of the entire year.
- Instructs to freeze current CX projects and initiatives.
- Top management asks for clear clarification of each team member’s responsibilities, tasks, what they do, how they do it, and how many results each activity can offer.
If you see these signals, get ready with a new strategy asap!
5 Strategies To Overcome Budget Cuts in Customer Experience
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Let us start with an example, Sarah is a CXO in an XYZ organization. She noted an economic crisis in her industry that forced many companies to take high- stake decisions like budget cuts. Even though her company didn’t make any recent announcement of any change in decisions and business operations, she started to prepare a plan that will be executed if there is a budget cut, to make sure the cut will not affect the results in the customer experience activities.
She prepared a strategy of what CX initiatives should be dropped, revised, and frozen and what needs to be continued as it is with a lower budget frame in advance. When her top leaders announced a budget cut in a few departments, including CX, she didn't panic like other leaders!
See, a well-prepared and pre-planned budget strategy can save a CX leader in any situation, even though there is no requirement for an immediate budget cut. All you have to do is listen to the signals and pre-plan accordingly. Decisions set in a relaxed environment with an unlimited timeframe will be more effective than decisions taken under pressure in a limited timeframe.
There are 5 best practices a CX team should be planning even before any crisis.
1. Use Data to Prioritize CX Activities
CX auditing with the help of data should be done at a constant frequency in any organization, even if there is no risk factor. When you audit, it is essential to prioritize the CX initiatives based on the effectiveness of the results they offer, the efficiency, the aftermath of a slow down, the financial impact/contribution to ROI, risk factors if it is eliminated, and how much it is tied with the overall CX strategy.
Analyzing each activity back and forth in different aspects will help you understand the inevitable and evitable CX activities.
2. Estimate the Impact
Even though we can’t precisely predict the future, an approximate estimation of future budget cut scenarios can be done by leaders. Also, how a small budget cut in CX would affect other departments needs to be foreseen and explained to the respective leaders.
But, do not restrict the business case preparations only to its impact on ROI and sales. In addition, figure out how changes in the CX budget cut and its activities would affect the CMO, CFO, COO, etc. When a budget cut is announced, you can clearly explain these to respective leaders.
Also, find out how the impact would be in numerical terms. For example, if there is a 50% CX budget cut, it should be considered a worst-case scenario, and x and y initiatives would be continuing but z would be eliminated. Similarly, you can prepare how the practices should be when there is a 25% cut, 10% cut, etc.
3. Analyze the Customer Data or VoC
It is vital to analyze customer data or the Voice of Customers and understand what aspect of their customer experience matters more to them. Because it is not the right way to cut CX initiatives randomly, which you feel is inefficient or evitable, consider what initiative matters to customers and how it contributes to an overall positive customer experience. Keep those initiatives or find a low-budget alternative with the same efficiency.
4. Rework the CX Strategy
For instance, if your organization currently uses an expensive and advanced subscription plan for a customer experience insights platform, the budget cut may force you to quit costly programs like this. In such a case, you can find multiple small-budget platforms in advance to continue with the similar services of your current platform.
Also, when you prepare a CX strategy, it is better to adopt platforms/tools that work in all weather conditions; and will work in best and worst-case situations.
5. Remap the Customer Journey
When certain activities freeze or eliminate forever, it will affect the customer journey map. Sometimes, a few journeys will be broken where customers connect with you frequently. In such scenarios, plan an alternate map where customers can connect with you without knowing there is a significant change in their journey.
For example, if a budget cut down demands a brand to shut down one of their brick-and-mortar stores due to high maintenance costs, you can plan for an online ordering facility with less budget and maintenance costs for customers in that region.
What Should CX Leaders Do After an Unexpected Budget Cut Announcement?
Once the CX budget cut is finalized, analyze the budget changes, where they will reflect, and how will be the new operations subsequently. After the deep research, prepare a new strategy for the new budget.
During this time, the CX leader should clarify everything regarding the budget change with the CFO or the concerned person in the finance department.
CXOs need to ask the questions such as:
- What is the current CX budget, and how will it be after the cut?
- How will other associated departments of CX be affected by the budget cut?
- When will the new budget plan start functioning?
- What is the nature of this budget cut?
- Is it a one-time cut for a limited time or a permanent cut?
- Are the salaries and hikes going to freeze?
- Is the hiring for the CX team going to freeze?
- What sections in CX do these reductions need to execute?
- If the headcount is reduced, can we outsource with low cost to continue with the operations?
Getting answers to these questions will help you to prepare the new CX strategy with a reduced budget.
After that analysis, you need to sit with other associated departments, including CFO, to let them know how it will result in the CX operations and the overall customer experience performance.
For example, if you are going to cut the budget on a customer experience activity, you need to let the people know the after effects, like, “in that case, activity X will be eliminated, activity Y will work with limited efficiency, and activity Z will continue as it is.”
Everyone associated with CX and other top leaders should know your new plan and how it will affect all aspects of the brand.
Categorize CX Activities to Optimize Customer Experience
Here, optimization refers to deciding what will stop and what will continue with the new fund. You can categorize the CX activities into 4 groups - Definitely Cut, Should Cut, Can Cut, and Do not Cut.
Definitely Cut
Add the activities that give minimum or no value and results to your CX functions in this category. This list should contain actions that can be cut without a second thought.
Should Cut
The 'Should Cut' and 'Can Cut' can come under each other, but be careful choosing in this category as your team will have multiple opinions regarding this list. This list includes the activities that can be eliminated for a specific reason. For example, this X activity will no longer work for this targeted audience.
Can Cut
This will be a bit hard to decide. What would you consider eliminating next if your budget cut is very high, say 50%, and can't cover the new budget even after cutting the 'Definitely Cut' and 'Should Cut' lists? When preparing this list, consider the result and impact each one offers to your CX environment and include the ones with the minor priorities in the list.
Do not Cut
These are the activities that keep your CX life always lively. So you can't cut these fundamental CX activities at any cost. But again, if the budget cut is too high and the pressure forces you to touch this list, find low-cost alternatives for the respective activities.
In a Nutshell,
We can't say a budget cut will shake the entire CX structure you have built. On the flip side, it can be enlightening to refine what you need to keep your CX alive and remove the unnecessary spending on initiatives or systems that do not yield any relevant results to your CX program.
How steep the budget cut may be, take your time to analyze it deeply, ask for precise explanations, and get clarified with every nuance of the reduction, its nature, and how it will impact your team internally and externally. Then brainstorm with your team and remove the functionalities that are not contributing to your CX success, find alternatives to keep certain functionalities to continue, and keep the essential ones that your CX can't survive without.