Are we in a recession? It’s a question being asked at an increasing pace.
In the U.S., the National Bureau of Economic Research (NBER) is responsible for determining whether the economy is in a recession, defining it as a “significant decline in economic activity that is spread across the economy and lasts more than a few months.”
While the NBER is unlikely to declare a recession while the labor market remains strong, for many consumers times already feel tough with budgets stretched by rising prices. Indeed, the latest IBD/TIPP Poll reveals 58 percent of Americans believe the U.S. economy is in a recession, up from 53 percent a month ago and 48 percent in May. And what consumers think directs their behavior, irrespective of economists’ predictions, meaning we can expect to see shoppers purchasing more cautiously as they focus on necessities over discretionary spending.
Why CX matters, even in an economic downturn
A positive customer experience (CX) engages customers, promotes loyalty and drives word of mouth, bringing more customers to your brand. And yet, when the economy takes a downward turn, CX is often sacrificed in favor of cost-cutting measures.
Some brands approach CX as a nice to have. But the reality is good CX is essential, especially for brands looking to weather uncertain times. By reducing or eliminating services that customers value highly, organizations that see their customer service as a cost center risk making short-term savings today at the expense of their business’ long-term growth.
Organizations that make decisions based on what matters most to their customers consistently outperform competitors who focus elsewhere. PWC research shows that brands that focus on customer experience are able to charge a premium and, while all industries gain, luxury and indulgent brands see the biggest benefit. As consumers feel the pressure of rising inflation, discretionary spending is hard-hit, meaning indulgent brands may do well to double down on CX as the economy bites.
How can brands protect their CX while also cutting costs?
Brands that recognize the role of CX in customer loyalty and also have a deep understanding of their customers hold the secret to this conundrum, being able to act strategically to optimize CX delivery to drive customer satisfaction while at the same time minimizing costs.
Recessions aren’t always bad news
While many organizations see a decline in an economic slowdown, that isn’t true for all brands. Some industries, such as healthcare, are relatively stable regardless of the state of the economy, while others see business ramp up in hard times.
Brands in industries that traditionally see sales rise as the economy slows down should review their CX delivery now to ensure that they are prepared in the event that they need to handle an increase in demand, this includes:
Grocery stores – as people cut back on away-from-home eating, consumers prepare more meals at home, leading to an increase in grocery store sales.
Discount retailers – as consumers look for lower prices sales at discount retailers increase. Brands able to act with agility to create SKUs designed specifically to meet the needs of discount retailers’ price points can benefit from changing consumer habits.
Accountants and financial advisors – in an economic crisis interest in support from financial experts increases as people worry about their financial health.
Debt collection services – as paychecks are stretched credit card and loan payment defaults increase. Brands must act early to create effective treatment paths to maintain a low debt ratio.
CX optimization in an economic downturn: 5 steps to success
Regardless of whether your industry traditionally thrives or declines in a recession, by uncovering the moments that matter to your customers and focusing resources in these areas, while simultaneously minimizing costs in less impactful areas, CX optimization positions your brand to weather any potential slowdown.
Truly understand your customers Understanding your customers is at the heart of delivering world-class CX and successfully retaining your customers for the long term. Every customer interaction holds a wealth of information that can be used to identify the moments that matter, but few organizations are effectively using this data.
Customer analytics enables you to identify and understand customer pain points, including the drivers of repeat contacts and dissatisfaction.
A downturn can be a catalyst for innovation, for example, the rise of fast-casual dining was propelled by the Great Recession as consumers looked for away-from-home eating without restaurant prices. Leveraging analytics to stay close to your customers as their needs evolve can reveal opportunities to launch new products, revise pricing or tailor services, giving your business a sales boost.
With a clear understanding of what your customers want and need you can design your CX to deliver the most impact with maximum efficiency.
Cut what customers don’t care for Limiting CX services indiscriminately in search of cost savings is a recipe for customer dissatisfaction. But, with customer insights at hand, you can easily identify broken processes. Streamlining inefficiencies can drive cost savings while also eliminating customer pain points, improving the experience delivered.
For many organizations, customer analytics will uncover outdated processes where customers would welcome self-service solutions. These insights create the opportunity to reimagine how your CX is delivered, promoting customer satisfaction while also delivering cost efficiencies.
Automate where customers don’t value live interactions Advances in technology mean many aspects of CX can be automated, enabling scalable, 24/7 service. But brands must think carefully about where automation adds value and where customers prefer contact with a live agent over the immediacy of self-service.
As a rule, when a customer has a need that includes low emotional effort on their side automation will be well received whereas in moments with more emotional weight customers value the empathy offered by live agents.
Customer analytics will uncover use cases for automation, enabling you to implement solutions that drive cost efficiencies without risking customer satisfaction and engagement.
Refocus your most valuable resources Focusing live agents on responding to customers calling in with simple queries is a high-cost, low-impact way to approach CX. Once you have automated your high volume, low emotional effort contact points, your agents will be free to focus on meeting customer needs in the moments that matter to them most.
Whether in voice or non-voice channels, there are times when only a live agent can effectively meet the need. While live agents are more costly than automation, prioritizing these high-value touchpoints with attention from fast, friendly, well-informed agents supports customer satisfaction and drives customer loyalty.
Re-evaluate how live CX is delivered Evaluating your CX delivery on a regular basis to ensure it is optimized to create the best combination of customer satisfaction and cost efficiencies is good practice regardless of the state of the economy. But with a potential downturn on the horizon, now is a good time to re-evaluate.
With economies of scale, labor arbitrage and well-oiled processes for recruitment, hiring and training, outsourcing can deliver cost-savings over in-sourced solutions. As the economy tightens, brands with captive operations may benefit from outsourcing some or all of their CX service delivery.
Organizations already outsourcing CX should consider how their shoring mix supports the best combination of CX excellence and cost minimization. The best shoring mix is built around your CX needs. For many brands, a combination of onshore, nearshore and offshore offers the optimal solution. Offshore locations offer excellent English-language skills at attractive price points and, as such, present significant cost efficiencies versus onshore teams. This can be especially attractive to support channels where accent is not a consideration, such as in chat and messaging support. Meanwhile, in voice-based channels, a desire for a close-to-home positioning may make near or onshore delivery more attractive for some brands.
Only time will tell if the current economic pressure becomes a recession. But history tells us that the brands that move early to improve earnings while protecting CX are those that will best weather any impending storm. Brands must stay close to their customers, enabling them to focus on delivering world-class CX in the moments that matter while leveraging automation and an effective shoring mix to minimize costs without negatively impacting customer satisfaction.
To discuss how Startek® can support you in optimizing your CX delivery, contact us.
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