When there’s a customer problem in a company it is a great opportunity to understand what it is and how we fix it. It’s like what we call the ‘burning platform’ something that HAS to be sorted. Senior management must listen so it’s a great time to present CX as the solution.
In these times, businesses may suffer and this is where CX may shine the brightest.
In one of our Masterclasses, we had David Conway and Michael Killeen join us to talk about how you can use CX to your advantage in these times of turmoil.
Here is a snippet of it:
Julian: What happens in an economic downturn and what are the positive things that you can do David to turn things around and invest in the future?
David: I think, you know, the economic headwinds that are ahead of us certainly indicate that we’re gonna be moving into a crisis. I guess there are two things that organizations might think about. So the first is what is our mindset going into this? You know, are we going into this thinking that this is going to be difficult, that we’ve got to cut costs, that we’ve got to downsize the business or are we thinking that there are opportunities here? Let’s find those opportunities. Let’s refine our business model. Let’s think about the customers who make a difference to us as an organization.
The second part then is when you come into a recession to take a scalpel rather than an ax to cut the costs. So recession is an opportunity to prune. And if you think about what’s happened to organizations over the last two years, most businesses as a consequence of the pandemic have had to refine their business models. They’ve had to, in many cases, think through their organization design. They’ve had to look at the propositions that they bring to market. So you’ve had a period of considerable reflection and now the world is changing again.
So organizations, I think, need to start to think about, well, where are the opportunities for us to move forward? Can we cull some poor-performing products? Can we cut back on waste and duplication? Can we get into taking out some of the bad practices that we may have sort of crept into over the last few years? And can we rebase the business, a healthier, fitter, more sustainable long-term organization focused on those customers that will make a difference for us.
You know, not every customer is gonna be impacted by the recession. Many customers will be able to ride it out. And so understanding how your customer base is structured and composed, and what the different economic impacts will have on different groups of your customers means that actually, you might be able to surface new products, new opportunities, and new ways of satisfying those customers.
There’s a fantastic Harvard Business Review article which talks about what you need to do when it comes to segmenting your customer base in a recession. And they identify four categories. And the first of those is, those people that are gonna be price-constrained. They’re going to struggle through this. They’re going to find things difficult. They’re gonna put on the links in a really sort of hard way. Well, we need to think about pricing strategy for these people. We need to think about loyalty. We need to think about how we develop incentives and communications.
The second group are those that they call pained but optimistic. These people are suffering somewhat, but for them, it’s about, being resilient, it’s about moving through this recession. And there are opportunities to service those customers.
You’ve then got those who are probably come to be well off where the likelihood of the recession biting too deeply is not so great.
And then the last one that identifies those people that live for today. So those people that, you know, regardless of the economic conditions, will continue to do what they’ve always done.
So they may not be the four that you want to focus on, but they’re very useful to understand, what percentage of your customer base falls into each of those four groups because actually, you can then start to develop strategies that make the most of any opportunities that lie within those groups.
Julian: Mike, same question to you. That’s a highly strategic answer there from David. How would you approach it?
Michael: I think everybody’s customers will remember you. They will remember that you looked after them, be it a pandemic or a potential recession. And therefore for me, this is the time I have to feed the emotional piggy bank*. You need to put credit in there. And it’s cheaper to do that in a recession than it is when you’re booming and you’re able to control that a bit better. So I think there’s a huge number of longer-term opportunities here to lock in customers.
I think there are five key areas where CX delivers better than any other of the business disciplines that are out there. The first is to keep and motivate your best employees. That to me is number one and that generally kind of falls down the line. They should be ready to shine and really look after their staff and look after their customers more so than ever. It’s going to be appreciated.
The second is locking in your most valuable customers. Again, that’s where we tend to focus. But do it brilliantly. And I think as David has hinted, there are ways to do that better and more cost-effectively when we start looking at really interesting segmentation approaches to it.
We need to continue to acquire new customers, but you can do it more cost-effectively. And then it’s about managing. And if necessary take the scalpel out, not the hatchet, and look at areas where you can reduce costs. And there will always be areas where you can do that.
And the final one is just about differentiating your business. And CX is the best way to do this.
David: One sort of piece of evidence really to support what you’re saying, Michael, is that a few years ago, I did a piece of research, conjoint analysis, where I looked at price, demand, elasticity. So I looked at organizations that were developing or delivering a fantastic experience. I looked at organizations in the same industry that were delivering a less-than-stellar experience and compared price, elasticity, and demand across the two.
What we saw was the organizations with a fantastic customer experience, their customers were much more resilient and loyal in the event of the price increase. So the point you make, which is you get these things right and you’ve got a great customer experience, it insulates you against some of the kind of harder realities of what happens within an economic downturn and protects the business and allows you to move pricing in a way which means that you’re more likely to keep your customers than those who have a poor customer experience.
Julian: So there’s a lot of CX practitioners on this call here sitting in companies wondering, how can I use a downturn to my advantage in my position in a company? And how can I actually get some budget? David, do you have any thoughts about what the process would be for a CX practitioner to put that in motion in their company?
Well, there’s a huge amount of information out there that shows that the quality of the experience drives new customer recruitment and lowers your costs for customer acquisition. So that’s the first point. The second thing is there’s also loads of information out there that shows that actually, a great customer experience reduces cost. So, you know, one of the organizations that I look at from a sort of cost perspective and perhaps one of the leading customer-oriented organizations around the world is a bank in the USA called USAA Bank and Insurance Company.
And they embarked on transforming their customer experience probably some 10 years ago now. And what they discovered was they were able to take out duplication, remove inefficiencies, and structure themselves more around the customer to meet their needs. The net result was they were able to take well over 20, 30% out of their cost structure without paying. I’ve always felt that you can take 10% out by just cutting stuff.
And actually what they were able to do is to completely refine the experiences, drive up customer satisfaction to stellar levels, right at the top of any company around the world and dramatically reduce their cost structure. So their management expenses compared to any other bank in the world is considerably less, all to do with creating a better experience.
So my advice would be, to focus on the economics of this, because this is all about economics. And if we’re going to get the board and senior management to participate, an economic argument is one that I think will hold sway.
Julian: David, we talked earlier about other opportunities and we talked about going back to basics a little bit and looking at the role of the purpose of your organization. And we talked a little bit about sustainability. Could you elaborate a little bit on that for us?
Sure. So we just conducted research in 11 countries on the whole area of sustainability. And some interesting stats came out of that. So the first is something like 86% of customers now consider the sustainability credentials of the organizations that they deal with, but they may not act on that, but they certainly consider it.
Another big step was something like 59% of customers are actually taking steps, whether that’s, donating to charities, lobbying, you know, active participation in driving a sustainability agenda. So for me, one of the big areas that organizations need to think about is how their purpose supports the environmental and societal requirements that are rising from their customer base.
66% of the respondents said they were willing to pay more for organizations that provided sustainable products and goods. Now, some of those are slightly more, and some were prepared to pay a lot more. Nonetheless, you know, this is an opportunity to change the basis by which consumers consider the value they’re getting.
Julian: So when we’re talking about sustainability, we’re talking about customer experience, we’re talking about not going back and talking to the board or talking about the product, and in other words, how to make the product more sustainable, which is important, obviously, but we’re talking about the purpose. So it’s practical as well as everything else, right?
Michael: I’ve always been concerned about purpose and values being in that kind of fluffy space. It has the potential to land there. But once the investors start developing a product around that, it’s going to win. And it is completely taken over.
One of my favourite brands of all time is Patagonia. I’ve loved them all my life. And last week, they announced that they now have only one shareholder. It was a beautiful piece of work. And that shareholder is Mother Earth. And it’s so aligned with what Patagonia has been doing over the years.
David: The other thing is considering the impact beyond just your own boundaries. It’s important to look at your supply chain, your products, you know, what is the carbon emission that arises from those? But actually what’s become more and more important is how customers are using your products.
So Unilever is a good example. They’ve set a commitment to be carbon-positive by 2039, and they’ve estimated that 77% of their carbon impact is how their customers use their products. So if they can get their customers to use their products more sustainably, reusing packaging, for example, how things are disposed of, and people’s purchasing frequency, if they can change customer behaviours, it will have a massive impact on their impact on society and the environment. So think beyond your boundaries into what it is that you need to do with your customers.
*Emotional Piggy Bank is a term we use in The CX Academy to describe a reserve of positive emotions and experiences and trust that you build up with your customers over time so that when things go wrong the trust and bond in not fully broken – it can be damaged but if done correctly you can easily fix the relationship.
What the full Masterclass here: Why CX Loves A Good Recession?
If you would like to learn more about how you can use CX to your advantage and ensure your business is growing at any time, enrol in our Professional Diploma in CX today.