Customer Experience in Challenging Economic Times, Part 1

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It’s that time of the year again – budget time. Companies throughout the United States are working on next year’s budgets, a challenging endeavor given the uncertainty and negative sentiment surrounding the economy. Individuals in charge of budgets have been found making perilous cuts to the customer experience budget, in the name of reducing costs and staying “lean and mean.” Senior executives, and individuals from operations and finance who advocate for customer experience budget cuts or for the redistribution of increasingly limited funds, do so because they fail to appreciate the value and benefit of delighting customers. Despite all their proclamations about the necessity of delighting customers, and putting customers before all else – here, during budget time is where these executives put the money where their mouths are. Clearly, it is not with the customer experience.

I recently received a request from a struggling customer experience leader to assist him with building the financial case for customer experience management. This executive was asking pointed questions such as “What should be my priorities in this economy?” and “How can I justify my budget?” While I was initially surprised by these questions, I soon recognized that only by answering them resolutely, would he be able to satisfactorily address his organization’s doubters and naysayers.

Back to Basics

As I have repeatedly emphasized for years, the customer experience is the core of an organization’s business, not an added service or feature. The decision to minimize the customer experience or cut customer experience budgets is tantamount to the cessation of product and service development. Reducing organizational commitment to the customer experience will inevitably lead to a deterioration of the organization’s value proposition – not exactly a winning strategy during a turbulent economy and increasingly competitive environment.

In tough economic times, your existing customers are more critical then ever. This is because your marketing, sales and PR budgets (those needed to attract new customers) will most likely fall victim to some form of cost reduction initiative. As such, the likelihood of attracting new customers will be greatly diminished. However, all is not lost as existing customers should remain a core interim and strategic priority. During this challenging economic period, existing customers are reevaluating their spending priorities and are actively seeking less expensive product and service alternatives. A reduction in customer experience quality will only serve to frustrate customers and accelerate their decision to take their business elsewhere. Remember that your customers have choices and that you should never be undertaking any action that would give your customers a reason to switch companies. Think about investing in the customer experience as an investment to protect existing revenue streams. Stated otherwise, investing in the customer experience is intended to defend the organization’s current market position.

Another dynamic you can count on during difficult economic times is the competitive response. Customers are not the only individuals subject to panic and erratic behavior. Your competitors are also feeling the pinch and can very well lower prices or increase value to retain and even grow their market position (at your expense) – leaving you with two choices.

  1. Defend your market position by lowering prices
  2. Offer additional value (through the customer experience) to defend and ultimately enhance your market position

Reiterating our earlier point – these challenging economic times necessitate making the requisite investment into the customer experience to both defend current market position(s) and prevent customer attrition. During periods where customers are reluctant to part with their money, it is critical to give customers a reason to remain loyal to your organization, its products and services.

Challenging economic times bring greater customer price sensitivities and intensified competition – and with it, a need to invest in and improve the customer experience. Since customers will be expecting you to cut costs and reduce service quality, now is your time to prove them wrong. Demonstrating your commitment to customers through the customer experience will yield dividends not only during the present economic crises, but long afterwards when the country faces far brighter economic prospects.

This posting will be the first in a two-part series on the role of the customer experience during these challenging times.

I’d love to hear your thoughts.
Has the recent economic downturn had a negative effect on your budget for customer experience initiatives? If your budget has shrunk, have you been forced to cut programs or features you think your customers will notice are no longer available?

4 COMMENTS

  1. I agree with your comments, Lior. What hit home is your phrase: “Customer experience is the core of an organization’s business, not an added service or feature”. I’d like to reinforce for your readers that way too many business decisions do not incorporate the customer voice. Despite popular practice, customer feedback is not about a score or PR opportunities. It’s about creating an outside-in focus, leapfrogging competition by better alignment with customers, and financial rewards for all. Ideally, all business decisions would involve customer voice as a guiding force. For some ideas about getting more ROI on what you’ve already got see What’s Your ROI on Customer Data

    Lynn Hunsaker, http://www.ClearAction.biz, mentors executives for superior customer profitability by preventing customer hassles and churn.

  2. Lior….. whilst I agree with wuch of what you say in principle, I’m not convinced about protecting customer experience budgets at this time. Or any budgets, for that matter. Recession in consumer-driven economies such as the USA is a reflection of changes to consumer buying behavior. Customers do one or more of three things when they become fearful: they postpone purchases, particularly of big ticket items; they reduce expenditures on ‘I want’ categories, and even on some ‘I need’ categories; the down-trade to lower priced options. These are the 3 ways that customers spend less, driving down GDP. Any customer experience initiative that fails to recognise these fundamantal changes to customer behavior is, in my book, likely to be unhelpful, if not counter-productive. I think every business should examine these 3 behaviors and ask the question: given this behavioral change how should we change customer experience? One thing is for sure, it shouldn’t remain the same.
    Francis Buttle, PhD
    The Customer Champion

  3. Lynn,

    I agree wholeheartedly with your comment about being customer focused. Customers can guide us as to how to solve their problems and improve their experience. Beyond improvements, organizations will have to become more artistic in their approach to wowing customers. Customers can not tell us how to wow and surprise them. We need to think and come up with those ideas. Therefore the customer centricity is really a balance between science and art.

    Lior Arussy

  4. Francis,

    Although I agree with you about the change in customer behavior, I disagree about the approach to address it. Most companies will rush to cut budgets. In the process they will dilute their customer experience and practically hand their customers a reason to play the price game. Additionally, they will play straight into the hands of their low cost competitors. The smart companies will take the opportunity to enhance their experience, justify their price and focus on the right customers.

    We should not accelerate our own commoditization during tough economic times. The price we will pay both in the short run and long run is too high.

    Lior Arussy

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