Does Customer-Centricity Have to Be a Victim of the Economic Downturn?

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Suddenly, and with very good reason, everyone is focused on the impact of the current world-wide economic crisis. How does a company maintain a customer focus in the face of an environment that cries out for cost-cutting, downsizing and laying off? There is much comment on websites such as this on the need to retain a sense of balance when faced with the temptation to cut back on expenditures on customer service and on the creation of positive customer experiences. The payback from such expenditures is not obvious when the emphasis will be, for the foreseeable future, on justifying every nickel spent.

The Economist newspaper recently labeled 2009 “the year of the CFO”. Its editors predicted that the coming year will be characterized, as is virtually every period of economic downturn, by a return to an emphasis on financial leadership, exemplified by ruthless cost-cutting.

The Economist also suggested that 2009 will not be a good year for directors of human resources and marketing, who will see their budgets cut and a return to the most basic functions within these departments. If such predictions are correct, then 2009 will not be seen as a year when customer focus will be in vogue. We can expect a lot of hunkering down and an emphasis on doing only what is absolutely necessary to keep the business going.

We can predict what is most likely to be cut first in many companies; so-called “softer” expenditures on programs and initiatives where it is extremely difficult to measure short-term financial impact. We will not only see reductions in first-class air travel, business lunches and health club memberships, but more importantly we will see threatened the very things that many of us have worked for over the past decade and that are principally focused on the customer.

Don’t expect in 2009 to see many companies looking for new and creative ways of attracting and impressing customers. We are more likely to see a return to basics and emphasis on doing what we already do in a much more cost-effective way. As for nice-to-do initiatives such as corporate social responsibility and environmental programs, expect many of these to be back-burnered for the near future.

The marketing and management press and websites such as this one are full of articles on why senior management and boards of directors should resist the temptation to cut expenditures in areas relating to the customer. But, this is easy to say from the sidelines, and less easy to enact when faced with the most recent set of financial statements. It’s easy to appear naïve in this situation, particularly as it makes considerable intuitive sense to continue to offer the best possible levels of customer service and to continue to look for opportunities to offer impressive customer experiences.

The challenge, I believe, is to be able to justify expenditures on customer-related programs at a time when funds will understandably be limited. I believe marketers and others with customer responsibilities, and indeed our human resources colleagues, should appreciate and embrace the need for financial restraint. But even in times such as these it is important to understand the difference between costs and investments. When we cut spend, we are not simply cutting costs, but in many cases we are cutting investments, particularly in our expenditures on customer initiatives.

If customer programs in your organization have not already been cut, I would suggest that you attempt to identify those components of your customer strategy that have obviously been successful and that your customers have genuinely appreciated. You will need to provide evidence of this success, and in the present climate this means you will likely be asked for numbers. To the extent that you can provide financial support for your argument, you should do so. Be prepared to lay out whatever financial justification you can for the programs that you have had in place and that you know are working. Where financial data are not available, at least provide evidence of increased customer satisfaction and retention.

Difficult economic times really do represent an opportunity to stand out. Despite advice to the contrary, I believe we can expect most companies to fall into step with their financial leaders and to embark upon programs of cost reduction that will impair their ability to deliver impressive customer experiences and will negatively impact customer satisfaction and loyalty as a result. I really do believe that those companies that continue to invest in the customer and that continue to deliver solid service and customer experiences will come out of this period of economic turmoil in far better shape than their competitors who ill-advisedly cut back on precisely those things that customers appreciate.

Your challenge will be to put forth an argument that will satisfy the financial leaders in your organization who will, inevitably, occupy a more important role in the months, if not years, ahead. They will be looking principally for a financial justification. Never has it been more important for us to be able to quantify the payback from our investments in building customer loyalty, relationships, and experiences.

2 COMMENTS

  1. Jim,

    There is little doubt that marketer will need to sharpen their saw to maintain budgets. I would like to point out that readers of your post can find 18 excellant papers, including one of yours, in a publication called, “The Importance of the Customer Experience in a Down Economy.”

    The publishers, Ogilvy’s Customer Future’s Group is making it available free by going to this link: http://www.customerfutures.com/downeconomypublication/downloadnow.

    John

    John I. Todor, Ph.D.
    Author of Get with it! The Hands-on Guide to Using Web 2.0 in Your Business

  2. Hi Jim

    I think you are right. We CRMers will have to get better, much better, at proving that we deliver value to the companies who pay our salaries. But to do that we need to get better, much better, at delivering value to our best customers first. Yet many CRMers don’t know who their best customers are. Or why they are their best customers. Or what they are worth either! Is there any surprise that companies are responding with knee-jerk cutbacks in CRM spending? Wouldn’t you be tempted to do the same in their shoes? I know I would.

    The irony of our current rotten situation is, that this is something we should have been doing all along! But we have been too content to just spend our CRM budgets and focus on growth on the top-line sales numbers. Rather than understand what customers really value, how value is delivered to customers and how that creates value for our companies.

    We know what we have to do: “CRMer, heal thyself!”

    Graham Hill
    Independent CRM Consultant
    Interim CRM Manager

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