The dreaded "R" word has been growing from a whisper to a rumble since the earliest months of 2022. Recessions require businesses to reevaluate their priorities, looking for potential savings while waiting out the storm. Here's why customer experience continues to deserve. your investment during economic downturns.
1. Great customer support costs less in the long term
One specific area of customer experience that often ends up on the chopping block is customer service. Historically, leaders have treated this as a necessary cost of doing business, rather than as a revenue opportunity. That cost, they reason, can always be lowered when necessary.
However, this is a case of "you buy cheap, you buy twice." According to Microsoft's 2018 State of Global Customer Service Report, 61% of respondents had stopped buying from a brand as a direct result of a bad customer service experience. Cutting back on customer service resources will likely impact quality and lead to customers leaving your brand. You can save the cost of getting them back or replacing them by continuing to invest in strong customer service.
Customer service doesn't start with call centers. If you invest in UI tools that make it easier for customers to navigate your website independently, you'll receive fewer calls and emails, which will enable representatives to spend more time serving the people who need further assistance.
2. With the right investments, you’ll emerge stronger
Companies instinctively cut costs in recessions, including in customer experience. However, the key to surviving a recession is not to cut across the board but to strategically assess where you should continue spending in order to secure long-term benefits.
Customer experience is one of those areas that is worth investing in even in economic downturns. In June 2022, consulting firm Watermark looked back at previous data collected during the Great Recession, which lasted from approximately 2007 to 2009. Over those three years, companies delivering poor customer experience lost market value—more than the average company on the S&P 500 Index—whereas customer experience leaders actually gained an average of 6.1% in returns.
If you continue to support great customer experience while your competitors cut back on theirs, you can ultimately come out in a stronger position than you started in.
3. You’ll see less drop off
People are less motivated to spend money in a recession. According to a 2022 survey from CNBC and Momentive, Americans across income brackets have started to cut back on their spending, particularly around luxuries such as dining out, vacations, and monthly subscriptions.
With people holding tighter to their purse strings, it's in your best interest to make their shopping process as smooth as possible. People are poised to click that X button if it takes too long for them to find exactly what they want. A strong customer experience that guides them expediently from browsing to "Order confirmed" ensures they won't get frustrated and give up.
4. You can earn and keep loyal customers
Winning new customers is even harder during a recession. People double down on brands they trust, rather than risk spending on something new that turns out to be a letdown. In addition, it typically costs more to acquire new customers than to retain existing customers. All of this makes it more important to keep your current customers happy and loyal during an economic downturn.
Customer experience can make or break loyalty. According to a 2022 PwC survey, on average across multiple industries, 37% of respondents said they ditched brands they otherwise liked after several bad experiences with a product or service. Great customer experience is not a nice-to-have. It plays a significant part in keeping customers coming back to your brand—which is essential in a recession.
5. Good CX drives referrals
In addition to providing recurring revenue, loyal customers can also help you find new customers. People are significantly more likely to trust recommendations from existing customers than any other marketing source. That might be someone they know personally, or from reviews.
In 2012, Nielsen published a study that found 92% of respondents "somewhat or completely" trusted recommendations from people they knew, while 70% felt the same towards online consumer reviews. In contrast, only 50% trusted marketing emails they had signed up for and only 42% trusted radio ads.
One way to drive those recommendations is by delivering a great customer experience. According to a 2020 study by Qualtrics XM Institute, 94% of consumers who rated a company's CX as "very good" said they were likely to recommend that company. Make your existing customers happy and not only will they come back, but they'll also convince more people to choose you.
Leaders have a lot of tough decisions to make during recessions. The wrong move can have repercussions that last longer than the downturn. Rather than cutting costs unilaterally, invest in areas of your business that will shore up your foundation when times are hard—including customer experience.