How to recession-proof your business with CXby
Steven Walden provides 10 tips on how customer experience teams can keep your organisation profitable during a recession.
In the midst of a global economic slowdown, rising inflation, and the Russian invasion of Ukraine, firms around the world are battening down the hatches for economic resilience.
The near-term outlook for the economy is not good. In a recent poll by World Economic Forum, nearly two thirds of economists surveyed expect there to be an economic recession in 2023. As we watch financial firms like Silicon Valley Bank fall, organisations are taking a look at their P&L and optimising their operations.
How businesses are dealing with the economic situation
Many companies are making short term moves from their inflation and recession proofing playbooks. Firms across many sectors are reducing spending by cutting, postponing or decreasing their budgets.
With labour being one of the largest costs to most businesses, layoffs are often the most immediate risk reduction strategy. In the first quarter of 2023, over 100,000 people have been laid off. While this can quickly reduce expenditures, there are many long term consequences to consider, such as the loss of institutional knowledge and the personal impact it has on employees.
We’ve been helping a number of firms with their strategy during these times. We often get calls seeking advice and resources. Some organisations have decreased their CX budget and are looking for ways to ensure continuity for their client experience. At the most innovative companies, CX leaders have taken centre stage. In order to help address their needs, we’ve collected our thoughts on the question of what role CX should play in a recession.
How can CX help businesses in a recession?
Among CX scholarship, it is generally accepted that better CX is correlated with revenue growth. During a recession, a focus on CX is one of the best approaches firms can take to recession-proof their business and maintain profitability.
In fact, CX should be a firm’s prime method of retaining key client stakeholders. As John Quelch and Katherine E. Jocz so succinctly put it in their piece for the Harvard Business Review: “During recessions it’s more important than ever to remember that loyal customers are the primary, enduring source of cash flow and organic growth”.
CX should be a firm’s prime method of retaining key client stakeholders.
Every relationship that professional services firms have with their clients is a high value relationship. Preserving those relationships by providing the best possible custom experience is quite simply the best strategy firms can pursue to maintain profitability during a recession.
In our white paper, “Recession Proofing Your Business With CX; How Customer Experience Can Keep Your Organisation Profitable During a Recession”, we examine ten principles of a best practice CX programme that organisations can implement to keep themselves profitable during a recession.
Below we have included a summary of the ten principles.
10 CX strategies to stay profitable during a recession
- Follow a purpose-driven approach: Anchor the firm with a purpose-driven north star. Why do you exist? Is there something greater than the profit that is seen as being worth being part of? Keep people focused – let’s find new ways to help our clients weather the storm. The North star helps us all stay focused on what matters most.
- Get closer to your clients: Understand what drives your client’s behaviours relative to your offering. Become more valuable to them. What specific things are your customers trying to solve with an offering like yours? Understand what things tend to put your customers at risk of churn and do what it takes to prevent that type of activity. In a lot of cases, the knee-jerk reaction to staff reduction in recessions is the 100% wrong thing to do.
- Cut what does not matter to your customers: Cut what doesn’t matter to your customers and identify ways you can become more efficient. Products and services that are least used might be good places to stop investing in.
- Find unrealised opportunity: Define not just what is, but what could be. Firms frequently focus on removing moments of pain, defined through business intelligence. But what about defining hidden needs or testing out new propositions? Or even reviewing the experience of new client personas.
- Redeploy employees: Redeploy employees to put them where they can have a greater or more positive impact on your customer relationships. Instead of cutting marketing staff in a downturn, redeploy them to customer success managers.
- Follow a CX playbook: Having established the specific challenges presented by inflation and recession fears, firms should deploy a comprehensive playbook to overcome them based on their strategic pillars.
- Focus on talent (employee experience): Two major trends are having an impact on the way companies manage employees, and make employee experience considerations a vital part of client experience.
- Optimise client services: Client services processes and procedures need to be optimised to the experience you wish to convey. How, for instance, are client services reporting on and responding to customer chat and voice of the client data? Are they measuring service performance effectively? Is there a mature topic tree that delivers volumetric and well-classified alert data into client services? To what extent is the customer success function engaged in client experience?
- Reevaluate pricing: Instead of setting the same price increases across the board, companies should implement differentiated increases tailored to each customer and contract. When facing pricing conundrums and the pressure put on prices in a recession they need to equip teams with agile pricing solutions, guidelines, and tooling. And they need to set up solid governance – coordinating pricing, sales, and procurement teams to address complex, volatile environments.
- Risk profile your client relationship portfolio: Has business intelligence tagged a risk profile to your customer groups? Does the business fully understand the variety of client segments and their risk profiles? Price-sensitivity and an increased risk of churn are all products of a recession.