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Customer experience matters most when the economy thrives - report

8th Sep 2014
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Scientists at Georgia State University have discovered an intrinsic link between a nation’s economic position and the importance the public places on customer experience; with the results not necessarily in line with conventional thinking on the topic.

Published in the journal, Marketing Science, the study entitled Assessing the Influence of Economic and Customer Experience Factors on Service Purchase Behaviors found that, when economies are struggling, consumers placed less value on customer experience in their purchasing decisions as when the economy is flourishing.

Interestingly, it also found that this type of decision-making was often independent of an individual person’s income, and that the economy itself influenced whether consumers use their past service experiences to make their next purchase decision.    

The results go against the common belief that when times are hard, businesses should “double down on improving customer experience”, suggesting that a focus on service was more critical when a nation was more prosperous.       

"While both sides of the debate are plausible, neither has been empirically verified with real data and from the perspective of the customer. We find that customer experience matters more to customers when the economy is strong," said V. Kumar, the lead author of the study and Robinson College of Business, Georgia State University’s Regents’ Professor.

Alongside Nita Umashankar, an assistant professor, and PhD candidates Hannah Kim and Yashoda Bhagwat at Robinson College, Kumar examined macroeconomic indicators such as GDP and consumer welfare before combining data on economic well-being and purchasing behaviour provided by the Gallup Poll to decipher public opinion.

They found that improving customer experience (i.e. increasing satisfaction, reducing failures, and implementing recovery efforts) yields a 20% revenue gain in a thriving economy, but just 10% when the economy is “worse off”.

Their research also discovered that when the state of the economy is poor, consumers tend to focus more on price and less on customer experience. In contrast, in a better economy, consumers are less price-sensitive and turn their attention to other aspects of the service encounter – in particular customer satisfaction. While both higher and lower income consumers are likely to spend more in a strong economy, the leap in spending from a weak to a strong economy is larger for lower income consumers.

In the UK, the economy is perceived by the public to be in a strong position of recovery following the 2009 financial crisis, however the Institute of Customer Services (ICS) recently published a report that placed customer satisfaction levels at their lowest point since 2011, suggesting that the insight from Kumar et al. may well be correct, and that UK businesses may need to improve the customer experience they currently offer while the economy prospers.    

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