Marketing

CX strategies to adapt to consumer changes in an economic downturn

One of the most important things retailers can do in times of economic downturn is to avoid a knee-jerk reaction that will cause customers to lose trust and avoid turning to the brand again.

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October 18, 2022 | Dan Arthur

An economic downturn directly impacts the retail industry and alters the behavior of consumers. Three-quarters of consumers are changing their shopping behaviors, including trading down and delaying purchases. Inflation is at its highest since the 1970s, and customer feelings toward the economy are at the lowest point since this started being measured in 1953.

It is critical for businesses to respond to these changes by not abandoning their customer experience strategy but instead by adapting to changing conditions using customer data and insights.

Strategic modifications vs. wholesale change of CX programs

During a downturn, customers prioritize what they're spending money on. For example, consumers may cancel subscriptions to certain services, slow or stop traveling, and/or halt spending on nonessential items. Often, businesses start to panic when they see their revenue decline or margins start to compress.

Upon seeing these changes, businesses tend to have a knee-jerk reaction and cut their budgets and customer experience initiatives. A knee-jerk response involves wholesale changes to CX initiatives and often cutting CX investments. These types of sweeping changes can be difficult to undo when the economy is no longer in a downturn — especially if customers have lost trust in the brand during the implementation of these changes — because customers may not come back.

It's best to take a step back, carefully evaluate the impact on the customer and the company, and take a more strategic approach. Look for small changes that can be adjusted without overly disrupting the customer experience. For example, is it possible to digitize experiences that can be time consuming for the customer and labor-intensive for the company? Disrupting customers' experiences can result in abandoning the brand, making it critical to make strategic modifications.

Using CX insights, automation to drive down cost to serve

Cutting costs can be essential in times of economic downturn, but it's possible to reduce costs and maintain or even enhance the experience at the same time. Prioritizing both value to the customer and value to the company together will ensure changes are not detrimental to the customer experience.

The knee-jerk reaction may be to prioritize cost cutting measures above all else, but it's essential for retail businesses to not change what they promised customers they would deliver. For example, if a business's brand promise is low prices, then it still needs to focus on delivering low prices but streamline the process elsewhere in the supply chain. If a business's brand promise is exceptional service, it shouldn't broadly cut front-line staff. If a business's brand promise is innovative products, then it needs to retain its research and development team.

Automation can also be a lever to enhance touch points and drive down cost to serve. For example, provide operations and design teams access to real-time customer feedback and analytics to make adjustments. Use analytics to get insights into experiences customers would rather do online than in a brick-and-mortar store or to understand where customers are having challenges that could be resolved online versus contacting customer service.

A retailer's goal should be to maintain or even enhance customer service as it drives down the actual cost to serve.

Strategies for nurturing customer loyalty and building trust

As customers start to trade down, reduce subscription costs or delay purchases altogether, it's critical to identify individual customers or customer personas that are at a higher risk to reduce purchases or have a higher propensity to churn. This can be done by analyzing recent purchase data, price increase data, NPS scores and recent issues/contacts to customer service together to determine a customer risk score.

Once these customers are identified, you can create personalized campaigns with empathetic messaging and retention tactics targeting these customers to reduce the likelihood of them leaving. In addition, understanding specific pain points with pricing, products or services that are drivers for them to churn can help you tweak the experience and or product/service offerings.

Consistent behavior and personalized interactions build trust over time. This is why consistency in how retailers interact with customers is so important. Don't give your customers a reason to try another brand. It doesn't have to be an over-the-top experience. Rather, a business just needs to deliver on what it says it's going to do and provide what it's promising to provide. Synchronizing brand promises with delivery is a key part of building trust, but it's essential to make sure there's consistency when delivering on these brand promises.

Maintaining customer experience in times of downturn

One of the most important things retail businesses can do in times of economic downturn is to avoid a knee-jerk reaction that will cause customers to lose trust and avoid turning to the brand again. By incorporating the strategies above and focusing on continuing to deliver a consistent customer experience, businesses can help mitigate the effects of the downturn and position themselves ahead of their competitors for the upturn.

Dan Arthur is the EVP of customer research and analytics at Andrew Reise, a customer experience consulting firm.