When the next recession occurs, what impact will it have on customer experience initiatives? How will companies behave? The answer depends on two dimensions – corporate strength and existing customer experience (CX) capabilities.
- Stop investing – businesses weak along both dimensions will put an end to any customer experience initiatives because of financial turbulence. Customers notice this and find more helpful and stable partners. The red quadrant is a sign of the weak getting weaker.
- Tighten belts – companies which already have strong CX capabilities but which haven’t yet attained corporate strength are on the right path. Organizations that invest in improving the customer experience lead their peers in financial performance (we’ll cover this in a subsequent post). Even though some may be forced to cut costs, these companies do not abandon their customers during recessions.
- Stay the course – companies just beginning to develop their CX capabilities who also operate from a position of financial strength have a wonderful opportunity to stay on course. Investments made during difficult times reap benefits as the economy rebounds and strengthens.
- Double-down – this is the position to which we all aspire. Strong CX companies with strong financials can grow while the rest of the market contracts. As weaker companies slow or stop investing, strong companies can and should differentiate based on their continued customer commitment. The strong get stronger.
One aspect I haven’t included is corporate attitude. It matters too, but is difficult to include in the heuristic because when a company is determined to cease investing, there isn’t much to be done. For example, I once helped a company which was in the top left corner (see diagram). Their CX capabilities were immature but developing AND they had a sound financial footing. But instead of leveraging this position of strength to emerge stronger, they stopped investing which reflected their defensive mind-set. As a result, customer relationships suffered needlessly. Unsurprisingly, financial performance diminished as customers took their pullback as a sign of weakness. Even though they were strong, customers noticed their extreme cost-cutting, interpreted it as weakness, and defected.
The pivot point is that the next recession WILL affect the customer experience. How it influences those initiatives is largely a result of a company’s current financial strength and existing CX capabilities.
In the next post, we will examine the relationship between corporate strength and rich customer experience capabilities.