It’s a few weeks since the autumn Budget was announced, and the response from businesses has been somewhere between muted and dejected. You don’t need us to detail the where’s and why’s of that response – they have been well-documented already.
However, where we can offer some productive insight, is in how your response to the Budget can influence the success of your business through customer experience. In this article, CGA’s Chief Delivery Officer, Carla Hall, talks about the benefits of taking stock rather than reactively cutting spending for short-term savings.
Taking a breath after the budget
It’s a natural instinct for businesses to pull up the drawbridge on spending while they assess the true impact of cost increases resulting from actions taken in the budget. For many, it will take a while to gauge the real impact of cost and other changes, while some will also be looking at the potential benefits of things like apprenticeship funding. It’s understandable that you would want to control expenses while you let the dust settle.
However, one of the things that often gets forgotten when you cut costs, is the potential impact on customers and the knock-on effect that has for the business as a whole. In B2B businesses, there’s also an added layer of consideration because the actions you take affect not only your customer, but their customers as well. If a cost-cutting action that you take were to filter down and negatively impact your client’s business, then the long-term effect could be the loss of a high-value contract for your own business, for example.
That’s not to say that you shouldn’t tighten up spending; it’s that any of those decisions deserve proper understanding of the potential outcomes. So, our recommendation is to take a breath first.
Looking at efficiencies through the customer lens
Businesses like to talk a lot about efficiencies and their importance to productivity and profitability, and a lot of that is good practice. However, if they’re not fully understood, then those operational efficiencies can have an impact on the customer experience that might not be immediately obvious if you’re looking at them from the inside out.
While the customer experience might be seen as something of a ‘nice to have’ from the practical perspective of the budgetary controls, research (and experience) shows that it has a profound impact on both the long- and short-term performance of businesses. For example, oft-quoted data from PwC’s Future of CX report says:
“43% of all consumers would pay more for greater convenience; 42% would pay more for a friendly, welcoming experience. And, among U.S. customers, 65% find a positive experience with a brand to be more influential than great advertising.”
Although that might not come as an enormous surprise, it’s not the immediate impact of changes that affect customer experience that is hard to assess, but the long-term impact that indiscriminate cost-cutting can have on customer loyalty, brand reputation, and consumer satisfaction.
In the words of Warren Buffett, “It takes 20 years to build a reputation and five minutes to ruin it.”
The success of careful spenders
Forrester’s 2024 Customer Experience Index gives some insight into the effect of challenging economic environments on CX, as well as an insight into where the opportunities lie for those who take the time to invest wisely.
They wrote: “In addition to 39% of brands and 10 industry averages declining in CX quality over the past year, CX performance dropped across all three dimensions of CX quality — effectiveness, ease, and emotion. Only 3% of companies are currently categorized as customer-obsessed, defined as putting customers’ needs, desires, and satisfaction at the forefront of all business decisions and actions. Customer-obsessed organizations reported 41% faster revenue growth, 49% faster profit growth, and 51% better customer retention than those at non-customer-obsessed organizations.”
Furthermore, the Internet is littered with examples of organisations that have gone against the grain and chosen to invest more in customer experience during challenging economic headwinds, and in turn have profited where others have struggled in the same period. As a case in point, Forbes writes:
“A decade ago, Domino’s was the laughing stock of the pizza world and took last place in consumer taste preference surveys. Instead of ignoring the issue, Domino’s listened to customers and updated its pizza recipe. The company showed transparency by encouraging customers to post feedback of the new recipe on social media. Instead of getting beaten down by negative opinions, Domino’s listened to customers and made innovative changes that excited both employees and customers. Domino’s stock price has risen 5000% since 2008 and has made huge improvements in consumer taste tests.”
In the same article they detail CX success stories for Qantas Airlines, Starbucks, BestBuy, McDonald’s, and more.
Assessing efficiencies and investment through the customer lens
Of course, it’s not as simple as telling you not to cut costs – it’s about looking at where you’re spending to make sure it’s maximising opportunity, and checking that any cost-cutting doesn’t inadvertently damage your business, its reputation, and its success. In most cases, it’s better to see where you can increase profit margins rather than simply reduce outgoings. Looking at your options through the customer lens is a powerful way to determine what will work for you and your organisation.
With that in mind, we don’t have to look beyond our own doorstep for illustrations of how a focus on CX, listening to customers, and seeing the business and its services through the eyes of the customer can be transformative. Dudley Building Society is a great example of an organisation that successfully went against the tide in its market as a result of listening to consumer wants and needs.
At a time when many banks were closing their high street locations and opting for a digital-only approach, they worked with us to determine and prioritise a customer experience so they could invest their efforts effectively. As a result, we found that they were in a unique position to continue and expand their physical presence on the high street, fulfilling a highly valued service amongst its customers.
Having implemented our recommendations, James Paterson, CEO, said: “We have seen £20m in new savings applications into the Dudley Building Society … which shows there’s still a huge demand for those offering a good product and physical service, alongside the option for online banking.”
Knowledge is power
The bottom line is that there’s more to cost-cutting than meets the eye. Anecdotally and statistically, premium brands that have focused on building and retaining trust amongst their market base consistently outperform other businesses during periods of economic hardship. When people are carefully considering where to spend each hard-earned pound, they look for brands they can depend upon, whether it’s an item that will last, or a meal out that’s worth spending the money on.
It’s comparatively easy to simply down tools and stop spending in certain areas, especially if you don’t have the data to show how those aspects of your organisation impact its success. However, it’s not a strategy – it’s a short-term coping mechanism.
We’ve written before about modern customer service and the need for data so that CX can prove its worth. For many businesses, that knowledge is essential for decision-making, and may well yield insights that help you avoid a race to the bottom in favour of a strategic pathway to greater success by elevating experiences.
If that’s an approach you would like to explore, CGA can help.
CGA are Navigators of Experience, helping brands achieve greater customer loyalty and retention through empathy, engagement, and customer centric transformation.
