In this article, I will be talking about:
- What recessions mean for business
- The impact of a recession on consumer spending
- How this translates into business performance – with statistics from previous recessions
- What businesses can do to prioritize customer experience
Let me begin by tackling the title of this article from another perspective.
Let’s say you earn $4,000 a month. That’s approximately the average wage across the United States, and a touch lower than the average wage of workers in the United Arab Emirates.
You budget your spending towards this $4,000. You know how much your rent is, you’ve got a handle on your bills, and your shopping spending is pretty regular. And, there’s always a bit left to spend on yourself at the end of the month.
However, the economic situation in your country is starting to decline. Prices are increasing, your rent is going up, and bills are starting to skyrocket.
This leaves you with less disposable income at the end of the month, as your budget is squeezed a little more.
Here’s my question for you then – when all is said and done, you’ve paid your bills, your fridge is stocked, and there’s some money left (albeit less) at the end of the month, who do you still spend your disposable income on, now you’ve got less of it?
A Rundown on Recessions
In the midst of their complexity, recessions are actually quite easy to identify. If you have more than one consecutive quarter of a decrease in GDP, your economy is in recession. They tend to be indications of much poorer economic prospects, and they tend to be predicted a good while before they arrive.
Recessions cause dramatic changes in customer habits, as people begin to set stricter priorities over what they spend their money on. Consumers tighten their belts, and they tend to have less to spend because of rising costs that go hand in hand with the conditions of a recession.
Even predictions of a recession can alter market activity, and this is something that we actually saw recently in the United States. As talk of a recession rumbled in quarter 2 of the month, consumer spending fell by 0.4% – before it had even been officially confirmed.
Naturally, consumers set new priorities for what they want to spend their money on. When they set these priorities, as a business owner you should be thinking – am I on that priority list? If not, why not?
The Reality of Recessions for Customer Experience
Actually, although the perception of a recession is that consumers revert to living off the basics and batten down the hatches on everything else, this doesn’t always translate.
In reality, they simply turn away from businesses that don’t provide something exceptional to them. Or at least, they take a hard pass on companies that don’t provide them with a very good customer experience.
To put some context around this, during the period of 2007-2009 in the U.S. – a peak recession period for the country at that time – the stock performance of customer experience leaders improved by 6.1%.
For even further context, companies that had an inferior level of customer experience saw their stock levels fall by 57%.
That’s a truly incredible statistic. Not only did consumers maintain some level of confidence in companies with positive customer experiences, but they also spent more with them – at a time when they typically had less to spend!
And where did they find some of this spare disposable income to put into the companies that provided them with this great experience? From those who did not provide it to them beforehand.
This isn’t a flash in the pan either. In the COVID-induced recession of 2020, the same trend repeated itself, and customer experience leaders’ stock levels performed between 30-40% better than industry averages.
There is clearly a correlation between having a superior customer experience, and being able to navigate the waters of potential recession not only smoothly, but triumphantly.
What That Means For Your Business
Recessions are of course telling times for any business, and it shouldn’t just be assumed that taking care of customer experience alone will solve any problems for you. There will be harsh winds that blow through markets and you’ll undoubtedly feel the chill.
However, investments in customer experience tend to be an excellent long-term strategy, and have certainly demonstrated that they can stand the test of a recession, and actually allow you to thrive.
At a time when costs are going to rise for your business, priority will often shift towards what can be cut. However, a recent customer experience study showed that 61% of people stopped buying from a brand because they received poor CX. So, is that something you really want to turn your back on?
Customer experience doesn’t just look like having a call center either. Chatbots, for example, is a tremendous, AI-driven alternative to the traditional customer experience model that 69% of consumers prefer to use because they provide instant responses to issues – which is critical to 82% of consumers overall.
Remember, it doesn’t have to look like the old model, but some kind of fast responsiveness to customer inquiries can be more than effective in promoting a customer experience culture. This is true for both online and offline channels.
And, considering the impact of poor customer experience and the trends associated with this in recession periods, at least some of your budget should be invested in ensuring your customers enjoy an experience with your business that goes beyond
So, is Customer Experience Recession Proof?
Statistically speaking, absolutely it is!
It is an incredible insight into consumer habits that not only will they turn away from brands that generally provide sub-standard customer experience, but in times of a recession they will not only continue to spend as normal but maybe spend even more!
It of course doesn’t make your business entirely recession-proof, as there are many other factors that will contribute to the success of your business in turbulent economic conditions.
However, a positive customer experience provides a clear cushion to your business that is demonstrated in historical data that should certainly be taken seriously by your business.
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