Big Ideas 2023: Battling Inflation, Companies Can’t Just Buy Growth

For decades, companies sought growth through massive marketing and advertising efforts, like multimillion-dollar 30-second Super Bowl ads and annual contracts for shelf space with big-box retailers. Then the rise of Amazon made online reviews essential. Customers began buying brands they’d never heard of if those brands had enough enthusiastic promoters.

When the pandemic moved everything from grocery shopping to international work conferences online, it raised the stakes for online reviews and raised the profiles of social media influencers. But with reports of bots churning out fake product recommendations and unscrupulous influencers getting paid to advertise pretty much anything, many customers began to doubt reviews’ credibility.

Now, facing rising inflation and a looming recession, how can companies build trust and business with wary, price-conscious customers?

Data from Ipsos shows that two-thirds of today’s typical shoppers expect immediate improvement in their customer experience as prices rise. Decades of experience working with leading customer-centric companies points to the answer: Earning growth through customer loyalty—turning customers into advocates by delighting them with exceptional service and experience—is the only way to defend and grow lasting market share in a downturn.

Among the customer-centric companies that understand this is Costco, which earned over $225 billion in revenue in fiscal year 2022 without investing in marketing or advertising or increasing its membership fees. More valuable than any Super Bowl ad, happy Costco customers have created countless TikTok and Instagram posts authentically attesting to all the things they love about Costco and its private-label brand, Kirkland.

Other recent acts of customer love include Walmart keeping Thanksgiving dinner 2022 locked at 2021 prices, despite a nearly 11% increase in food prices in the US. And in early November, Airbnb responded to complaints about a lack of price transparency and unexpected fees by displaying the total price on all listings and using that to rank search results, rather than the nightly rate. In a Twitter post about the change, cofounder and CEO Brian Chesky said the company had heard customers “loud and clear.”

Making moves that benefit customers when times are tough pays off in loyalty over the long term. During the height of Covid, when some businesses like Amazon and Peloton were booming, auto body shops were hit with a monster recession. Hardly anyone was driving, so revenue for the car repair industry plummeted by 55%. Caliber Collision kept its shops open, and its employees working, partly by upgrading its service levels and partly by initiating a policy of covering deductibles (up to $500) for all first responders and frontline medical personnel. Its customer satisfaction, as measured by Net Promoter Scores, jumped to all-time highs, and soon insurance companies began referring a bigger share of business to Caliber.

Buying customer love with fancy advertising is over. Any company’s No. 1 most efficient salesforce is its customers and everyday employees. Those are the people who know the truth about an organization and the value it delivers. In a recession, companies must fire up this true salesforce by doing something really special for their customers—something so remarkable that they are compelled to talk about it with their friends and colleagues.

In tough economic times, many leaders turn to their accounting staff for solutions to boost profits. They should also turn to their most innovative customer service reps and embrace their suggestions for making each customer’s experience so remarkable that they feel the love. Leaders must identify the product lines and service interactions that generate the most customer love—and make sure they are not diluted. Test out experiments that can wow customers. You can’t buy loyalty these days, so you’ve got to find the most efficient ways to earn customer love.

Accounting profits are necessary, of course, but they obscure the underlying economic flywheel that drives business prosperity, especially when times get hard. Think of it as “the customer love flywheel.” It spins only when customers feel so much love that they come back for more and refer their friends. Costco feels the same inflationary and recessionary pressures as everyone else. Yet it still offers that enormously popular hot dog and soda combo for $1.50 because it understands what it takes to make this miraculous flywheel spin.?