Will the cost-of-living crisis drive down customer care for providers seeking cost leadership?

Something has to give.

Inflation in many countries is at a 21st?century peak of near 10 percent. Energy and food inflation are soaring higher still, and wages, whilst rising, are not keeping up in real-terms.

For millions of consumers, this puts them on the margins of being able to meet monthly household outgoings. They are left with little choice than to tighten their belts and seek to curb their spending whenever they can.?

How can goods and service providers seeking cost leadership respond to this?

One route is offerings that are even more ‘affordable’ – from own-label ‘essentials’ ranges and smaller pack sizes in supermarkets, to stripped-down services such as entry-level insurance policies or freemium software with little or no personal support. How firms seeking more affordable propositions achieve this can vary – including reducing the quality of the ‘ingredients’, slimming down the ‘features’ or cutting back on their own internal costs of providing a service.

And typically the biggest cost of customer care offering is...... people.?

Yet, simply by reducing the headcount, organisations will heap more workload on to remaining staff, causing burnout, dissatisfaction and ultimately higher staff turnover. The impact on the customer is often felt by longer wait times, with less experienced staff driving up poorer service experiences, many of which may no longer be resolved first time, resulting in higher customer defection rates.

In short, a blanket reduction in the workforce in the name of slimming down a service proposition is a false economy. Instead, firms need to find a way of supporting and even improving customer care, but in targeted ways that improve both productivity and customer experience.

In their?2022 ‘State of Customer Care Survey’?of over 160 customer care leaders, management consultancy firm McKinsey found that customer experience improvement was by far the most targeted priority goal.?

The route to achieving it in such a challenging economic environment was to:

1.????Start with the workforce?– retain the most talented staff, through an employee proposition that blended achievable workloads, advancement opportunities, good salaries and work-life balance. This approach reduces employee churn, so lowering recruitment and training/onboarding costs, and improving overall morale.

2.????Lower contact volumes –?target?shifting the workload away from transactional, repetitive calls that both staff and customers would prefer not to have to do at all. Instead, use a digital-first approach that can offer self-service speed and convenience to customers, whilst freeing up employees to focus on more valued and valuable work

3.????Leverage AI assistance –?this is still in its infancy, but the concept is to user first-touch AI to filter the customer care need to the right place, be that a digital-only solution or a customer care agent. Right now, this is a fine balance, and in my own experience, industries such as airlines, telecoms and insurance are frustrating as many customers as they are supporting, by lacking the insight into what customers actually want, and instead training AI to see patterns in how?firms?want to classify and channel inquiries. But with the right customer research upfront, AI has huge potential to save time and workload, whilst still leveraging skills that only humans can provide.

4.????Develop revenue-generation-enhanced customer care?– in days gone by, this might simply be badged as “up-selling” – taking the opportunity of a customer contact to offer extra features and benefits. But in a cost-of-living-crisis, this is going to need to be flexed towards improving retention and loyalty, such as offering lower prices for longer subscriptions, or no-cost additions that have value to the customer at marginal cost to the provider. But caution –?only?if such enhanced offers are firmly anchored in customer insight can firms be confident that their customers will perceive such an interaction as valuable rather than self-serving at best and exploitative at worst.

The Takeout:

The cost-of-living crisis is putting pressure on millions of consumers to seek savings in everyday life. Classic models for firms achieving competitive advantage through cost leadership and cost focus still apply. But the post-pandemic workforce environment has added another consideration. Firms must compete for staff in a tight labour market, as well as customer loyalty. Covid-19 forced through mass take-up of virtual customer care at an unexpected and unplanned-for rate, but this did have the advantage of making more digital interactions nowadays an expectation, even if not always desired. It has provided an opportunity for firms to excel, but also for them to fall below enhanced expectations.?

Whilst on the surface it may be seen as counter-intuitive, customer care is at the centre of supporting customers in a cost-of-living crisis. If done well, it will be founded on clear insight for what consumers need and value most in challenged economic times, and matched with skilled employees, technology and flexible propositions that maintain loyalty across customer and employee alike.

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About Customer Faithful:

Founded in 2009 by Rick Harris, Customer Faithful is centred around a small collective of multidisciplinary experts (meet them?here). We are a research-led consultancy, equipped with a wide range of tools and techniques to highlight unmet need in customer, patient and employee experience. Our?client testimonials?tell us that the results of our approach are the clarity of what matters and what to do next.