Now that there is official word from the National Bureau of Economic Research that America is in an economic recession and has been since December 2007, companies nationwide are scrambling to gain the attention of increasingly stressed-out consumers worried about their financial futures. New research from Customer Futures, "The Importance of the Customer Experience in a Down Economy," finds companies should focus on the new needs of consumers rather than blindly cut prices or lay off employees.
[Editor's Note: The title of this report notwithstanding, it is not connected or related to the Viewpoint of the virtually identical title that was posted on our site earlier this year.]
John Todor, managing partner at Pleasant Hill, Calif.–based customer-centric consulting firm The Whetstone Edge, says that the study was inspired by the notion that most business leaders today lack experience operating in a tough economy. As a result, he says, many are retrenching and taking a conservative approach. "Some were around for the dot-com bust, but this is something of a scale much bigger," says Todor, who also co-edited the report. "We believe the customer-focused strategy has merit, and it can help those in the business world."
Todor suggests that the economic crisis is making consumers stressed out and confused. Given that set of circumstances, he adds, two "mutually exclusive psycho-economic mindsets" can take hold:
- hoarding, in which consumers take a "ride out the storm" mentality reflected in reduced spending and a heightened focus on price; and
- engaging, in which individuals seek out relationships with companies that will engage them in a process of regaining a sense of control.
The customer experience influences both of those mindsets, according to Todor. "You can react by focusing…on constraining costs and dealing with the recession as an internal problem, or recognize that now consumers have new needs," he says.
Those new needs aren't necessarily met by lower prices alone. Todor explains that a company must do a better job of engaging its customers and showing how they can get additional value from the products or services sold, as opposed to just a smaller price tag.
The study cites Apple Stores as an example: The computer and electronics retailer immediately gives customers who enter its store a quality experience by allowing potential buyers to try out different products, free classes on how to better use the company's offerings, and a Genius Bar at which consumers can get a free diagnosis for purchases that aren't working properly. "Apple is the prototype of enlightened companies that are moving in the direction of offering more experiential value," he says.
That said, Todor admits that companies taking a long-term view of the recession still have bills to pay and revenue projections to meet. He explains that organizations need to think beyond product offerings and ponder what's on customers' minds. This can mean reevaluating company policies to remove or revise cumbersome ones that may frustrate -- and drive away -- consumers.
In online shopping, for example, Todor explains that taking the time to post a clear return policy on the Web site can help make a first-time customer a returning one. "If I buy a product and save a nickel, but I'm unhappy with the product and there's a hassle in returning [and being credited for] it, then the savings weren't worth it," he says.
Todor says that what's at stake here is each company's long-term health -- and the difficult circumstances extend far beyond the current economic downturn. "[Even] before the crisis hit, customers have been increasingly gaining control over [their] interactions with businesses," he says. "The recession just magnified everything. Organizations must respond to the underlying challenges…. They can either create comparative differentiation that has lasting power, or struggle and cut costs, lay off employees, and perpetuate a downward spiral."
The entire 84-page report is accessible for download here (free registration required).
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