With inflation surging this year, companies across industries are responding not by slashing prices, but by cutting customer service.
This was the conclusion reached by a story in The New York Times that recounted how firms were taking steps that diminished the overall CX as part of their cost-cutting measures. In response to the story, however, CX advocates are questioning the wisdom of the tactic, which, in essence, favors short-term savings over preserving a brand’s reputation and safeguarding longer-term revenue and value.
The Times’ account presented various examples in which customer services and conveniences have taken a hit. For instance, hotels may not have raised their prices for a room, but daily cleaning services have been curtailed and amenities like free breakfasts are no longer available. Car buyers are being asked to be flexible in their choice of color or even the car’s make and model—unless they are prepared for a long wait. Services at restaurants have become limited with the wait staff stretched thin, and mistakes are frequent on orders that also take longer to be delivered. And in retail, just 57% of customers this year obtained customer service within 5 minutes, down from 68% in 2018, according to data analytics and consumer intelligence company J.D. Power.
Across the board, consumer prices surged this year. And in the sharpest rate of increase in 30 years since 1990, data from the Federal Research show that the Consumer Price Index (CPI) rose 6.2% in October compared to a year ago. In September, that figure was 5.4%.
For many businesses that have chosen to cut customer service, doing so is supposedly a less obvious and less easily measurable response to inflation than raising prices. Customer preferences also vary among individuals, the thinking goes, so online hotel check-in may be viewed as a desirable feature of convenience and timesaving, rather than as a loss of personalized service.
A Short-Sighted View
Economists says that an annual inflation rate under 2.0% is generally healthy, as it shows economic growth, but conditions start to become challenging once inflation crosses the 2.0% threshold. Yet, cutting customer service as a response to deal with inflation is a myopic approach, according to many insightful business leaders.
While a higher price point might deter less dedicated customers, CX experts believe that the impact of poor customer service on a brand and its reputation must be considered. Data from global management consulting firm Deloitte show that happy customers will mention their positive experience to at least 9 people, but that dissatisfied customers will tell 16 people about their negative experience. Moreover, compared to their negative counterparts, satisfied customers are likely to spend 140% more and will remain dedicated customers for five years longer, so companies can reduce their cost of serving customers by up to 33%.
“For every dollar saved on cutting customer experience programs, many more dollars may be lost on long-term customer loyalty and repeat purchases,” said Daniel Rodriguez, chief marketing officer of the customer service outsourcing firm Simplr, in his article, Inflation Is No Excuse to Cut Customer Experience Programs.
Rodriguez also said that companies thinking of paring down elements of their CX must confront the question of whether they see their brands as having an intrinsic value beyond just the prices of their products. If the answer is “yes,” he opines, CX may be “the last thing” in which to decrease investments.
Finally, Rodriguez added that the idea of cutting CX during inflation—believing that it is less measurable—is based on a faulty premise. At a time when social media is a potent force for feedback and public discourse, customer satisfaction is highly visible and easily quantifiable, with many CX metrics available for tracking that show a direct relationship between CX and revenue.
His views are echoed in a study conducted by reputation management firm Reputation X, which found that a negative review is “the equivalent of a put-down,” and that a whopping 86% of consumers will hesitate to purchase from a business that has negative reviews. “Quite simply: changes in customer service have never been more measurable, and more visible, than they are today,” Rodriguez noted in summation.
Author Information
Alex is responsible for writing about trends and changes that are impacting the customer experience market. He had served as Principal Editor at Village Intelligence, a Los Angeles-based consultancy on technology impacting healthcare and healthcare-related industries. Alex was also Associate Director for Content Management at Omdia and Informa Tech, where he produced white papers, executive summaries, market insights, blogs, and other key content assets. His areas of coverage spanned the sectors grouped under the technology vertical, including semiconductors, smart technologies, enterprise & IT, media, displays, mobile, power, healthcare, China research, industrial and IoT, automotive, and transformative technologies.
At IHS Markit, he was Managing Editor of the company’s flagship IHS Quarterly, covering aerospace & defense, economics & country risk, chemicals, oil & gas, and other IHS verticals. He was Principal Editor of analyst output at iSuppli Corp. and Managing Editor of Market Watch, a fortnightly newsletter highlighting significant analyst report findings for pitching to the media. He started his career in writing as an Editor-Reporter for The Associated Press.
