Cost-of-living impacts on CX

CX trends and advice for inflationary periods

June 3, 2022

With the well-documented squeeze on consumer disposable income, how will a strategic CX ensure your brand maintains, or even grows, its share of your customer’s wallet? CX experts from across the UK discuss their concerns in this economic climate.

With the current stresses on consumer income and no sign of inflationary pressures easing, brands will have to work harder to encourage customer spending and maintain their market position.

Purchasing decisions will become less frequent, will lengthen in duration, and will have customers doing more research into factors they had not previously considered (e.g., return policies, ethical stance of a brand, sustainability, and good customer service).

Without a doubt, cost will continue to be a key factor. But can a great CX differentiate your brand, while driving increased sales conversion and customer loyalty?

At a HGS-hosted roundtable earlier this month, we had the opportunity to hear the perspectives of several CX leaders from different sectors (e.g., retail, utilities, consumer electronics) about the role of CX in combatting the cost-of-living crisis and about how the crisis was not just affecting their businesses and customers, but also their employees.

1Increased customer vulnerability

During discussions with sector leaders, one of the topics that resonated highly was “vulnerable customers.”

In the not-so-distant past, “vulnerable customers” was a term that was reserved only for the elderly, disabled, or those receiving benefits in our communities. However, the cost-of-living crisis has meant that the definition of “vulnerable” must be extended to include those with low incomes or household food insecurity.

The definition of a vulnerable customer, according to the UK (FCA), is a “customer who is particularly susceptible to detriment due to personal circumstances.”

According to research the UK (FCA) recently conducted, of the 67 million people in the UK, over 53%, could be in vulnerable circumstances.¹

From a CX perspective, this statistic now means that it is more likely that, when one of your advisors engages with a customer, they will be dealing with a vulnerable customer, than not.

The increase in vulnerable customers will have an enormous impact across all sectors, some of which will experience more acute challenges. The utilities market is a good example, where large chunks of customers have already been moved to suppliers of last resort (SOLR) due to the failure of providers as a result of wholesale energy cost increases. With the recent increase in the energy price cap, providers are now going to have a rise in contacts from customers worried about affordability and ongoing usage, risking their (and their family’s) health by not using the heating due to the escalating costs.

It will be the responsibility of both business and individual employees to identify potential vulnerable customers. Strategies that were discussed (and that we will explore in other blogs) include the following:

Identifying vulnerability through analytics or bots
Providing more discreet channels for customers to speak freely
Establishing specialist teams
Increasing agent training and empowerment
Relaxing of time-sensitive metrics

Unfortunately, vulnerability is not just limited to customers. Many employees engaged in CX activities may also find themselves at risk…

2Increased employee vulnerability and risk

Contact centre employees are not immune from cost-of-living pressures. However, rising inflation, and its impacts on staff, are often ignored by businesses.

The UK’s Office for National Statistics said the cost of living is increasing at its fastest rate in 30 years.²

Energy bills in the UK are due to rise by an average of 50% this year. Combined with the climbing cost of food and soaring gas prices, employees may soon not be able to afford to work from home, let alone come into the office.

Businesses will need to do more not only to attract talent but also to retain the employees they already have.

Steep increases in salary levels and incentives are being offered to employees to help support them during this period, but there is more that will be needed and demanded. Businesses will need to have processes in place to support their employees with their general well-being. People have just dealt with the pandemic, and now they are faced with the stress and potential isolation of a cost-of-living crisis. Who can afford to go out with friends?

According to MIND,³ a mental health charity,“Poor mental health can make earning and managing money harder. And worrying about money can make your mental health worse. It can start to feel like a vicious cycle.”

The consensus amongst the group of CX leaders is that businesses are adapting, but there is still more that can be done. The opportunity to take a role with progression opportunities, a good work-life balance, incentives, and benefits will help. However, what will be equally critical is cultivating support in mental health, engaging good mentors, and building sound internal networks that offer help or opportunities just to “pass the time of day” with someone.

Interestingly, all of this is happening when, for the first time on record, the number of advertised jobs has risen higher than the levels of unemployment. This is according to the Office of National Statistics (ONS),⁴ who recently shared an unemployment rate of 3.7% for January to March.

3.7% unemployment means that 1.26 million people are looking for work in the UK, whilst for the same period, the number of vacancies rose to 1.29 million.

Does this add further weight to the need for companies to digitise?

3Accelerated digitisation

Live advisor interaction has historically been the primary route for managing customer enquiries. Since the pandemic, however, many brands (out of necessity) have embraced digitisation to improve the speed and consistency of outcomes.

By using the right blend of people and technology, it is possible to improve self-serve options, increase contact options and deflection opportunities, and free up advisor time to deal with the complex, emotive, or high-value contacts — therefore reducing the demand on advisor resources and optimising the overall cost to serve. With the impacts of spiralling costs, this strategy is unlikely to lose pace.

Adopting more digital channels and investing in technology will also improve a business’s ability to react to dissatisfaction and/or vulnerability.

Attendees of the CX roundtable have used and suggested visual IVRs and bot technology to remove the high-volume, low-value activity, including WIZMO (where is my order) in retail and bill payments in utilities. Sentiment analysis during both live and automated interactions prioritises routing to a live agent or escalation to a team manager to provide increased support when negative sentiment and frustration is identified.

Digitisation of channels may help customers (and employees!) cope. The use of more discreet digital channels is viewed as a safe, improved way of allowing people to discuss emotive issues.

According to Statista, WhatsApp is the most used messaging app in the UK with 81% of people using the app.⁵ This channel gives the option of a more discreet service for “vulnerable customers.”

These types of customers may be too embarrassed to be talking aloud about their situation or be too worried about being overheard to fully describe their needs or concerns, so messaging may be a better option.

The investments in digitisation should, in the mid-term, drive significant reductions in CX operating costs whilst improving the overall experience. These types of alternatives are going to be critical as businesses reassess spending across their entire supply chain…

4Limited and capped CX budgets

Although no one at the roundtable expressed concern around reducing CX budgets, in the past when faced with economic challenges, the provision of CX was quick to attain the mantle of a cost centre.

With the current economic climate, it would be easy for brands to decide to rein in spending on CX to save costs. However, attendees were unanimous in their belief that this approach was short-sighted and likely to add to — not remove — the challenges faced as a result of the cost-of-living squeeze.

CX leaders are not requesting more money for customer service during the economic crunch; instead, they are focusing on more effectively using budgets to find the right balance between technology and people to deliver better outcomes and experiences for customers and businesses.

Conclusion

Anne Marie Forsyth from CCA Global compared today’s business climate to the roof of a building. The roof has been blown off due to the pandemic. It is instinct to repair straight away — but what if instead of just putting the old roof back on, we take the time to assess whether the walls of the building are where we need them to be? Using this experience — this tight economy — as an opportunity to rebuild the walls where we want them, to restructure, and to build a more robust roof that will survive the test of time and weather the next storm may be the more logical approach.

Whilst each day the media has more doom and gloom about the current cost-of-living crisis, the experts that attended the CX roundtable had a more positive outlook. Most of the attendees had experience in supporting brands through the recession of 2008. And whilst knowing there are certainly challenges ahead over the next 12‒18 months, they are confident that they have the people and technologies in place to not only survive, but thrive — just as they were able to do during the hardest days of the pandemic.

There will be both winners and losers coming out of the latest economic crisis. Those brands that remain nimble and adaptable will stay afloat and weather any market storm.