Economic recession is one of the hot topics of 2023. In late 2022, Bloomberg predicted a 100% chance of a recession for this year. In MyCustomer’s recent survey of customer experience leaders, 32% of respondents said that economic conditions and the cost-of-living crisis are their top concerns for the next 18 months.
Let’s explore what’s driving those worries about economic recession, how customer service leaders are responding, and why they are surprisingly optimistic despite those concerns.
Factors Fueling Fears of Economic Recession
One of the top stories of the past couple of years has been out-of-control inflation, which has caused the price of many goods to skyrocket. To combat this, the Federal Reserve has been steadily raising interest rates in a move to raise unemployment and thus slow down inflation.
The idea is to slow the economy just enough so prices don’t climb out of control, and the Fed has been aiming for a “soft landing” in which inflation is brought into line without too much economic damage.
But, there have been complications. One of those has been Russia’s invasion of Ukraine, which has set off all sorts of geopolitical wild cards. The other complication has been that rising interest rates have exposed weaknesses in regional banks, leading to the failure of Silicon Valley Bank, Signature Bank, and Silvergate Bank.
As MyCustomer put it in their report, CX Leadership in an Uncertain Economy:
The global economy is reeling from a series of destabilising events. As The World Bank noted at the end of 2022: “The war in Ukraine, lockdowns in China, supply-chain disruptions, and the risk of stagflation are hammering growth. For many countries, recession will be hard to avoid.”
We’ve also witnessed multiple large layoffs and hiring freezes in the tech sector.
New York Times columnist Jeff Sommer put it bluntly:
The odds of such a slowdown over the next year are fairly high…This emphatically does not mean that there will be a recession — or that I or anyone else has the ability to predict one with precision. But I think there’s enough reason to suspect that rough times are coming to factor that possibility into your personal planning.
However, there are some reasons that we may dodge a recession or at least have a short and mild one. The US economy added 236,000 jobs in March, unemployment is still around 3.5%, and markets are flashing bullish signs.
In any case, customer service leaders remain optimistic.
Reasons for Customer Service Optimism Despite an Economic Recession
Despite the challenges economic uncertainty brings, customer experience leaders are shockingly optimistic about the next 18 months. MyCustomer surveyed 143 CX leaders between December 2022 and January 2023. 43% of them anticipate that their budgets will rise over the next 18 months.
That’s down from 65% in 2020 and 60% in 2022, reflecting a 17% year-over-year drop, but is still an optimistic figure given overall pessimism about the economy. Only 14% of CX leaders anticipate reduced budgets.
Another reason for optimism is that customer experience teams are growing once again. The number of single-person teams dropped from 22% in 2022 to 9% this year. 18% of respondents said that they have 20 or more team members, up from 10% last year.
Hiring of customer experience consultants is also rebounding:
- 31% in 2020
- 19% in 2022
- 33% in 2023
“This is a positive demonstration sign by leaders and it is related to the recognition that in times of recession, investment should be made on front-line roles, contributing to retaining existing customers,” Sue Nabeth Moore, co-founder of Success Chain tells MyCustomer.
Beyond personnel rebounds, 46% of respondents anticipate increased technology investments over the next 18 months.
MyCustomer summarizes the findings:
The findings reveal that there is a surprising amount of resilience, despite the obvious difficulties. Many customer experience leaders remain optimistic that their budgets will increase in the foreseeable future, with very few anticipating cuts. At the same time, expenditure on CX technology is forecast to rise by our respondents, while the average size of their teams is rising and greater numbers are investing in consulting assistance.
The reason is that as economic conditions tighten, businesses must hold on to as many existing customers as possible.
An economic recession is no time to cut back on customer service
“The recession is pushing focus on retaining existing customers rather than acquiring new ones,” Moore says in the MyCustomer report.
As the cost of living has increased and economic conditions tighten, customers are increasingly demanding… and sensitive.
A recent survey by Verint revealed some stunning statistics:
- 88% of customers are likely to make a second purchase after an excellent customer service experience
- 62% of customers are unlikely to make a repeat purchase if a customer service issue isn’t resolved in a single attempt
Additionally, 66% of companies surveyed by Zendesk report that customers are less patient than they used to be.
Mario Sepp, founder of consulting firm Gastspiel, tells MyCustomer:
Companies are increasingly recognising the importance of CX and the benefits that can be realised by investing in this core area of their business, and they are looking to stay ahead of the curve in terms of delivering customer experience. Because at the end of the day, customers with positive experiences are what keep us in business.
It’s increasingly important to retain existing customers and give them outstanding customer service. While customer service has traditionally been considered a cost center, smart leaders are realizing that it can be a profit center.
“I’ve always believed customer experience doesn’t cost. It actually sells and makes money. It’s a way to enhance revenue,” Shep Hyken recently said on Amazing Business Radio.
There is increased recognition of the business value of CX, companies have come to understand that a positive customer experience is directly linked to increased customer loyalty, higher customer lifetime value, and improved business performance,” Sepp says in the MyCustomer report.
One of the challenges customer service leaders are facing in 2023 is justifying the return on investment in customer service, with 28% of respondents now saying it’s a key metric.
One way to increase the ROI of your CX team is to increase your team’s efficiency. The average employee wastes 19 working days per year on repetitive tasks, and a 500-person company can lose more than $6 million yearly.
TextExpander can drastically reduce your team’s repetitive tasks and increase your ROI. Try it out today.