How Leaders Can Prepare for an Economic Slowdown
Depending on who you ask, the US economy may be on the edge of a prolonged drawback.
Inflation is currently at 8%, the highest in 40 years. GDP contracted by -1.4% in Q1, and is currently expected to be only 2.3% for the year. Meanwhile, a Bloomberg survey estimates a 30% chance of a recession in the next 12 months, up from 15% in March.
In our corner of the world, many are wondering what a recession would mean for contact centers. On the heels of the pandemic and its ensuing challenges (the Great Resignation, supply chain snags, etc.) the last thing contact centers need is further instability.
But fortunately, economic challenges offer something that the pandemic did not: precedent. Using learnings from past markets and consumer behaviors, contact centers can better navigate a potential downturn and come away stronger than before.
Here’s what a prolonged economic drawback would mean for contact centers, and how they can still position themselves for growth.
Consumer Spending Will Slow
With rising interest rates and new home buying expected to fall, some economists think consumer spending has peaked following a long streak of growth. On the business side, capital investment is down, as well as spending on R&D.
In the event that customer dollars become harder to earn throughout the summer and into the fall, contact centers will have an outsized impact on company revenues in 2022. Customers have always been quicker to leave brands that offer subpar support and service. One in three customers will leave a brand they are loyal to after one bad experience. On the other hand, increasing customer retention rates by just 5% can increase profits by 25% to 95%, part of the reason why customer loyalty will be contact centers’ biggest asset.
But Customer Loyalty Will Drive Resilience
During the Great Recession of 2009, companies deemed “CX leaders” saw a 6.1% rise in cumulative returns despite the S&P 500 tumbling over 15%. On the other hand, brands deemed “CX laggards” fell close to 60%. This striking difference is a testament to the value of strong customer experiences in driving loyalty.
When customers have immediate access to resolve issues when it’s most convenient to them, they’re less likely to cancel an order, pause a subscription, or abandon brands as a whole. And when customers receive a consistent, personalized experience across channels and can speak to an agent faster, they’re more likely to stick with a product or service – even through a recession.
Investments Will Be Met With Scrutiny
In a constrained market, it’s not just consumers who reevaluate their spending habits. Many, if not all, companies also cut budgets, often slashing innovation and technology investments in favor of a “wait and see” approach. Additionally, recent hiring challenges in call center agents may push companies to reduce overall investment in their contact centers.
Evidence from past recession cycles shows that companies who identify savings opportunities earlier in a declining market are more resilient. A Harvard Business Review study found that in the first quarter of 2008, resilient companies had already cut operating costs 1%, even as their sector’s year-on-year costs were growing.
A potential recession will mean that contact center leaders must be prepared to justify investments with strong ROI models that show clear paths to savings. Luckily, there’s plenty of proof that supports continued innovation investment in a recession.
But Leaders Won’t Pause Innovation
While investments will be under the microscope, savvy companies will continue – if not increase – their innovation plans through the duration of a recession. For contact centers, this is motivated by evidence that customer loyalty leads to more recession-proof balance sheets. According to HBR, loyalty leaders grow revenues roughly 2.5 times as fast as their industry peers. Conversely, 76% of consumers say a poor customer service experience negatively impacts their perception of a brand and one in three says it affects loyalty.
After decades of stagnant contact center solutions like IVRs, standalone chatbots, and agent assist tools, leaders will use an economic downturn as an opportunity to reevaluate their current tech stacks. By investing earlier in innovation, these companies will not only be more resilient, but more competitive when the market comes back.
Contact Center Automation Will Become Mainstream
Contact Center Automation – the most rapidly growing contact center solution – is a modern technology that addresses every customer service obstacle associated with a recession. Companies who leverage Contact Center Automation regularly return over 50% in cost savings when compared to a highly optimized BPO, and over half of companies have already accelerated their AI adoption because of Covid.
Contact Center Automation’s future-proof benefits include:
- Lower costs and better ROI. Decrease your cost per contact by automating all tier 1 requests.
- Scales up or down instantly. Minimize wait times with automation that scales with demand
- Resolve, don’t deflect customer issues. Resolve requests on first contact up to 50% faster than agents
- Automate engagement across channels. Consistent customer experience across voice, chat or SMS
- Better data. Analyze every conversation and surface insights automatically with no manual data entry
- Improved agent productivity. Relieve agents from repetitive, high volume requests
- Faster escalations. More efficient hand-offs with full context to assist agents
Even in an economic downturn, certain industries such as travel and hospitality will see a surge in demand in 2022 and struggle to provide great service for customers. Others will need to combat lower budgets and higher customer attrition with loyalty initiatives. In either case, leaders from every industry will deploy Contact Center Automation to provide a safeguard against an unpredictable economic future, without having to hire a single additional agent.
Schedule a demo to learn how customer service leaders are approaching economic instability with Contact Center Automation. Or, download the definitive guide to learn more about the solution.