Deprioritising Customer Experience During Hard Times – What's the Cost?

It’s a given that Customer Experience Leaders and Business Owners/Heads of Operations will have completely different priorities as both see the business in a different light.

As a matter of fact, COVID-19 has only pushed businesses to focus on their “Operational priorities” and decrease their focus towards “Customer Experience”. This is a strategy for survival during such unprecedented times. 

However, as things begin to open up again, this redirected operational focus and lack of emphasis on the creation of positive customer experiences will start to seep through the cracks and could prove to be problematic for businesses post-pandemic. 

Why? Because the lack of care that businesses put into their CX Initiatives will be evident when they’re faced with skyrocketing consumer expectations and the need to receive a phenomenal experience to be happy.

Here at HOED Research, we must make one thing clear, “we do not believe that businesses prioritising operations over customer experience during the past few years means that they don’t care about CX”.

However, we do believe that decreasing CX Strategies and Initiatives in the “short-term” will almost always cause “long-term” effects, especially when it comes to Customer Attrition – Also known as Customer Churn.

Ultimately, we all know that the past cannot be changed, however, we can control how and what we learn from it. Therefore, in future times of crisis, we as Business Owners and Customer Experience professionals can carry forward lessons learnt (i.e. that both operations and CX should be prioritised to prosper through difficult times)


Finding The Balance Between Operations and Customer Experience: A Case Study.

To conceptualise this, we will use a frequently reported example from a New Zealand Airline and their policy for crediting travellers when COVID-19 Border restrictions prevent them from entering and travelling the country.

Now, before we get into it, if we think about this from an Operations Leader perspective, this particular situation would present as the customer’s fault since the option is available for international passengers to purchase a “Flexi-Fare”. Therefore, they were not entitled to a credit and must pay the change fee of $50 if they wish to move their flight.

However, what complicates this policy above all else in the current climate is the fact that there is no certainty around when New Zealand’s international borders will open quarantine free, especially with the rise of Omicron and COVID-19 restrictions reverting to “red light” lockdown measures. 

So what options does the international traveller have? Do they change their flight to a future date and pay $50? Only to risk having to pay another $50 if the borders are not opened, or do they just forfeit their airline ticket altogether?

At the end of the day, whatever they choose, one thing that is certain above all else is that when customers encounter a negative experience, they develop a negative perception of the brand.

As a business owner, this is a situation that can grow to be extremely costly in the future because one person’s negative experience never ends with just that one person. Research indicates that individual’s negative experience with a brand is shared with at least five other people!


What does all of this mean? 

Well, a customer-focused policy should view the long term impact that the policy can have on a customer’s lifetime value and compare it against the financial impact that a operations focused policy will have on the business. 

As a Customer Experience Leader in business, this will be the core reasoning that is utilise to advocate for the customer, showing the financial impact of both operations-focused and customer-focused policies side by side.


Why are these numbers important?

Numbers are the universal language spoken through and by all levels of a business (e.g. the CEO, CFO, CMO and COO etc)


Financial Impact of Customer Attrition?

As an example, let’s quantify the possible financial impact to our aforementioned Airline with a less customer-focused policy.

For this example, we have constructed a hypothetical narrative of a local couple – Mike and Molly.

Mike and Molly are frequent domestic flyers and had recently lost $300 for two domestic return economy tickets due to a poor policy held by the airline. After this experience, they promised themselves that they would never fly with an airline that doesn’t have customer-focused policies in place. 

Mike and Molly, were due to get married in January 2022 and had invited all of their family from overseas to attend their wedding here in New Zealand. As a precaution to their negative experience, they advised all of their guests to not book with our Airline in question and to book with a customer-focused airline of their choice instead.

Do you remember how we said that an individual’s negative experience with a brand is shared with at least five other people? 

Well for Mike and Molly, this number was around 150, all of which were international guests booking flights to attend their wedding.

Now we can calculate the average lost revenue to our Airline in question. For this example we have assumed that all 150 guest were flying from Australia to New Zealand on a return economy ticket.

Let’s say the average return ticket cost about $500 x 150 guests = $75,000 in lost revenue!

That’s a huge long term loss for a situation that could have been prevented if the Airline had held up a better “customer focused policy”. Comparatively, if the airline had upheld a better policy in the beginning, their loss would have only been the $300 for Mike & Molly’s two domestic flights. 

In conclusion, the cost of a disgruntled customer is exponentially more damaging long term than taking a small loss for a long term win!


Wrapping Up: Customer Churn Is Always Costly to Businesses

It’s pivotal for businesses to take into account customer experiences like this one when developing their policies, especially during the current market conditions.

A policy focusing that deprioritises customer experience has the potential to cost your business big money when it comes to recurring long term revenue. 

Here at HOED Research, we understand the need to reduce costs during hard times, however, now is the time to revisit those plans and budgets placed on hold during the pandemic as we have learnt that, one strategy (i.e. Operations) cannot function and grow without the other running smoothly (i.e. Customer Experience)

Contact:
Richard (Managing Director) Email: 
richard@hoed.co.nz