The Pandemic, the Economy, and the Impact on Customer Experience

The Pandemic, the Economy, and the Impact on Customer Experience

David Lahey, Senior Consultant, Growth Molecules™  

The pandemic forever changed the employee and customer experience, revealing long-held beliefs to be mere myths: we have to be in the same office to be productive. 

My last two commutes home from the office in 2020 felt so profound, I even took pictures during them. I thought I’d be back in a week or two. More than two years later, most leaders believe we’ll never return to what it was before.

San Francisco, 03/11/2020

My last commute, 03/12/2022

The pandemic triggered severe social and economic disruption, including the largest global recession since the Great Depression almost 100 years earlier. Stay-at-home requirements wreaked havoc on the supply chain and unprecedented chaos threatened the survival of many businesses. At the start of 2022, CEOs identify supply chain turmoil as the greatest threat to their companies’ growth and their countries’ economies.

But is the chaotic supply chain really the greatest threat to growth? I think not. The more significant threat is labor or the lack of it. The “Great Resignation” was first identified about 14 months into the pandemic during May 2021 when workers started to reevaluate their priorities. In fact, the Covid-era workforce-participation rate remains below pre-pandemic levels, defying expectations for a mass return to work that would have thawed supply chains and cooling inflation.

Burnout has led workers to demand flexibility from their employers. Service workers also want a new deal, resulting in a labor shortage. Some workers want to work remotely forever. Others want a hybrid model. Leaders are at a crossroads, managing short-term pressures against medium- and long-term uncertainties.

The past two years have been challenging for everyone. Fundamental customer behaviors have changed with 73% pointing to customer experience as an important factor in their purchasing decisions. Yet only 49% of U.S. consumers say companies provide a good customer experience today. The net situation is that customer expectations are higher than what is currently being delivered.

What Can Executives Do?

1. Improve the Employee Experience

First, improve the Employee Experience (EX) because this will lead to a better Customer Experience. EX is the relationship an organization creates with employees. Author Jacob Morgan breaks out his definition of EX into three primary environments: physical, cultural, and technological. The “people-first” strategies of Sir Richard Branson of Virgin Group, Tony Hsieh of Zappos, and Howard Schultz of Starbucks, have formed the conventional wisdom that happy employees create happy customers. Glassdoor’s analysis found a strong statistical link between employee well-being and customer satisfaction.

This makes sense because all business outcomes can be simplified to the performance of people, processes, and systems. The most efficient processes and the best systems cannot deliver growth if the people element is not working correctly. However, mastering EX is not enough.

2. Build the Desired Customer Experience

Forbes defines Customer Experience (CX) as the cumulative impact of multiple touch points over time, which result in a real relationship feeling, or lack of it. It encompasses all phases of the consumption process including pre-purchase, consumption, and post-purchase stages.

Take a moment to consider your favorite brand. I can guarantee one of the reasons they are a favorite is because of how their product(s) made you feel during the consumption process. The more consistent that positive (or even wow!) experience is over time, the stronger (and faster!) your loyalty grows.

It is important to note there is a direct relationship between product pricing and a customer’s expectation of the experience they expect to receive. As shown below, the higher the price, the higher the expectations. You might even find that as you deliver a great CX you’ll be able to command up to a 16% price premium according to a PwC report.

Either way, the investment in CX is worthwhile. Research shows customer experience drives revenue growth. Companies dedicated to improving CX can increase their revenue to 4 – 8% above their market.

3. Get Proactive, Invest, Operationalize, and Grow

Delivering an excellent EX and CX is not siloed in a single department within a company. It is a discipline that requires a proactive effort by the entire workforce. Known obstacles include lack of strategy and leadership as well as technology limitations. If you’re not sure how to get started, the Qualtrics XM Institute has created a good launchpad that outlines five stages:

1. Investigate – identify the “best” first steps and build buy-in with senior executives to acquire resources and support.

2. Initiate – build cross-functional support of strategy and deliver initial value.

3. Mobilize – drive action, improve upon pain points, and demonstrate good behaviors.

4. Scale –use metrics and gather insights systematically to track the impact of workforce efforts.

5. Embed – evolve the organization’s ingrained capabilities for its ongoing differentiation.

The bottom line? The experiences you create for employees and customers have a direct impact on your business. Consistently good experiences will pay off, while the price of one bad experience sets you back. Smart companies who understand the connection between EX and CX clearly do better than those who do not.

You might be thinking other investments are more important or now is the time to reduce spending. The truth is that increasing your rate of Net Revenue Retention is the most efficient path to growth and value creation. As fears of recession increase and expectations of achieving growth at any cost evaporate, only 14% of VC/PE investors believe in decreasing spend in this area.

Conclusion

My inspiration to write this post-pandemic guide came after a family celebration over a long weekend during August 2022 and expectations were not met more than once. Having worked for years leading teams in Human Resources technologies and Customer Success, the whole experience made me pause and consider the “why” behind what I was feeling and check my own conclusions against what I know to be true.

Businesses need to do a better job finding the correct balance between recovering the losses incurred during the pandemic vs. damaging their employer brand and referral customers. If you find yourself not knowing what to do next, I’m happy to help you improve your EX and CX so you can thrive as you grow your business.

About the Author:

David Lahey is a successful software executive with extensive domestic and international experience in Enterprise Resource Planning and SaaS platforms. He’s built and managed high-performance, cross-functional teams that contribute to the strategic success of organizations. David has personally worked with leading companies such as SAP, LinkedIn, Twitter, Groupon, Logictec, Lyft, WeightWatchers, the International Red Cross, and many others. He’s also been a keynote speaker at Gainsight Pulse and Totango Summit. You can contact David at David@growthmolecules.com.

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