How do customer expectations change in difficult economic climates?

Episode topics

• 0:00 - Introduction
• 1:11 - What kind of consumer behavior are we seeing in today's economic climate?
• 2:44 - What do we mean when we describe the difficult economic circumstances we're facing?
• 4:57 - Are these economic changes permanent, or do they revert if and when the economy changes back to where it was?
• 8:37 - What are the leading brands doing to capitalize on these changes?
• 9:33 - Explaining two types of companies: scalers and transformers
• 11:12 - How do you stay competitive as digital and physical worlds blend more and more?
• 13:29 - What is the key to personalizing omnichannel experiences?
• 14:46 - In difficult economic times, how can companies justify making these investments?
• 16:50 - What's the first step on the digital transformation journey, and how do you find opportunities to automate?
• 18:10 - What does the future of digital customer experience look like?
• 20:24 - Conclusion

Transcript

[00:00:00] Robert Zirk: Between the rising costs of living, supply chain issues and whatever else the world throws our way, customers are faced with a myriad of challenges today. Take a weekly grocery shop, for example, where one item on the list is mustard.

[00:00:14] Or if you don't like mustard, substitute a condiment of your choice. Ketchup, hot sauce — there's no judgment here.

[00:00:20] A consumer who's purchased the same name brand for as long as they can remember might look at the options before them and, for the first time, start to really think about it.

[00:00:31] Is the name brand really that much better?

[00:00:33] It's a couple bucks more, but it adds up.

[00:00:35] Am I even going to notice a difference? It's just plain mustard...

[00:00:38] And that's just one example. In uncertain economic times, customers are asking a lot of questions about their purchases. So, on today's episode of Questions for now, we'll ask how their expectations are changing with the current economic climate and how your business can meet those expectations while maintaining and building brand loyalty.

[00:01:00] Welcome to Questions for now, a podcast from TELUS International where we ask today's big questions in digital customer experience. I'm Robert Zirk.

[00:01:10] So what kind of consumer behavior are we seeing in today's economic climate? Well, according to Chuck Lindsey, associate professor of marketing at the University at Buffalo State University of New York, consumer confidence is at a nine month low. And while there's still some splurging in the travel, dining, and apparel segments...

[00:01:30] Charles Lindsey: ... that's related to pent-up demand due to COVID...

[00:01:34] Robert Zirk: ...consumers are, overall, much more budget-conscious.

[00:01:37] Charles Lindsey: Nominal spending is up because of inflation, but real spending is flat. And consumers, they're taking on additional debt. They're eating into their savings and, in many cases, their retirement accounts.

[00:01:49] And so they're making trade-offs right now. And those trade-offs could mean delaying major purchases. It could mean purchasing less quantity when it comes to certain items, it could mean trading down to a lower price point or a different brand. As a matter of fact, if you look at different types of retail outlets, about the only category of store growing: warehouse clubs and discount stores, dollar stores.

[00:02:13] Robert Zirk: And this is causing a ripple effect among many categories of consumer goods and services. Pete Tapley, vice president of customer experience innovation at TELUS International, is also seeing that consumer dollars aren't stretching like they used to.

[00:02:27] Pete Tapley: Prices are rising and discretionary spending is tight. It's tough for consumers out there, for the end customers. And many of them are cutting back, and many of them are maybe one bad customer experience away from canceling a service or deciding "Maybe I don't really need that."

[00:02:43] Robert Zirk: So what do we mean when we describe the difficult economic circumstances we're facing?

[00:02:48] A lot of it comes back to inflation, which, in the United States, increased from a rate of 3.2% in 2011 to 8.3% in 2022, according to Statista. As demand outpaces supply, the cost of goods and services is rising. Some of the contributing factors include supply chain shortages or disruptions caused by the pandemic, global conflicts, climate change, fiscal policy and more.

[00:03:16] For consumers, that means changes in consumer behavior. For businesses, that can mean many things, but at minimum, it means a strong focus on customer care is even more crucial than before.

[00:03:28] A TELUS International survey shows that 44% of consumers said nothing can excuse a poor customer experience — not price, not convenience and not even the goodwill that a brand has built up to that point.

[00:03:42] So how do you ensure you're delighting customers enough to keep them coming back?

[00:03:47] It's about making things easy, anticipating pain points and being proactive in offering support. Pete advised businesses to give customers the self-service options they might be seeking out to solve issues on their own, but not to shy away from offering human support to those who ask for it.

[00:04:04] Pete Tapley: I think we would all agree that the best customer care issue is the one that doesn't happen. So if you can be proactive and preventative and have self-healing and be nimble so that you have an ability to roll out new features and functions and capabilities and products that customers want, you're gonna have fewer problems and a lower need for that person saying, "Hey, I need help."

[00:04:29] Robert Zirk: Reassurance, empathy, transparency. These are all things customer support can bring to the customer experience.

[00:04:36] And all of these things go a long way to strengthening relationships with your customers when money is tight and people are stressed. In fact, a Salesforce report shows that when things go wrong relative to the brand experience, four-out-of-five customers will let those mistakes slide — but only as long as they're backed by excellent customer service.

[00:04:56] So when consumers and businesses adapt to the current state of the economy, are these changes permanent or do they revert if and when the economy changes back to where it was?

[00:05:06] Pete Tapley: I don't think you ever fully go back. We used the example of not a lot of people worked from home previously. Now, I think you're gonna see some sort of hybrid work from home into the future. So an economic change may cause the introduction of new technologies and new business models, and they may be acute in the short term, but I don't know that they're ever really gonna go back.

[00:05:25] Robert Zirk: Chuck noted that in the eCommerce and retail landscapes, we're seeing a growing importance placed on digital experiences, including greater personalization along with alignment and consistency with the in-person customer experience. Some of these changes were starting to roll out prior to the pandemic — the pandemic just accelerated their implementation.

[00:05:46] Charles Lindsey: We can think about BOPIS: buy online, pick up in store. We can think of the continued strength of online shopping in the grocery area, which really wasn't the case for most consumers prior to COVID. I was reading a report that over a third of consumers that purchased groceries online during COVID, that's the first time they'd ever done that. And many of those consumers found it to be convenient and they're still doing that, even though we're back to some semblance of normal when it comes to in-store shopping.

[00:06:19] But what they used to spend in store every month at the grocery store, likely never to go back to that same level because a certain percent of consumers, and for a certain percent of their grocery budget, they're always now going to be using those online channels.

[00:06:33] Robert Zirk: And though online shopping has continued to grow, it doesn't mean the end of in-store shopping. Online retailers who started out strictly online are starting to open their own brick-and-mortar retail outlets.

[00:06:45] Charles Lindsey: All we hear about nowadays: online, online, online. And online is important, no doubt. That's where the growth is. Eight, nine, 10%, still around double digit growth.

[00:06:55] But what people fail sometimes to understand is in most product categories, 70, 80% of total spending is still in store. So four dollars out of every five, still in store. So that is going to be with us still for the foreseeable future, the importance of in-store shopping.

[00:07:12] Robert Zirk: Chuck also sees the changes in entertainment and media delivery as ones that are here to stay, and a continued trend of new social media platforms finding a new spin on sharing interests and creating connections.

[00:07:25] Charles Lindsey: I'm not talking about Instagram. I'm not talking about TikTok, Facebook. I'm talking about Fizz, I'm talking about Geneva, I'm talking about BeReal and the fact that we have this proliferation of new social media platforms really appealing to the younger generations, and also in terms of social media content: short form video, stories, reels.

[00:07:47] Robert Zirk: Online shopping, which was once its own category, is now just an extension of the shopping experience in general.

[00:07:55] Charles Lindsey: We use a term a lot, and you see this a lot everywhere now in business — omnichannel management, where companies are managing their in-store presence and their digital presence, whether it be online mobile, or online desktop, tablet, what have you. They're managing their various channels in a way to create a 360 degree experience with consumers, that is seamlessly — the goal is that all of those channels are integrated seamlessly — and so you have these various touch points, different channels — in person, online — but when it comes to the consumer experience, it's seamless.

[00:08:36] Robert Zirk: We know we aren't going back to the way things were. So who are some of the brands leading the way into the future? And what are the most successful brands doing to capitalize on these changes?

[00:08:47] Charles Lindsey: I think it starts with the brands and the firms that were out in front to begin with five years ago. They were out in front in terms of understanding the customer experience, they were already investing heavily in their digital platforms. They were investing heavily in analytics to really understand the interplay between in-store and online and how they worked together for different customers, different customer groups.

[00:09:19] How was online perhaps driving foot traffic to various stores and driving the in-person shopping experience? How was, for instance, what was happening in the store creating a situation where people were more likely than to go online?

[00:09:33] Robert Zirk: In working with brands across a variety of sectors, Pete identified two types of companies.

[00:09:38] Pete Tapley: Those companies that are born in the cloud tend to be more nimble. And part of that is just the nature of their newer cloud-based, more flexible applications that underpin their business. So they're able to quickly pivot and adapt and put in a new innovation or try something else.

[00:09:57] Robert Zirk: These companies are called scalers. Think fintechs, social media companies and automated self-driving car companies, to name a few. On the other side, the more established companies are known as transformers.

[00:10:12] Pete Tapley: They need to transform their business to avoid having the scalers take their lunch. And they have some real hurdles in that they have a large installed base, older technology, complex systems and system flows.

[00:10:25] Robert Zirk: And TELUS International works with these transformer companies, building frameworks to help them be more nimble.

[00:10:32] Pete Tapley: First, if there are things we can add on at the front end that are customer facing, that are slicker, that provide less friction with the customer, we can bolt those on. And then we're also trying to — you know, more and more we're seeing these companies have chief digital officers, have folks maybe even from other industries who are driving the technology agenda.

[00:10:52] And we've found that by working with those folks, they really get the customer experience. They get trying to manage cost of care. They get trying to manage cost of up-sell and cross-sell. And that by working with those individuals, we can drive a true transformative agenda, even with these larger companies, as opposed to a keep-the-lights-on agenda.

[00:11:12] Robert Zirk: With our digital and physical worlds intertwining more and more, omnichannel CX, personalization, and a strong web presence are key to staying competitive.

[00:11:22] For example, Nike made big investments in direct to consumer models and built out a variety of digital experiences, including an app that complements the in-store shopping experience and a metaverse platform.

[00:11:35] United Airlines uses travel patterns and consumer preferences to help make finding relevant flights easier, and provide assistance that enhances the in-airport experience.

[00:11:45] And through its communications, Sephora provides personalized recommendations, personalized discount codes, and even personalized email frequency, meaning it will reduce the amount of emails sent to customers who aren't opening them, so that people are less likely to unsubscribe altogether.

[00:12:03] Charles outlined a few of the tactics that successful companies like these are employing, including showrooming...

[00:12:10] Charles Lindsey: ...where people see something in store and then ultimately, they go home and they get online, they go to the store's website, and they order something — maybe it's delivered to their home, or maybe they pick it up at that same store that they were in, buy online pickup in store.

[00:12:25] Robert Zirk: ...web rooming...

[00:12:26] Charles Lindsey: ...where individuals are shopping at home and they see something online and they actually, again, thinking about BOPIS, they go to the store to pick it up, but not just BOPIS. They go to the store to pick it up, but then when they're at the store, they decide to actually buy a few other items.

[00:12:44] Robert Zirk: ...and A/B testing.

[00:12:45] Charles Lindsey: Firms are changing different aspects of the in-store experience. They're changing different aspects on their websites to understand truly what moves the needle, what really moves the needle in store, what route moves the needle online and also understanding that cross channel traffic so that when someone does do some showrooming in store, yes, you're always going to lose some folks to the competition. But trying to optimize in store and online so that when they do go online when they get home, you have a high likelihood of getting that sale.

[00:13:19] Robert Zirk: It all comes back to consumer confidence. When you build trust...

[00:13:23] Charles Lindsey: There's a little less price sensitivity. You have a little bit of a buffer relative to the competition when it comes to price.

[00:13:29] Robert Zirk: To underpin these strategies to gain consumer confidence, to effectively test them and analyze the trends amongst your own customers, you need a strong technological foundation. Technology is the key to personalizing omnichannel experiences.

[00:13:44] But Pete notes that technology can also be used to pick up on signals that customers are having a hard time finding what they're looking for or contacting support.

[00:13:53] Pete Tapley: Now we're really seeing some innovations where, even on the company side, companies are embedding technology into the service so that it can be more proactive, so that it can alert that a customer might be having a rough experience.

[00:14:06] Robert Zirk: You want to have the tools and strategies in place to pick up on these signals and to extend a helping hand proactively, turning what could become a poor experience into a surprisingly positive one.

[00:14:17] You see this with proactive chatbots, for example, that can offer to connect consumers with a human right away if that's what they want from the outset.

[00:14:25] Pete Tapley: So if you can address those issues through great apps, and then if there is care, make that experience as frictionless as possible. Some of the basics of not having to punch in your phone number and then get asked again. Anything we can do to automate either through it, through an agent or through a bot or through other technology to reduce that friction, those are the things we're looking for.

[00:14:46] Robert Zirk: We've identified that it's important to make investments in technology to enhance the overall customer experience, but at the same time, businesses aren't immune to this challenging economic climate. Many are under pressure, having to make tough decisions to stay afloat.

[00:15:01] So the road ahead is understandably daunting. Brands need to invest in their tech infrastructure, but many can't afford to get that wrong.

[00:15:10] Partnering with a firm that understands digital transformation and the technical requirements to make it happen can help dilute the risk of just buying enterprise tech on your own. Plus it has the added benefit of having guidance to optimize it.

[00:15:24] Pete Tapley: The business case for those investments paid for itself very quickly in terms of both, some of the typical metrics are called deflection, but even more importantly on the customer satisfaction and cross-sell and up-sell metrics.

[00:15:36] Robert Zirk: Talking about knowing where to start can be daunting, but don't succumb to analysis paralysis. Pete notes that these changes don't always require a complete overhaul.

[00:15:46] Pete Tapley: It's continuous improvement. It's iteration after iteration of making small adjustments and changes and improving things over time. And that's not to discount the fact that, yes, I recognize that moving to an omnichannel cloud-based contact center management system... that's a big change. I get that.

[00:16:04] But there are also little things you can do along the way. And what the net effect of those little things is, while you are gonna be improving customer interactions, a lot of those customer interactions are gonna be automated. They're not gonna go to the call center. And as a result of that, what you're gonna end up with is the really complex, frustrating items are the ones that are gonna still go through to the call center.

[00:16:27] Robert Zirk: As much as automation will play a larger role in digital customer experience, it doesn't mean the role humans play will diminish. Pete says it's quite the opposite:

[00:16:35] Pete Tapley: In fact, you're gonna have a higher need for more caring, more creative, more empathetic people to handle the hard stuff. The things that people are willing to bother to pick up the phone and call about.

[00:16:49] Robert Zirk: So what's the first step on the digital transformation journey, and how do you find opportunities to automate?

[00:16:55] Pete Tapley: First of all, you gotta understand your customer journey. What are all the touchpoints you have with your customer? And then, within that customer journey, how do you maximize the experience at every point? And when I say maximize it, it could be minimize! Slim it down. We're looking for frictionless. If there's anything that's a bump, we need to smooth that down, and then strategically look at it.

[00:17:18] Robert Zirk: Asking questions like...

[00:17:20] Pete Tapley: Is this an automation that would smooth it down? Is it a caring, compassionate person that would smooth it down? Is it AI that would smooth it down?

[00:17:27] Is it teaching your AI better to be more human so that it's a better interaction? So it could be lots of treatments for each of these rough patches, but taking it interaction by interaction, doing the testing and trying different things and offering options at each step in that interaction.

[00:17:45] Robert Zirk: Finding the right balance of efficiency and innovation to ensure a return on investment can be tough.

[00:17:51] Pete Tapley: "Do I cut expenses? Do I manage my bottom line, or do I make investments and invest in the customer experience in hopes that I can retain customers, in hopes that I can maybe grow wallet share or grow my top line?"

[00:18:04] Robert Zirk: And that's where working with an experienced partner like TELUS International can check all those boxes.

[00:18:09] Chuck and Pete emphasized that, looking toward the future, consumers will come to expect a customer experience that's user-friendly, easy, frictionless and in the flow of people's lives. Chuck spoke to some of the enhancements to eCommerce and retail that will deliver some of these effects, like social commerce.

[00:18:28] Charles Lindsey: I think people underestimate how big social shopping's gonna be in, let's say five years. We're already getting to a tipping point. I think people underestimate perhaps how big video shopping is gonna be. Again, virtual reality, augmented reality.

[00:18:44] It's just going to be something, I think, in five years that is part of our daily experience, believe it or not.

[00:18:51] Robert Zirk: Why jump from a social feed, breaking from that experience to create an account, log in, input payment details, and go through checkout, when you can do all that seamlessly within the same app?

[00:19:04] Charles Lindsey: About 30% of all carts online are abandoned because it required somebody to put in their address again or put in their credit card information again. And individuals just became frustrated or they didn't have enough time.

[00:19:20] They were on their way to a meeting. They tried to order it, they thought they had enough time, but when it required them to enter their credit card information again, or their address again, they said, you know, I just don't have time. I'll do it later. And who knows, maybe when they do it later, they do it later with someone else?

[00:19:34] Streamlined payment systems in the future where you don't have to do that. You just press one button or it's a QR code or digital wallet, version 3.0 or 4.0, where it's a push of a button.

[00:19:47] Or it could be voice. I know I've been reading about some voice activation systems in that regard where you just say, "Buy this."

[00:19:56] Robert Zirk: And generative AI can deliver personalization at scale for recommendations and messaging, dialing into each customer's unique preferences.

[00:20:04] Pete Tapley: AI is certainly the game changer. So, you know, we've spent a lot of time trying to make AI more human and more user-friendly. I think with all the news we've seen with ChatGPT, that's gonna have a real shift in the cost paradigm. Frankly, we haven't seen a lot of major companies fully embrace it, but certainly see that coming.

[00:20:23] Robert Zirk: Thank you so much to Chuck Lindsey and Pete Tapley for joining me and sharing their insights today. And thank you for listening to Questions for now, a TELUS International podcast.

[00:20:39] If you're enjoying the series so far, and you think our podcast cuts the mustard, please subscribe or follow on your podcast player of choice. We're looking forward to sharing more insightful episodes with you in the future that can help your business level up its digital customer experience.

[00:20:54] Until next time, that's all... for now.