Customer Delight: The Key to Retaining Customers During Times of Inflation

As inflation continues to be a leading challenge for both businesses and consumers, customer delight has become a powerful way for businesses to counteract the reduced purchasing power and changing spending habits of customers.



When inflation goes up, customer satisfaction goes down

  • In September of 2022, “79% of Americans are dissatisfied with the way things are going” in the USA. Second only to government policies, inflation was said to be the “top issue” facing Americans (Gallup, 2022).

  • “Inflation has, at a minimum, altered the economic mood, and potentially reset the path of global and national economies worldwide for years to come” (McKinsey & Co, 2022).

  • Research from Duke Univesity indicates that people get less “purchase happiness” after buying things when “they feel financial stress”(ScienceDaily News, 2022). What used to delight your customers before inflation, won’t be as effective during seasons of financial stress.

  • “Households are feeling the impact of the Fed’s actions on their monthly expenses as higher interest rates raise the cost of carrying credit card balances, borrowing to buy a house or financing the purchase of a car…Amid lower confidence brought on by pernicious inflation and rising interest rates, consumers have become cautious – but they have not stopped spending” (National Retail Federation, 2022).


Why focus on customer delight?

  • There were “more US consumers reporting that they switched brands and retailers in 2022 than at any time since the pandemic began. And most of them say they intend to keep switching, with price at the top of the list of consumer motivations” (McKinsey & Co, 2022).

  • “In today’s environment, consumers are becoming less brand-loyal and turning to private-brand goods to cope with inflation” (McKinsey & Co, 2022). Customers are no longer purchasing goods just because of branding. Businesses now need to entice their former customers via customer delight to continue buying their goods and services.

  • “The quality of customer experience offered by consumer-facing brands and government agencies declined in the year through April 2022… Consumers who might have been more forgiving earlier in the pandemic are also likely running out of patience” (Wallstreet Journal, 2022). By investing in customer delight, businesses can win over the customers of competitors who are providing poor customer experience.

  • “80% of customers said they have switched brands because of poor customer experience.”43% of customers changed brands after a single bad experience (Qualtrics, 2021).

  • “26% of consumers stopped using or buying from a business in the past year” (PwC, 2022).

  • 82% of customers “would share some type of personal data for a better customer experience” (PwC, 2022).

  • “Consumers as a whole are more discerning than ever” (PwC, 2022).

  • “More than half of respondents said getting good value for the price of a product or service is a top reason why they keep using or buying from a business… 30% said they like the benefits, rewards and privileges — discounts, rebates, and special access or offers ” (PwC, 2022).

  • “One-third of respondents said human interaction is important to their loyalty, and for many types of businesses it was more than 50%” (PwC, 2022).

  • “15% say they’re now less loyal to brands they regularly bought from before COVID-19” (PwC, 2022).

How to develop customer delight

  • Be consumer-led

  • “First develop brands with high awareness, advocacy, and stand-alone loyalty by adopting consumer-led brand strategies and category-management and design capabilities that consumer packaged goods companies are known for” (McKinsey & Co, 2022).

  • “Recognize the rise of emotional loyalty.” The more you understand your customers’ experience and feelings as they interact with your business, the more you can engage with them and the “more likely they’ll continue engaging with your business”(PwC, 2022).

  • Consider how personalized your customer experience is.

  • Balance “physical and digital customer engagement”. Both are important to today’s consumers (PwC, 2022).

  • “Prioritize efforts to better understand younger and more racial and economically diverse groups” (PwC, 2022).

  • Conduct price changes with precision, not broad sweeps

  • “Instead of implementing broad price increases that may erode customer trust, retailers can tailor their inflationary price response by customer and product segment, considering both margin performance and consumers’ willingness to pay… Retailers that take a surgical approach are more likely to emerge with profitability and consumer relationships intact. Further, retailers can re-evaluate their price and promotion mix during this time; pulling back on promotions can help manage cost increases without raising prices” (McKinsey & Co, 2022).

  • Examine your customer journey

  • What areas do your customers care about the most? Where and when do they interact with your company and products? How can this experience be made better (McKinsey & Co, 2014)?

  • Consider subscriptions

  • 55% of consumers “belong to at least one type of subscription service that allows them to make regular payments for access to a product or service. Benefits of subscriptions also factor in customer loyalty, as discounts, lower prices, faster and/or easier service and automatic renewals were what survey respondents liked most about the services” (PwC, 2022).

  • Acknowledge the impact of inflation

  • How can you make your product more affordable for your customer base? If not possible, how can you increase the value they get from your product or service at it’s current price?

  • Loyalty and reward programs

  • “Assess how rigid your loyalty programs are and reconsider the selection of benefits, including expanding beyond points and discounts to experiential loyalty” (PwC, 2022).

  • Examine your mobile presence

  • What apps, videos, social media, and newsletters from your company and competitors are your customers interacting with?

  • “More than half of consumers check prices on mobile phones and are influenced by what they discover on the web”(McKinsey & Co, 2015).

  • “One-quarter of consumers sign up for loyalty programs cellphones” (McKinsey & Co, 2015).

  • The National Retail Federation predicts that non-store and online sales will grow between 11% and 13% in 2022 (Reuters, 2022).


How are leaders investing in customer delight

  • New subscription services to meet consumer needs

  • In response to inflation and a loss of subscribers, Netflix is adding a more affordable streaming service with ads. “We’ve left a big customer segment off the table, which is people who say, ‘Hey, Netflix is too expensive for me and I don’t mind advertising,’” Sarandos said. “We’re adding an ad-tier. We’re not adding ads to Netflix as you know it today (TIME, 2022).

  • Personalized reward and loyalty programs

  • Bed, Bath and Beyond has introduced a rewards program called “Welcome Rewards” and “Welcome Rewards+” to “bring valuable savings, more benefits, and special perks to customers who shop online and in stores nationwide at Bed Bath & Beyond®, buybuy BABY®, and Harmon®.” Welcome Rewards are available to all customers and Welcome Rewards+ requires an annual fee, but with additional perks and benefits for interested customers (PR Newswire, 2022).

  • Creating new ways to help consumers save

  • Apple is planing on introducing a “new high-yield savings account from Goldman Sachs” to their Apple Card users. They share that “Apple Card users will be able to grow their rewards in Apple Wallet by automatically depositing their Daily Cash.” Apple’s VP, Jennifer Bailey, states that this program will allow “users to grow their Daily Cash rewards over time, while also saving for the future” (Apple Newsroom, 2022).

  • Investing in online programs and customer convenience

  • During the COVID-19 pandemic, Discount Tire “launched a new brand message…of providing the best end-to-end customer experience.” Starting in June of 2021, Discount Tire started their Buy and Book online program advertising a “30% shorter average wait time” for customers. The Assistant VP of Marketing at Discount Tire, Lisa Pedersen, shared, "We know how important convenience and time are for the overall shopping experience, and we're here to accommodate… The 'Buy and Book Online' experience is key to ensuring that we provide the most inviting, easy and safe tire and wheel purchase and service experience around" (PR Newswire, 2021).

  • Improving the digital and physical customer experience

  • In 2020, Zara introduced an in-store mode to “make shopping easier, safer, and more sustainable.” This feature gave customers the “option to shop available inventory from the store closest to their location with pickup ready in just 30 minutes.” In-store customers can also use the app to find the location of products they viewed online and even reserve fitting rooms (McMillan Doolittle, 2021).


The main takeaway

With the current rate of inflation and economic hardships faced by customers, consumer loyalty on the basis of brand and habit alone is no longer feasible. Business leaders can retain customers and gain those lost by competitors by investing in customer delight. Businesses can do this in a variety of ways such as new rewards programs, improved online interfaces and programs, more personalized customer service and experiences, and consumer-led marketing and product innovation.


References

https://news.gallup.com/poll/401969/satisfaction-shows-modest-improvement.aspx.

https://www.sciencedaily.com/releases/2022/02/220228095500.htm#:~:text=Whether%20they're%20getting%20a,financial%20stress%2C%20new%20research%20shows.


https://www.mckinsey.com/featured-insights/inflation/how-inflation-is-flipping-the-economic-script.


https://nrf.com/research/monthly-economic-review-october-2022.


https://www.mckinsey.com/industries/retail/our-insights/navigating-inflation-in-retail-six-actions-for-retailers.


https://www.wsj.com/articles/customer-experience-is-getting-worse-11654639388.


https://www.qualtrics.com/blog/qualtrics-servicenow-customer-service-research/#:~:text=New%20research%20from%20Qualtrics%20and,single%20negative%20customer%20service%20interaction.


https://tethr.com/customer-loyalty-in-recession/.


https://www.mckinsey.com/capabilities/growth-marketing-and-sales/our-insights/for-customer-loyalty-only-the-best-will-do.


https://www.pwc.com/us/en/services/consulting/business-transformation/library/customer-loyalty-survey.html.


https://www.reuters.com/world/us/us-consumers-spend-record-1-trillion-online-2022-report-2022-03-15/.


https://www.mckinsey.com/capabilities/growth-marketing-and-sales/our-insights/mobile-fortifies-customer-loyalty.


https://www.prnewswire.com/news-releases/bed-bath--beyond-inc-introduces-welcome-rewards-301573990.html.


https://time.com/6175837/netflix-ads-coming/.


https://www.apple.com/newsroom/2022/10/apple-card-will-let-users-grow-daily-cash-rewards-while-saving-for-the-future/.


https://www.prnewswire.com/news-releases/new-campaign-from-discount-tire-tells-customers-get-30-shorter-average-wait-time-when-you-buy-and-book-online-301312593.html.


https://www.mcmillandoolittle.com/zaras-in-store-mode-pilot-offers-win-win-for-the-retailer-and-pandemic-era-shoppers/.


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