Recession Budgets and the Customers You Already Have

Customer retention in a recession comes down to one decision, at least in my experience: when the budget gets cut, protect the people who talk to your existing customers before you protect anything that chases new ones. On December 1, 2008, the National Bureau of Economic Research confirmed what most of us had been feeling for months: the US economy peaked in December 2007 and has been shrinking for a full year. Every service manager I know is being asked the same question this month, which is where to find the savings.

The easy answer is the support team. It’s a cost centre, it’s visible on the payroll report, and a cut there doesn’t show up in the quarter’s revenue the way a cut in sales does. I understand the logic and I think it’s backwards. A customer who stays through a bad year is worth more than a new one you pay to find, and the people who keep them are exactly the ones on the phones. Cut them thin enough and you’ll see it in the churn report about two quarters after the savings look so good on paper.

Companies have lived through downturns before, and the pattern repeats. Budgets tighten, the service team shrinks, wait times grow, and the customers who were already nervous about their own money start looking at the competition. Then everyone acts surprised.

What does a thin team sound like on the phone?

You’ve probably been on the other end of it as a customer. The agent is polite and obviously rushed, the answer is half there, and you can hear the queue in the pauses. Nobody in that conversation is doing anything wrong. The person is doing the job they’ve been left with. I think that’s the part budget conversations tend to miss: a smaller team doesn’t give you the same service for less money, it gives you a different service, and the customer is the first to hear the difference.

I’ve never forgotten how often a customer’s anger was about the silence and not the fault. When I could tell someone what we were doing, give them a time, and say when I’d next be in touch, they’d often stay with us through a problem I hadn’t fixed yet. That costs nothing but attention, and attention is exactly what a stretched team runs out of first.

What would I protect first?

If I had to choose, I’d protect three things in this order. The first is the ability to respond to customers on the day they contact you, which usually means protecting the people on the phones and the queue. The second is callbacks and follow-ups, since those are the first promises to slip and the ones customers remember. The third is training, even in a reduced form, because it’s what makes a smaller team good instead of merely smaller.

Everything else gets a harder look. I’d question every report, meeting and project that doesn’t help a customer in the next quarter, and I’d be willing to pause the things that are nice to have. It’s a different way of cutting. Instead of asking what each team can spare, I’d ask what the customer would notice, and start with the things they wouldn’t. It’s slower to work out, and it tends to leave the service intact.

Where does a tight budget actually hurt service?

It hurts first in the small gaps between contacts. When a team gets smaller, the first thing to go is the time an agent used to have to finish a call properly, write good notes and take a breath before the next one. I wrote earlier this year about the drive-through order that goes wrong because the person serving you is half somewhere else. A leaner team makes that worse, because every agent is now carrying a longer queue in their head.

The second place it shows up is callbacks. Customers forgive a problem far more readily than they forgive silence, and a thinned-out team is the first to stop returning calls on time. A ticket that sat for two days because there was nobody free to update the customer costs you the account, and you’ll never find it in a cost report. I’ve saved customers before just by telling them what we were doing and when I’d next be in touch, without fixing a thing, which is cheap and which stops working the day the team is too stretched to do it.

Training goes next, since a training day is a day off the phones. It’s the wrong thing to give up, because a new agent hired into a recession is replacing someone who left or was let go, and the customer on the other end doesn’t care about the reason. Keep the basics running even if everything else has to shrink.

What do you cut instead?

Start with work the customer never sees. Reports nobody reads, meetings with no decision at the end and the third review of a process nobody has changed in a year all cost real hours. Most service operations carry more of that than the managers running them would like to admit. Find the hours there first, and put the ones you find back into the queue.

Then look at where the contacts come from. Every call that exists because of a confusing invoice, a missing status update or a broken self-service page is a call you chose to pay for. Fix the top three causes and the volume falls without anyone losing a job. It’s slower than a headcount cut and it works, because you’re removing the demand instead of the people who answer it.

If you do have to reduce the team, do it with a plan for what you stop doing, written down before the first person leaves. Tell the customers who’ll feel it, and set an honest response time rather than the old one you can no longer meet. An angry customer who was told the truth is far easier to deal with than one who was promised the usual service and didn’t get it.

How do you know retention is slipping?

Watch the quiet signals before the cancellations arrive. Contact volume per customer, repeat contacts on the same issue and the time between a customer’s request and your first reply all move weeks ahead of churn. Pick two of them and look at them every week through the winter. If you’re measuring only the customers who left, you’re reading last quarter’s newspaper.

The recession will end, and nobody can tell you when. What you can control is whether your best customers are still around when it does. Show me a company that held onto its service team through 2008 and I’ll show you one that came out of it with customers it didn’t have to buy back.

I’d add something that’s harder to put on a slide. Customers remember how they were treated when things were tight, and they remember it longer than the discount or the feature that came afterwards. A company that kept returning calls and answering honestly through a bad year earns a kind of credit that a marketing budget can’t buy. That’s the thing I’d want to still have when this recession lets go, and it’s the reason I’d rather trim almost anything else first.

If I were writing to my own team this month, I’d keep it short. I’d tell them that nobody is going to be asked to do more with less and call it a plan, that we’ll be honest with customers about response times where they slip, and that the work we’re protecting is the work that keeps people with us. Then I’d go back to the numbers and check that I’d actually done what I said. I’m not sure what 2009 looks like, and I don’t think anyone really is. I do know which customers I’d rather still have when it’s over.