Published: May 1, 2020
COVID-19 has changed customer behavior in ways that will profoundly affect the mechanisms businesses use to interact with customers. We are already experiencing a series of accelerated shifts that may become permanent, including the move to digital purchasing and e-commerce for basic goods like groceries. Since the customer experience (CX) landscape is composed of a series of parallel but related technology stacks, the implications for CX will be diverse and unpredictable. Buyers of marketing tools will have a different agenda for their tech usage than buyers of tools for customer service and support. Even as we have watched a gradual convergence of these stacks over the past few years, this economic moment may force a rethink about how to prioritize certain projects (e.g., digital transformation or automated self-service), accelerating some and pushing others to the back burner.
The 451 Take
Decimating the consumer economy puts the customer experience marketplace in a strange bifurcated position. In the short term, there is a tremendous need for tools to facilitate the transition to working from home and conducting transactions digitally. But in the longer term (and we are not yet sure how to define 'longer term'), the pressure on businesses to cut costs just to stay alive is undoubtedly going to dampen enthusiasm for initiating new technology projects. In the service segment of the CX economy, customer interaction volumes are surging across industries, forcing businesses to take quick action. In the martech segment, however, caution is the watchword as advertising dries up and the appetite for disruptive technologies takes a back seat to business continuity. The ultimate outlook for customer experience technology providers is solid – customer interactions will always need to be managed, measured and leveraged for revenue. The question going forward will be which technologies are likely to have the most effective return on investment in the shortest time.
CX priorities must be Redefined
Any initiatives that rely on increased headcount are likely to be pulled back or delayed, but tech projects that focus on automation have a decent chance of moving forward. Figure 1 illustrates the degree to which businesses are currently planning to pull back from technology spending (as reported in 451 Research’s Coronavirus Flash Survey, March 2020). Notably, pullbacks are currently limited, suggesting that priorities will shift rather than be eliminated.
Customer experience is, at heart, a communications effort. It involves identifying the best messages for specific groups of customers and prospects and crafting effective responses to inquiries. Internally, it requires CX professionals to communicate to executives and decision-makers the true state of the customer base: its size, intent and reaction to company efforts.
In a normal world, this divides CX into an operational component, focused on the mechanics of messaging, and an analytic component that tries to understand behavior. The goal of good CX is to know enough about customers (individually and in aggregate) to find and leverage moments of influence that emerge from sales or service interactions. The immediate effect of the pandemic on customer experience is that businesses have to ensure continuity of operations and revenue, and at the same time, they have to track and communicate externally using different tools with people in rapidly changing situations.
Businesses are finding that one of the first elements of dealing with COVID-19 is to ramp up a fast service response. Interaction volumes are high, raising the short-term costs of providing service even as the capacity to do so is reduced. Companies have little appetite for expanding the universe of contact channels at this moment, even if they expect to have to support esoteric messaging channels in the future. For the moment, companies with surging volumes are retreating to a position of triaging to strength: voice calls, chats and emails, with as much automation as can be applied on short notice. Some companies have done a good job responding to service requests, but some have struggled, notably airlines dealing with extreme economic distress while simultaneously working with customers who need to be rebooked or refunded. Many firms have tried to head off incoming contact volume with proactive outbound notifications of service delays or alternative modes of assistance. Self-service is one of the processes that will see increased automation as a result of the pandemic.
On the more strategic side of the CX equation, businesses are going to have to work harder to find and protect revenue sources. That suggests an opportunity to ramp up recommendation engines, personalization tools and audience targeting. Many companies have access to these tools through existing CX suites and relationships with CX vendors, even if they haven’t yet fully used all the features that are under the hood. Responding to the pandemic and its economic fallout is putting a premium on strategies that emphasize capturing better data, synthesizing it across systems and analyzing it for hidden opportunities.
And all of this has to be done while transitioning to a workforce (and a customer base) that is isolated at home, with all the limitations in technology and communications that entails. As illustrated in Figure 2, companies report that they are expecting to spend more on technology for communications (43% of businesses surveyed) and on bandwidth capacity, which will be needed for provisioning work-at-home service agents (32%).
Contact centers become less Effective
Service delivery revolves around contact centers, which have been evolving slowly from voice-centric institutions to more flexible multichannel operations. Right now, that evolution is taking a back seat to the wholesale reinvention of the contact center model – no longer can dozens or hundreds of people sit side by side in open rooms. Across the vertical industry spectrum, businesses are forced to rehouse labor forces at home or dramatically cut headcount, even as call volumes surge. Hotels, airlines and retail companies are seeing dramatic increases in customer contact as the economy has shifted (or eliminated) consumer demand.
But labor forces are hard to move. It is difficult to quantify the capability of the contact center industry to move to a work-from-home model. Despite years of experimentation, only a sliver of the service delivery workforce works remotely. The industry’s conundrum is that in typical times, it would staff up to meet surging demand, but right now, that is not an option for financial and technical reasons. The situation will be made worse as staff members fall ill or deal with illness or childcare in their households.
Adding to the difficulty, only about half of contact centers are equipped with cloud-based technologies that make relocation and staff scaling easier. The transition to cloud has been slow, allowing vendors to continue to sell premises-based systems for agent and interaction management even as the market develops cloud-native platforms. This situation is an opportunity for contact center as a service (CCaaS) vendors that can offer flexibility and scale. Ultimately, nearly all contact centers will transition to cloud tools, and the pace will likely accelerate.
Service delivery is much more of a labor business than a technology one, dependent more on having a workforce of trained agents to assist customers than on having the most advanced technology. One outcome of the COVID-19 pandemic may be to accelerate the adoption of tools that automate functions like self-service, agent recordkeeping, and systems that use machine learning to directly assist agents with knowledge or suggested next best actions.
Businesses will rely on CRM and analytic technologies to further refine the way they categorize and separate customer groups, allowing them to focus on responding to high-value customers in a crisis in order to avoid losses. Industries that are especially vulnerable to high demand and the negative impacts of poor or delayed response include travel and hospitality, insurance and government agencies at both the state and federal levels.
Focus on data will support marketing Outreach
Marketing professionals have a more varied set of responses available to them for customer experience management than service teams do. For one thing, most of the tools in the marketers’ arsenal are powered by the cloud, which makes them reasonably easy to access by workers quarantined at home. Marketers have remote access to data and communications tools that service reps have a harder time using.
Even though the actual work of marketing CX can be done readily, businesses are still figuring out what should be done in an environment where much of the customer base has become inaccessible or unwilling to buy. Half of retailers say they have seen a loss or reduction of customer demand as a result of the pandemic, according to the Flash Survey. When the customer base disappears, marketers have to work harder to retain and incentivize them to stay, and in many cases, that won’t be possible. Messaging and brand management have become more than a means of promotion – they are necessary to keep lines of communication open so that business can resume upon recovery.
Part of the short-term strategy will be to use data resources to identify people and their new behaviors and needs. Resources like CRM, CDPs and other systems that try to collect a 360-degree view of customers will be used widely, perhaps creating a stronger demand for these tools in the longer term as marketers become reliant on data for micro-targeting and personalization.
One critical element of the new CX world is that advertising has almost entirely dried up, causing the adtech sector to collapse. What advertising is left is going to be deeply scrutinized for positive return on ad spending; this and other closely watched metrics will create demand for analysis and measurement. Without advertising, businesses will rely on more targeted communications that include personalized emails, text messaging (often automated via AI) and mobile in-app messaging.
There is evidence that the absence of the event economy is already hurting lead generation in some sectors. According to the Flash Survey, 67% of enterprises are not attending events they have in the past. However, the flip side is that zeroing out the event budget lines for the rest of the year may free up resources for other initiatives, especially if those initiatives can demonstrate near-immediate ROI at relatively low cost. Attention will focus on recommendation engines, customer data tools and audience creation.
After the initial economic shock in Q2 and the early part of Q3, businesses are going to rely on marketing teams to rebuild decimated sales pipelines, so CMOs should be thinking now about how to create small but impactful projects that can work quickly to identify prospects and retain existing customers, especially those of highest value.
Look to technologies that support slimmed-down Processes
The unknowns about a post-pandemic future outweigh the knowns. CX is a horizontal business function, meaning it appears in every business regardless of industry. That makes it highly adaptable to different business conditions. Its qualities and needs are distinct depending on what vertical market is considered. In general, though, there are some things that we can expect.
First, in the service segment, we know that responding to customer inquiries in the short and medium term is an urgent priority; for now, some service functions have to continue to be funded. Soon, though, service centers will take a hit in headcount, and alternatives will be sought.
Businesses will need maximum flexibility, so CCaas can be expected to come into its own as a deployment method for service delivery tools across large and small contact centers. Non-voice channels will come to the front of the line because they are less expensive to process and more in line with consumer expectations for self-service. Automation will be able to reduce the need for human labor at some point, perhaps accelerating the adoption of AI for agent support and knowledge management applications. These might allow for service-level retention with a lower headcount.
For many of the same reasons – cost, speed and flexibility – marketing will move to digital channels. That will occur side by side with the adoption of analytics to personalize interactions at scale and to target customers more precisely based on a stronger sense of their buying intent.
In short, we will see an acceleration of systems that wring waste and unmeasurable activity out of processes, and that automate as many of the remaining workflows and processes as possible.
Keith Dawson is a principal analyst in 451 Research's Customer Experience & Commerce practice, primarily covering marketing technology. Keith has been covering the intersection of communications and enterprise software for 25 years, mainly looking at how to influence and optimize the customer experience.
Jordan McKee is a Research Director for Customer Experience & Commerce, and also leads 451 Research’s coverage of the payments ecosystem. He focuses on digital transformation across the commerce value chain, with an emphasis on the major trends impacting payment networks, issuing and acquiring banks, payment processors and point-of-sale providers.
Csilla is a senior analyst for 451 Research’s Data, AI & Analytics channel. She currently focuses on decoding the blockchain market to help replace confusion and complexity with an examination of the technology, the competitive landscape and available solutions that are driving the market, as well as real-world use cases and deployments.