Cutting costsLast week I covered the concept of skimpflation. In case you missed it, the short definition is that skimpflation is the result of a labor shortage, some say due to The Great Resignation, and higher business costs that come from inflation and supply and demand issues. This translates to the customer experiencing a lower level of service, and in some cases, quality. Our colleague at Shepard Presentations refers to it as customer service on a diet.

Unfortunately, customers in both the B2C and B2B worlds are not having the experiences they’ve come to expect from some of the companies they enjoy doing business with. Companies are forced to skimp on quality and service, and that is causing frustration at all levels. Customers don’t like it. The leaders at these companies don’t like it either. And employees, at least the ones who are still there, often have to take the brunt of their customers’ frustrations.

I keep wondering, what’s the answer? How can companies work around skimpflation? Unfortunately, I don’t have the perfect answer, but I do have an idea to avoid a big part of the problem, which is how the customer experience is being impacted.

Before sharing that idea, here’s a quick, but important observation and a couple of examples. I’m seeing that customer loyalty is up for grabs. In our research, we see customers demanding a great experience in exchange for their repeat business. Let them down, and they move on. The companies that still get this right are flourishing. Laggards are struggling at keeping both customers and employees. And skimpflation is what’s causing the problem.

For example, you may have to pay more to keep your employees. This may force you to cut some employees to make up the cost difference. I hate that that would happen at all, but if you cut employees on the front line, there’s a good chance your customers will notice. A bad experience or two, and the customers won’t come back.

I wrote about this example a few years ago. I went to a restaurant and ordered a popular dish, but that night it tasted different, as in “not as good as usual.” I mentioned it to the manager and the explanation was that food costs had gone up and they were forced to substitute different – as in less expensive – ingredients. Obviously, it impacted the quality and taste of the food. I’m not the only one who noticed. Cutting the quality of any of your products could cause customers to notice and seek out the competition, hoping for something better.

So here is my idea. Many businesses have to make cuts and concessions. They don’t have a choice, but they do have a choice about where they cut. So, try not to cut in places the customer will notice.

It sounds simple, but that doesn’t mean it’s easy. It’s not. Some may even say it’s not realistic. So, here’s a way to start. Gather your team and brainstorm the answer to this simple question: “Where can we cut costs that our customers won’t notice?” You never know. Someone may have the perfect answer!