Good Times, Good Service: When Customer Care Counts Most

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Even though the economy is improving and shoppers are spending more money, now's not the time to ease up on your customer experience efforts, new research finds.

Customer experience actually matters more to consumers when the economy is doing well than when it is in the tank, according to a study recently published in Marketing Science, a journal of the Institute for Operations Research and the Management Sciences.

Despite the popular belief that businesses should spend more on improving their customer experience when the economy is down, the authors find that more of an investment is actually needed during the good times.

"We find that customer experience matters more to customers when the economy is strong.” V Kumar, a regents professor at Georgia State University, said in a statement.

For the study, researchers combined data on state-level economic well-being with data on hundreds of customers of a Fortune 1000 international airline carrier, including their purchase behavior and perceptions of the firm. They found that the same improvement in customer experience results in a 10 percent gain in revenue when the economy is worse off, but yields a 20 percent gain when the economy is better.

Based on the results, it is more important for businesses to improve customer experience by increasing satisfaction, reducing failures and implementing recovery efforts to enhance the positive effects of a good economy, the researchers said.

The study's authors attribute the results to their belief that when economic conditions are poor, shoppers focus more on price and less on customer experience. In a better economy, however, customers are less price-sensitive and focus on other aspects of the service encounter, such as how satisfied they have been in the past and whether the businesses righted any wrongs they faced.

The results prove that businesses must change how they position their service offerings based on the state of the economy, researchers said. They believe that when the economy is doing poorly, businesses should emphasize lower prices and better value and when the economy is doing well they should communicate superior experience, such as comfort, speed and reliability.

The study was co-authored by Georgia State University professor Nita Umashankar and Ph.D. candidates Hannah Kim and Yashoda Bhagwat.