The Impact of Inflation on Services Success and Customer Experience

The latest episode of Kantata’s Professional Services Pursuit Podcast, hosted by Banoo Behboodi, features Jessica Noble, Head of Strategy and Managing Partner at Magnetic Experiences. Jessica is also an author, a speaker, and an expert on customer experience.

This blog focuses on the just two aspects of the conversation Banoo and Jessica share in the episode: 1) the basics of inflation and how it’s impacting services today and 2) a tool that’s available for businesses to combat inflationary challenges – the PAIR concept.

The podcast episode covers many more techniques, best practices, and tools available to reduce the impact of inflation at your business. It covers not only how to survive — but thrive— in an inflationary market, with a focus on delivering exceptional customer experiences while improving margins and driving profits. Listen to the entire podcast episode or read the transcript here.

The Basics of Inflation

In order to succeed in services today — which means balancing margins, profitability and the customer experience — it’s key to understand the basics of inflation and its impact on services. Jessica breaks down the complex topic of inflation by explaining that “inflation makes it so that our buying power is reduced… I can buy less with the same dollar as prices go up and buying power goes down.”

In an inflationary market, buying behaviors significantly change. Jesssica explains, “customers stretch out their sales cycles, which means it takes longer for them to buy, and they have additional layers for deal approval.” These factors are compounding and lead to deal sizes shrinking and reduced margins for providers. As Jessica puts it,, inflation has “eroded your margins before you’ve even gotten to delivering your product or service.”

Inflation, at its core, takes a chunk of profits out automatically, even before the proposal is sent. This requires businesses to respond in a variety of ways, but most commonly they raise prices in response to inflation. However, a somewhat new term has emerged that can occur alongside  (or in lieu of) price increases — skimpflation. 

What is Skimpflation?

Put simply, skimpflation is when companies begin to ‘skimp’ on doing the extra, ‘little things’ to improve the customer experience. According to Jessica, “companies do that because they’re trying to reduce the cost to serve, which isn’t inherently a bad thing — it can be the absolute best thing.” 

Jessica says the key to skimplation is prioritizing customer reviews and needs and diving into their feedback. Jessica explains the importance of sincere feedback, “If you are taking away certain services or amenities, how do the customers feel about it? This is how you can truly understand what value that ‘extra’ service actually provides.” When skimplation is paired with feedback, it can really benefit a business, especially those who have been inadvertently hiding waste. Businesses that have been hiding waste — or failing to see opportunities to improve margin — can benefit from skimpflation and customer feedback. They can tap into areas of inefficiencies and shift focus from lower to higher impact activities. 

PAIR as a Tool to Combat Inflation

Banoo asks Jessica about the PAIR acronym (Prioritize, Automate, Incentivize and Recognize) and how this concept can be used to make sure that you’re providing value and a great customer experience for the client while maintaining your margins — all during inflation. According to Jessica, PAIR can be boiled down to the following four points: 

Prioritize what customers and team members truly value

Automate routine mundane time-consuming tasks

Incentivize productivity, efficiency and or quality improvements

Recognize people with appreciation and gratitude

If your business is facing many of the same inflationary challenges as the majority of services businesses today, a good place to start is by implementing the PAIR concept (just one of many tools discussed in the episode). 

Want to Learn More?

The PAIR principle is only one way  to solve the challenges being posed by inflation. If you want to learn other best practices and tools available to overcome the hurdle of inflation, listen to the entire episode or read the transcript here. Subscribe to the The Professional Services Pursuit Podcast for expert advice, trends, and best practices surrounding professional services.