Who Is To Blame For Greedflation?
Business leaders and economists are always obsessing over a recession. Is it coming, has it started, and how long will it last? One of my favorite quotes around this topic is, “(Economists have) predicted nine of the past five recessions.” This basically means no expert knows what the hell they are talking about when they try to predict what the economy will or won’t do. However, one thing is certain, between price increases, continuing supply chain disruptions, alleged price gouging, and other inflationary pressures, we are in one of the worst customer service recessions ever and have been since 2018.
Could this financial crisis be Milton Friedman’s fault? American economist Friedman is famous for his theory introduced back in 1970 in an essay for The New York Times titled A Friedman Doctrine, in which he stated:
“There is one and only one social responsibility of business, to use its resources and
engage in activities designed to increase its profits to maximize shareholders’ wealth.”
He argued that a company has no social responsibility to the public or society, i.e., the average consumer; its only responsibility is to its shareholders. For his theory, which became extremely influential in the corporate world over the following decades, Friedman was awarded a Nobel Prize. Many of his economic theories, some regarding government spending–including monetary policy taking precedence over fiscal policy–remain important.
Greedflation: Power, Unchecked
“Greed is good. Greed is right. Greed works.”
Contrary to the words of Gordon Gekko, the ruthless character from the movie Wall Street, greed leads to unethical behavior. Today, as a society, we seem numb to corporate scandals, e.g., those of Enron, WeWork, Theranos, Uber, Arthur Anderson, Facebook, Lehman Brothers, and BP. The list goes on and on. When unethical corporate behavior becomes the norm, brands lose the trust of both employees and customers.
However, behavior by businesses can walk a fine line. Even if an organization is not behaving unethically, it can still be greedy. Greedflation refers to how employee compensation is falling farther and farther behind relative to senior-level executive pay. The last time the federal minimum wage was increased was in 2009. Meaning it has declined by 26 percent over this time. The Economic Policy Institute (EPI) estimates that CEO compensation has grown 1,322% since 1978, while typical worker compensation has risen just 18%. In 2020, CEOs of the top 350 firms in the U.S. made $24.2 million, on average—351 times more than a typical worker.
The Good News about the Economy
Crisis creates opportunity. A crisis is a horrible thing to waste! As a business owner, I prefer recessionary times or even the Great Resignation. It isn’t that any of my businesses do better in such times, it is that my competition does worse. During difficult business conditions, your business has an incredible opportunity to lap your competitors. Indeed, to totally crush them, gain more market share, have the pick of the top talent, and maybe even enjoy record profits.
I had seen first-hand, long before the pandemic, that companies with the strongest company culture were significantly less affected by the Great Resignation, whatever the inflation story of the day happened to be. And the organizations with subpar business practices, the ones that churned and burned their team members and where a great workplace culture was only lip service, are the ones now being hit the hardest by employee turnover.
Return on Experience: Happy Profits
Over the period from 2006 through 2021, the top customer satisfaction companies across a wide range of industries generated an annualized return of 20.16% for the ACSI Leaders portfolio, while the S&P 500 had an annualized return of 10.97%.
There is also a strong correlation between the overall customer satisfaction average and corporate profit over time. As you can see, customer satisfaction started to decline around 2013. Average corporate profit followed suit. It is often the case that a change in customer satisfaction precedes a change in profitability.
“In competitive markets, firms are rewarded by treating their customers well and punished for treating them badly. The rewards/punishments show up, not only in earnings but also in stock prices, and make equity markets better aligned with consumer utility, which, in turn, causes an upward shift in demand curves. As a result, consumer spending increases and so does economic growth. Investors in customer satisfaction don’t just beat the market, they also contribute to a stronger economy.” – Claes Fornell, Chairman and Founder, American Customer Satisfaction Index
To establish the correlation between relative Net Promoter Scores (NPS) and companies’ sales growth, Bain compared competing industries by measuring their NPS to their relative growth. On average, an industry’s Net Promoter leader outgrew its competitors by a factor greater than two times.
BX STRONG in the Face of Inflation
This is why organizations need to focus on the BX Strong (Brand eXperience Strong), which is an entire experience ecosystem. Your service vision statement is just the beginning. Beyond this current bout of inflation with its uncomfortable rise in energy prices and the cost of food, the companies that will dominate their industries for the next decade will be the ones that are obsessed with evolving the experience at every level–the employee experience as well as that of the customer, vendor, and community.
*New Customer Experience Executive Academy starting in September ’23
Episode 107 of the CSRev Podcast – Customer Complaints 101
This episode is from a presentation by Dave Murray, VP of Consultant with The DiJulius Group, presented at the Customer Service Revolution Conference in Cleveland on Nov 7th, 2022. The title of the presentation is Complaints 101.
Complaints to any organization are truly a gift, especially these days as consumers have so many options. Are your teams handling these important interactions consistently well? Are you tracking the issues and outcomes to monitor trends and bigger issues? Learn some easy-to-implement standards and how to create a service recovery playbook.
QUOTE OF THE WEEK
“Life is relationships; the rest is just details.” —Gary Smalley
CX VIDEO CLIP OF THE WEEK
To make CX your biggest competitive advantage, find out what CEOs do
New Customer Experience Executive Academy starting in September ’23
Our 2023 Class of our Customer Experience Executive Academy (CXEA) that started in January sold out. So instead of waiting till 2024, we are starting a new class in September ’23. We expect this class to also sell out. Don’t delay and register now!
Are you in charge of your brand’s customer experience? Are you currently, or on track to be your company’s Chief Experience Officer (CXO)? It’s time to start learning the methodology applied by world-class companies to create consistently memorable moments that lead to happy customers and happy employees. The Customer Experience Executive Academy (CXEA) is the Harvard of Customer Experience, featuring:
- The DiJulius Group’s trademarked X-Commandment methodology
- How to improve the 6 components of your customer’s experience
- How to develop a strong Customer Experience Action Statement that brings purpose and meaning to your employees and organization
- How to recruit and develop a team with high customer service aptitude that aligns with your core values
- How to build a culture that always goes above and beyond what is expected during interactions
- How to develop tailored experiential standards for each customer, in each interaction they have with your company
- How to create systems that ensure consistency among departments and locations
- How to implement zero-risk systems that avoid service challenges and strengthen customer relationships
- How to measure your customers’ experience and execute with the data you receive, and
- Become a world-class Customer Service Experience leader!
*Register for the Class of 2023 Customer Experience Executive Academy