Did Customer Experience Management Die With The Economy?

I was doing a little research ahead of my conference session at The Customer Experience and Engagement Event in Orlando this April. As I was looking for prime examples of exceptional customer experience I noticed that many of the companies that excelled at managing the experience (defined as driving not just loyalty, but advocacy) have been having serious troubles. One of the most notable is Starbucks, which exploded with stores after 1987 and is now falling apart at the seams. Starbucks survived the dot com bubble burst and a few of the other bumps along the way, but now it is in serious trouble despite continuing to deliver a superior experience.

Is the price of the exceptional experience no longer worth the cost? Consumer confidence is way down, unemployment is way up, and the stock market is in full of big, ugly, burly bears. However, capital is now in short supply and that may be just as important as the human side of the equation. With over 50% of all loans being made by investors (did you think banks were loaning the amount of money that was growing out economy over the past 20 years?), and those investors on the sidelines or wiped out, people simply don't have the money in their bank accounts right now. Most people are not cashing in their 401K's right now, but they look at their statement and realize that they have lost upwards of 60% of their retirement funds. This deadly combination of real and perceived losses and future risk is hitting the experience economy companies where it really hurts, the wallet.

What businesses are doing well right now? Discount retailers, fast food, trash collection, and mortuaries. As long as people keep having babies, the last two will always be growth industries, but the first two are signals that people are cutting way back on expenses. New terms have entered our lexicon to express our desire to avoid major expenses (e.g. staycation). We are fixing our old cars instead of buying new ones. I have even heard of people buying books instead of going to the movies (gasp)!

Meanwhile, the companies that prided themselves on having the most addicted customers in their industries have been badly hurt by the cost associated with producing such a fabulous experience. Just look at this year's nominees for Fast Company's Customer Experience Awards (yes, these are the nominees for the October 2009 issue):

• USAA is consolidating locations, which will result in fewer jobs as employees refuse to move
  
• Build-A-Bear is cutting costs and eliminating Friends 2B
• Virgin Atlantic is eliminating 7% of its workforce despite also leading all airlines with a score of 90.8 in the Market Metrix Hospitality Index (MMHI)
• One of W Hotels' properties is in foreclosure (but is not expected to close)
• At least Cabela's is having a banner year (due to gun sales, which you can interpret any way that you want); Kiehl's is expanding in the Americas; and Zappos is still selling shoes like hotcakes after busting a $billion last year
  

To be fair, companies must look for every available opportunity to become more efficient as consumer consumption drops precipitously. Business Week prefaced its entire section in last week's Customer Service Champs with the heading "When Service Means Survival". Then they open with an example of how Hertz is killing its reputation with loyal customers after a ~4,000-person layoff. The question that companies need to be asking themselves is, "How do we survive this downturn without losing our advocates?" The answer to that question will help drive decisions that will lead to long-term viability, not just cuts that appease the Board of Directors.