How to succeed in uncertain times: Experience is key.

As we kick off 2020, concerns about a slowing economy are prompting companies to consider how to leverage their M&A strategy in the best way possible. Retail and consumer product companies are no exception, as a pullback in spending during a slowdown could have a major impact on a company’s future success. And as we saw in our 2020 CEO Survey, growth through acquisitions is still prevalent among US CEOs.

The amount and diversity of capital available for acquisitions is greater than ever, and companies that are willing and able to wield that capital for deals during a downturn could see better returns than their competitors. Across the consumer landscape, some are positioned well to invest. These are the "haves" – they have sufficient capital, their business is in order and they’ll have substantial buying opportunities as valuations moderate.

On the flipside, the "have-nots" will be under pressure to divest, and some assets will be distressed. Many of these companies have debt they’re unable to service or refinance, and they may become sellers. For example, the consumer discretionary sector has the third most cash among S&P sectors, just behind tech and healthcare. However, the discretionary sector also has the most BBB-rated debt, and companies will likely need to divest if cash flows weaken.

Where a company falls on that spectrum of haves versus have-nots is a function of past, present and future strategic decisions. So for those consumer brands and retailers in a position to buy, what should they focus on? In my opinion, the answer is clear: customer experience.

It’s no secret that in order to win consumers’ hearts – and dollars – companies must be able to provide a truly great and unique customer experience. For many brands and retailers, the best way to improve customer experience could be through strategic M&A. Some of greatest returns on investment come during downturns. And those companies that don’t invest can be exposed early as the economic cycle accelerates, and consumers look to put their dollars toward the companies with the best experiences.

Scale, digital capability, product innovation, market entry and competitive displacement are also key elements for successful investment in a growth recession and integral to shaping your customer’s experience and competitive advantage. 

Here are three important things to keep in mind on your customer experience improvement journey:

Prioritize customer needs

Before the economy slows, companies should determine what aspects of their particular customer experience are most important and what they need to do to preserve them as conditions change. They should identify concrete resources to safeguard the quality of engagement, maintain the customer base and determine what’s needed to enhance that experience, potentially through M&A.

Capture sentiment directly

In executing an acquisition in a downturn, develop a process to understand sentiment early in the deal. Learning from customers of a target business can be a valuable complement to dialogue with management. Listen to the themes. In addition to customer opinions and expectations, sentiment can provide another lens into the workforce – a key part of the customer experience.

Consumer experience is directly tied to data, as customers are open to creating deeper relationships with companies through technology. They recognize the benefits of connectivity and customization, and the proliferation of e-commerce business models and social media platforms has made for a richer customer experience in many industries. Social listening and sentiment analysis provide more insight on consumer preferences and behaviors that can be used to strengthen ties. 

Analyze to retain and expand

Use analytics to determine which customer retention incentives are more important in a slower economy, as well as where the company may have newfound pricing power. Being able to deploy those quickly in response to customer anxiety can ensure a company remains stable and better able to acquire in a downturn. Analytics also can identify areas of potential customer expansion in acquisition targets, which can increase deal value as the economy eventually improves.

Before jumping on the CX train, make sure you consider this: Customer loyalty can be more complex in a digital world. Products and services tailored to specific needs have appeal, but things like flashy in-store experiences and customization don’t displace traditional demands, such as competitive pricing and fast service. Customers are more mobile than before and can quickly end relationships if they experience gaps in key areas.

Bottom line: Investing early in a downturn can help your company see a great return as the economy expands. Wait, and you could fall farther behind. To not only survive but thrive in a lagging economy, focus on what truly drives your success, divest the distractions and reinvest in the future.