Inflation’s got businesses in a pinch, and some are turning to skimpflation – shrinkflation’s sneakier, meaner cousin – by slashing service quality instead of product size. Restaurants swap in lower-quality ingredients; airlines drop perks; and banks replace staff with chatbots, hoping you won’t notice. The gamble? That you’re too distracted to realise the missing peanuts on your flight or too worn out by the hassle of switching brands.
But here’s the catch: while customers stick around out of inertia, their basket sizes, share of wallet and lifetime value quietly shrink – churn is only delayed, not prevented. One juicy competitor, and boom – they’re out.
Cutting CX might save a few bucks upfront, but here’s the rub: As the Customer Service Skimpflation report by UJET (2022) highlights, 66 per cent of consumers report dissatisfaction with wait times, ineffective agents and impersonal automation. 87 per cent say they’d stop spending with brands that skimp. In Skimpflation Outrage, Evangelidis (2024) notes that customers feel more betrayed by declining quality than price hikes, risking emotional connections and market position. Regulators are catching on – France and Germany are considering bans on service downgrades, raising reputational risks.
Companies engage in skimpflation by over-automating services, cutting staff or training, replacing personalised touchpoints with AI, and scaling back perks. Opaque communication about these downgrades frustrates customers further.
The real solution to inflation isn’t cutting CX – it’s investing in smarter CX that balances cost-cutting with customer satisfaction. Here’s how:
Avoid death by KPI overload
Companies stuck in skimpflation obsess over KPIs, which measure how customers perform for the company (like conversion rates) rather than how the company performs for customers. As Christensen (2016) explains in The Innovator’s Dilemma, customers care more about circumstances than features – like caring less about an airline app’s bells and whistles when rushing to catch a flight for a medical emergency.
The focus should shift to the job-to-be-done, helping customers navigate through a struggling circumstance by designing for real circumstances through ethnographic research. This means moving from KPIs to CPIs (customer performance indicators). For example, ‘Nothing broke’ would be a CPI for grocery retail, while airlines might track ‘flight delay compensation efficiency’ and ‘travel purpose satisfaction’, based on trip context (e.g. emergency versus business travel).
Avoid feature shock and focus on what customers would pay for
Restructuring services to offer flexible options helps align resources with customer demand—like offering Wi-Fi only on flights where passengers value it.
À la carte upgrades or subscriptions prevent the waste of bundling unwanted services, reducing operational overhead. Lower-tier customers can choose self-service, while premium services –like personalised assistance – could be reserved for high-value customers.
A willingness-to-pay (WTP) exercise, as outlined by Ramanujam and Tacke (2016) in Monetizing Innovation, fine-tunes this approach. WTP identifies what features customers value most by asking directly – through focus groups or conversations – how much they’d pay for specific options. This prevents feature shock, ensuring customers get exactly what they need without excess.
Avoid letting AI and technology break your CX
Technology can balance cost-cutting with CX – if applied correctly. But 30 per cent of generative AI projects fail (Lee, 2024, Training your own AI model probably won’t help win customers, but data will, Salesforce), often due to poor data quality. Custom Large Language Models (LLMs) come with cost, governance, and accuracy headaches.
A smarter approach is pairing pre-trained LLMs with a solid data warehouse – aggregated, not monolithic – and using a strategy to add use cases gradually.
For example, a bank could start by improving digital loan applications instead of overhauling its entire customer service system. Focusing on high-impact areas ensures quick wins without overspending.
The AI rush, combined with layoffs, has backfired – automation alone won’t save CX. A hybrid model works better: automation handles routine tasks, while humans manage complex or emotional interactions, maintaining the personal touch customers value.
Reward cost-cutting
Companies can strategically incentivise behaviours that lower expenses and offer perks in return, aligning cost-saving measures with personalised rewards to create a win-win.
As Deneffe and Vantrappen (2021) suggest in How Airlines Can Cut Costs – Without Annoying Customers, airlines can reward passengers with miles for opting out of perks like lounge access, in-flight meals or Wi-Fi. Offering miles for early check-ins reduces staffing costs, while off-peak travel rewards or sustainable choices – like carrying less luggage – encourage behaviours that lower operational expenses.
To master the yin-yang of cost-cutting and CX, companies must avoid drowning in KPIs. Focus instead on CPIs that reflect real customer needs. Invest in what customers value most, using willingness-to-pay insights to guide decisions. Apply AI strategically, with automation handling routine tasks and humans stepping in for high-touch interactions. Finally, align cost-saving initiatives with personalised rewards. Done right, this approach trims the fat without cutting into trust, keeping customers loyal even in tight times.
By Elie Bassil, Business Lead, Digitas.
