Balancing act of keeping customers happy in recession

The airline's travails seem to be splashed across the media most weeks, as it tries to reduce its overheads while maintaining high levels of customer service and – critically – not alienating the cabin crew staff delivering its frontline services.

BA has seen its core customers – business class travellers – cutting back on air travel as the recession bites. This poses the question – what should BA (or any company) do to keep hold of, or even grow, its customer base during a recession?

The choice is simple – focus on your core customers or try to bring in new ones – known in the business as 'switchers'. Some companies, including Blacks Leisure and Marks and Spencer, are remaining competitive by focusing on core businesses and markets and ensuring the people they know best are kept happy.

The big supermarkets on the other hand have sought to capitalise on the demise of former rivals like Woolworths and attract new customers by selling a wider variety of goods.

You know what your core customers want and, assuming they keep buying from you, they offer a degree of stability. Switchers offer potential in that they currently do not fill up their baskets at your store and if they did, it could boost sales revenue. But the risk is that the shift in consumer behaviour that brought switchers to your door might not endure, and they begin to shop elsewhere.

So which approach is right? The fact that both Waitrose and Hyundai have thrived in this recession tells us that the answer varies according to the economy, type of business and characteristics of your customers. It is also vital to consider what happens when the economy picks up and people revert back to their old spending habits. Companies which are overly focused on keeping happy the new customers they have won risk alienating their traditional clientele by taking their eye off the ball.

The issues facing BA also reflect another key problem facing businesses during a recession – how to cut costs in the face of a financial squeeze. BA's cabin crew are vital in delivering the service that the airline's customers expect.

The airline, like many firms, wants to cut costs and the most obvious way is by cutting overheads, the biggest of which is often staff. But this is fraught with danger. Your customers still expect a good service and probably don't care that your resources are stretched.

Academic research on this is interesting – one line of thinking is that customers derive value not just from the product (i.e., with a bit of service tagged on), but that the service itself can be the 'main event' in dealings with a company. Companies trying to make efficiency savings should remember that well-trained and responsive employees on the frontline of customer services are a vital and lucrative asset.

Yet understanding this asset may be easier said than done. My own research, and that of others, shows that employees who are committed to their company can exhibit what is called 'service employee citizenship behaviour' – broadly, the ability to give customers that 'bit extra' in terms of service – and this feeds into customer perceptions of the service they receive.

But companies and their employees also have to consider how they represent their employer when away from work. Firms are increasingly picking up on this by keeping a close eye on things like the comments of employees that are posted on social networking sites.

Unfortunately, some businesses mistakenly assume external representation of this kind mirrors service delivery. BA's arch rival, Virgin Atlantic, is not alone in firing employees who blogged negatively about their employer.

My own research suggests that external representation is not necessarily closely associated with service delivery.

Tempting though it must be for a firm to study social networking sites to identify employees who it feels might not be as committed as it would like, employers should keep in mind that an employee might be excellent at their job but not care enough to post positive messages online.

And employees expressing frustration at their employer online could also be productive and effective service providers in the workplace – they care enough to want to be heard.

Matthew Robson is professor of marketing at Leeds University Business School.