When the dust settles on tariff upheaval and the effects of stalled orders and product-line cuts hit, what is the real cost to your business? Businesses are working hard to mitigate and offset the effects of tariffs: finding new sources of inputs and materials, trimming product lines, and simplifying operations. They are, as we have recommended, creating "tariff war rooms" to manage short-term disruptions and long-range changes in sourcing and operations.
Too often in a crisis, however, they are so focused upstream and internally that customers become an afterthought. Yet sudden changes in prices and availability can have big—and sometimes profound and long-lasting—effects on customer loyalty and brand equity. Justifiably worried about profitability, companies run the risk of reducing customers to data points on a price elasticity curve. When costs are the only priority, businesses may reduce customer service and support, cheapen products, or reduce investment in new products or features that drive customer excitement. Even brief interruptions in service can cause customers to look elsewhere; some will not come back.
Your response to tariff disruption will be much stronger if the voice of the customer is part of every conversation. Here are four ways to make sure that happens:
- Let customers know what actions you are taking, even if the news isn't good. No customer wants to hear that prices are up or stock is unavailable. But it is better to operate transparently and respectively to customers —even if you are bringing them bad news—than to try to hide the truth. Walmart is setting a good example in this respect: reiterating its commitment to sell at the lowest possible price, while saying that it will be impossible to avoid all price increases.
- Look for opportunities to take market share. Business is a long game, with several players at the table. Your competitors are probably facing similar problems with availability or cost. If their service is interrupted, you might be able to step in. Or it might be worthwhile for to eat costs now to gain share that will be profitable later. Alternatively, today's difficulties could give you a reason to double-down on most your profitable customers (and shed unprofitable ones).
- Focus on value, not just cost. Especially in B2B markets—but in many B2C situations also—price isn't the only reason customers come and stay. Often the most important sources of customer loyalty are intangibles like service or the value you can add because of your understanding of your customers' business. Price doesn't affect those.
- Invest in the fitness of your commercial organization. We've never seen a sales or marketing organization that couldn't be made more effective e.g., by identifying overlaps and gaps in customer coverage, new opportunities to upsell and cross-sell, or ways to target marketing better. Often these reduce sales and marketing costs as well, which is a double benefit. This is an area where artificial intelligence has made especially long strides, for example in creating "propensity models" that identify customers as flight risks or creating ways to test marketing and sales communications.
Of course, companies must respond to tariffs by looking to their procurement, operations, and finance teams. But as Peter Drucker said, the purpose of a business is to create and keep a customer, and it would be a grave mistake to forget that, even for a moment.
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