So, for every ten customers you lose due to bad service, you lose both those customers for life (and their referrals), and you have helped your competition by sending 6 new customers their way.

The data is below, but the overall point is right in front of you: bad customer service hurts your business now, and in the future.

Remember the words from Dustin Hoffman in Rainman: “Kmart Sucks.”

You are not competing with the guy down the street or one listing down from you in Google.  Today, you are competing with Disney, Federal Express, Nordstrom and McDonalds.  Not for your product or service necessarily, but for the expectation of excellence, personalized service and consistency.

Here’s an easy, inexpensive, and quick way to assess your own customer service:

Have several people in your company go through your buying process.   Basically, be a mystery shopper and come in the store, fill out the form, call the 800 number or whatever your buying process may be.  Record everything - clarity of messaging, pricing, responsiveness, speed, friendliness, hold times, wait times, rapport building.  What’s it like when you leave or cancel?  Then ask the threshold questions: Would you buy from us, would you buy from us again, would you refer your best friend?

Then get to work.

—

Here’s the research, courtesy of the respective companies:

Genesys, with research firm Greenfield Online and Datamonitor/Ovum analysts, measuring the cost of poor customer service in the U.S., found that enterprises in the U.S. lose an estimated $83 billion each year due to defections and abandoned purchases as a direct result of a poor experience. Nearly two-thirds of consumers said they had ended a relationship due to customer service alone.  The survey participants said that when they end a relationship, 61% of the time they take their business to a competitor.

The $83 billion overall cost of poor customer service in the us came from:

• Business abandoned and lost to entire industry, $32.4 billion
• Customer churn and defections within industry, $50.6 billion

Furthermore, the problem has become more complicated as customer interactions move beyond the contact center. According to numerous industry researchers, more than 90% of all transactions initiated over the Web are abandoned before any transaction is completed. And virtually no researchers have accurately measured the value of customer service across communication channels, says the report.

Across 16 key economies (countries), the total loss for poor customer service in US dollars is $338 billion annually or the average value of each customer relationship lost to a competitor or abandoned of $243. In addition, 86.4% of consumers would welcome extended offers or help during self-service transactions.

The biggest losers at the industry level are in cable & satellite TV, financial services, and consumer products. Nearly one quarter of consumers in the US said they abandoned a cable/satellite company in the past year, resulting in over $12 billion in lost revenue. And financial services companies suffered more than $10 billion of losses alone. Industries that were previously safe from competition, such as utilities in deregulated regions, are also feeling the pain, with $1.75 billion in lost revenue.

In the U.S., 71% of consumers have ended a relationship due to a poor customer service experience, and the average U.S. customer surveyed had 11 interactions each year and ended 1.2 relationships. The average value of lost relationships in the U.S. is $289 per year.

• Younger consumers differ sharply from older consumers in their willingness to switch:
• Consumers aged 27-43 terminated relationships most frequently, at 1.52 times per year
• Consumers under age 26, at 1.43 times per year
• Ages 44-62 did so once per year
• Those over 63 years old did so 0.71 times per year

Assisted service is well developed, with 78% of consumers saying their most satisfying experience occurred because of a capable and competent customer service representative. But self-service lags because it is not often intelligently integrated with assisted service. Consumers feel the most significant root causes of poor service are:

• Repeating themselves
• Being trapped in automated self-service
• Forced to wait too long for service
• Representatives don’t know my history and value
• Cannot switch between communication channels easily

33% cite voice self-service as the most challenging channel compared to only 1% who find it most satisfying. And 38% of consumers said it is critical to improve voice self-service to make it more intelligently integrated with human assisted service. Where they were trapped in an automated system, consumers spent, on average, more than 9.5 minutes trying to reach a human.

When thinking of their most satisfying experience, consumers said competent service representatives played the largest role, while proactivity makes a significant difference. Consumers satisfaction is increased when four key needs are met:

• Competency
• Convenience
• Proactivity
• Personalization

Consumers felt that companies had done much more to improve in the area of competency than any of the others.

In prioritizing improvements in cross-channel conversations, consumers want companies to enable them to:

• Start in voice self-service and get assistance from an agent
• Start on the Web and get voice assistance or chat from an agent
• Receive an e-mail and then get assistance from a contact center
• Schedule callbacks to avoid wait times
• Add chat or instant messaging to Web interactions

In conclusion, the report notes that poor customer service has a clear and immediate impact on a company, and the first step should be to understand and measure the direct business impact of customer service, and identify the gaps between the customer experience and expectations.

Related posts:

1. If You Break My Guitar, I Will Hurt You
2. I Don’t Need No Stinkin Web Site
3. 10 Rules From Sam Walton for Building a Successful Business

It is not a change for the better.

This is the easiest post I have ever written, because the visuals tell the story.

I really need to dial up my chutzpa and get into branding one of these days…..

OLD AOL Logo:

New AOL Logo:

Related posts:

1. Who Moved My Raisin Nut Bran? – Part Deux

Starbucks instant coffee to be revealed next week

http://www.walletpop.com/blog/2009/02/13/starbucks-instant-coffee-to-be-revealed-next-week/

I thought Starbucks was all about the experience and building friendships? Maybe they took their mission statement the wrong way.

No related posts.

I have participated in over a dozen Pinewood Derby races as a Scout, Cubmaster, and father of two Scouts.  Yet, I had never wondered about who came up with the original idea and “invented” the Pinewood Derby.

Cubmaster Don Murphy organized the first pinewood derby, held on May 15, 1953 in Manhattan Beach, California by Pack 280.  Murphy’s son was too young to participate in the popular Soap Box Derby races, so he came up with the idea of racing miniature wood cars. The cars had the same gravity-powered concept as the full-size Soap Box Derby cars, but were much smaller and easier to build.

It is estimated that over 100 million Cub Scouts have participated in Pinewood Derby races in the past 55 years.

Murphy said he wanted to “devise a wholesome, constructive activity that would foster a closer father-son relationship and promote craftsmanship and good sportsmanship through competition.”

If you’ve ever participated in one, you know that he accomplished his objective.  The last minute building and weighing of cars is an amazing experience. Watching the boys cheer for each others car is fantastic.

Think about the impact his five-ounce block of wood, wheels, paint and nails has had around the world.  Simplicity is genius.  Thank you, Don.

No related posts.

Tomorrow I am speaking at the JFAM:Live! Fall 2008 Symposium at the Bloomberg Building in NYC. JFAM is a catchy acronym for the Journal of Financial Advertising and Marketing, run by Bill and Samantha Wreaks. At 2:00 PM I hit the stage to discuss the role of internet marketing in financial services “The Trust Factor – What Does Your Web Site Say About You?”. I gave the keynote at this event two years ago and JFAM does a nice job bringing together some of the top minds in financial services marketing to share and learn from each other.

Next week its off to the iMedia Connection Brand Summit in San Diego. If you have never been to an iMedia summit before, you should really see if you can get yourself invited. Pretty much all the top brand advertisers and the key media partners are there and it’s a phenomenal networking environment. I think I have seen more deals get done there than just about any other conference.

And then it’s off to Vegas, baby! I’m speaking at the Online Lead Quality Summit at the Mandalay Bay Hotel on Wednesday , September 17. In what I think will be a very timely talk, my presentation called “Mortgage Implosion: Marketing Maneuvers to Make Now!” focuses on how to build a portfolio of long term and short term direct response lead generation tactics to generate quality leads and maintain order among the sales organization during tough times like the financial sector is experiencing now.

That’s it for now…if you’re at any of these events please swing by and say hello. We’ll do lunch.