Poor Customer Service Costs Companies $83 Billion Annually

According to a new study, 66% of consumers have ended a business relationship over bad customer service.  And 61% swiched to a competitor, while 39% just stopped buying.

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.

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2 Responses to “Poor Customer Service Costs Companies $83 Billion Annually”

  1. David Hall on March 21st, 2010:

    Phenomenal info that is right on the money. I couldn’t agree more. Overall customer service and the processes that are being implemented by big companies just gets worse and worse.

  2. JenniferHTOATECH on March 21st, 2010:

    Thanks for the information. These statistics are very telling.

    There’s no surprise that cable and TV satellite companies have suffered in lost revenue as a result of poor customer service. It’s astonishing to me that they’ve lost over $12 billion in revenue due to poor customer service, yet they’ve done very little to improve their services.

    And that’s why we created with TOA’s web-based SaaS solution: A system that collects analyzes , processes and disseminates real-time, time-based, actionable, predictive, intelligent information of what is happening in the field with a focus on the customer and the customer experience, so no one is kept in the dark waiting.

    Companies need to understand the correlation between customer service and longterm revenue and implement a strategy to improve their customer experience.

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