The Cost of Poor Customer Service
What is the True Cost for Poor Customer Service?
Poor customer service can severely impact a business’s bottom line. Companies risk losing existing customers, damaging their reputation through negative reviews, and incurring higher acquisition costs for new customers.
It also leads to decreased customer lifetime value, missed upselling opportunities, and higher employee turnover.
You may think that most businesses don’t have the same customer challenges that your organization does. But this couldn’t be further from the truth – and what distinguishes successful businesses from unsuccessful ones is how they address these problems.
Successful businesses take a more proactive approach, tackling problems as they arise and ensuring that customers are ultimately happy.
Still, many companies don’t really understand the true cost of poor customer service. Companies need to realize that investing in a good customer service team is ultimately much less expensive than ignoring its importance and, as a result, providing either poor customer service or not providing any meaningful service at all.
Providing an outstanding customer experience should not be considered a “nice” bonus or an “add-on” feature; rather, it should be a basic principle of every company’s mission statement.
Poor customer service can result in client loss, low corporate morale, damaged reputation, and increased price sensitivity, among other problems. To combat this issue, organizations should consider using customer service aptitude tests when hiring staff for customer service.
In this article, we’ll discuss:
- The Impact of Customer Dissatisfaction
- Consequences of Bad Customer Service
- Poor Customer Service: An Example
- Effects of Customer Dissatisfaction on Your Business
- Where Does Poor Customer Service Stem From?
- What About Internal Customers?
- Avoiding the Risk of Customer Dissatisfaction with Customer Service Tests
The Impact of Customer Dissatisfaction
Did you know people are predisposed to remember bad events more vividly than positive ones? According to a study published by the Association for Psychological Science, negative stimuli have a greater influence on the brain than positive stimuli.
Researchers assume that this is directly correlated to our innate ability and desire to survive.
Customers will avoid a repeat of those negative experiences in the future if they clearly remember the past bad ones. This implies that customers who have a bad experience with a particular business may forever identify a brand with that bad experience – and take their business elsewhere.
This is why there’s a special emphasis on the importance of customer service. Businesses should ensure that they have employees with the ability to handle all customer interactions in a positive way.
A good way to ensure that potential employees have transferable skills for customer service is through pre-employment testing.
Consequences of Bad Customer Service – What Does Data Say?
In 2020, CCMC (Customer Care Measurement & Consulting) conducted a National Customer Rage study centering on customer dissatisfaction experiences in the United States.
The research showed that dissatisfied customers are 22% less brand loyal than non-complainers. Only when complaints are satisfactorily resolved does brand loyalty improve.
Given that the majority of complainers are dissatisfied, corporate America is implementing customer service programs that may cost them customers. CCMC also reported that companies may be losing more customers than they are keeping due to bad customer service.
While customers are more satisfied with the service they receive after they complain, 58% of complainants reported receiving “nothing” in return.
Although social media is a significant factor in customer experience and satisfaction in 2020 (compared to prior decades), findings are still alarming and call for immediate action: 14% of customers have posted their complaints at least once on social media, 49% have never received a response to their social media complaint, 66% of households experienced a product or service problem in the past 12 months, and finally – 65% of customers who faced an issue of some kind experienced customer rage.
Between all of these figures combined, a total of $494 billion in revenue is at stake for the businesses for not taking better care of customers.
Poor Customer Service: An Example
Bill McFarlan, journalist and Managing Director of one of Britain’s major media consultancies, argues in his book “Drop the Pink Elephant” that in the age of social media, the customer experience plays an essential role in how the message of the business is conveyed.
A single negative customer review can have a major impact on a company’s reputation and bottom line.
McFarlan says that today’s businesses are focused on simply delivering the message without considering the consequences of negative parts of the message, which is why he advises against using negative words like “no”, “never”, “nowhere”, “nothing”, etc.
Even if it’s a “tongue-in-cheek” marketing effort, businesses should avoid anything that could have a negative connotation.
Long before social media came around, businesses used to tell each other, “The customer is always right.” Today, not only is the customer right, but they are armed.
With online businesses thriving, competition is greater than ever, which means that the moment a customer becomes dissatisfied (sometimes for a good reason), they can look elsewhere, and they will gladly do it.
In the process, they just might use the opportunity to drag a business down and harm their reputation.
Here’s an example of the consequences of bad customer service. A day after the New York Post reported on the Union Street Guest House’s policy of charging visitors $500 for unfavorable online reviews, the hotel’s Yelp and Facebook page accounts were bombarded with nasty remarks.
Although the hotel removed the $500 policy from its website and claimed it was just for fun, at least one negative Yelp review from 2013 claims the owner did genuinely try to collect $500.
Over 3000 inappropriate reviews bombarded the business – making this a prime example of the cost of poor customer service.
Effects of Customer Dissatisfaction on Your Business
Brands are held more accountable than ever before for their online and offline conduct. Just a few decades ago, if a client was displeased with a product, their best hope was to receive a refund – if they wrote a complaint letter.
They would probably want to vent and release the tension caused by poor customer service before calling it a day. Today, things get more heated, to say the least.
Businesses must change to keep customers satisfied, according to Forbes Customer Experience Predictions for 2021. Digital channels are more important than ever for customer engagement and satisfaction. For many customers, the customer experience will be critical.
Businesses must understand the consequences of a poor customer service experience. More than 90% of Americans consider customer service when deciding whether or not to do business with a company.
Poor customer service leads to customer dissatisfaction, which in turn may lead to lower conversion rates of potential customers. Before completing a purchase, some prospects want to interact with the business by asking more about their service.
And if a potential customer has a negative experience during that interaction, they may decide not to take their business elsewhere.
On top of that, customer service experience can have a significant influence on customers’ LTV (Lifetime Value). It is far more expensive to acquire new customers than to retain the existing ones.
As a result, businesses must focus on providing great customer service and experience rather than spending extra money on marketing and new customer acquisition.
Finally, because the customer care team works diligently to handle consumer concerns, businesses risk losing employees owing to increased job fatigue and stress.
The less stress the customer support team feels as a result of unhappy customers, the more motivated they will be to continue delivering outstanding service to all clients.
Where Does Poor Customer Service Stem From?
Pinpointing the exact reason for poor customer service can be difficult and dependent on the industry. But there are a few common reasons why customers feel frustrated and vent on social media and review sites:
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Lack of training on how to properly handle difficult situations
Contrary to the popular belief, customer service representatives aren’t innately knowledgeable about handling customer complaints. The right tone of voice, communication skills, and empathy go a long way in successfully resolving issues and handling conflict.
Customer service excellence training can provide staff with tried-and-true methods for dealing with problems. It can teach the representatives how to de-escalate a difficult situation, remain calm and use emotional intelligence to develop relationships, and serve customers using their natural talents. These abilities can reduce most common customer service complaints.
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Lack of knowledge on the products, services, or policies in general
Businesses should ensure that customer service staff are trained on their products and services. Giving them access to the most recent training materials and exposing them to de-escalation tactics will give them an advantage.
Furthermore, keeping employees up to date on the current policies is straightforward by ensuring they can access their employer’s most recent policy pages. Adding tutorials, product information, or building a FAQ page online will help to answer most questions, preventing consumers from having to contact customer support.
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Backlog of workload
There are times when the customer service team feels overwhelmed, especially when schedules are suddenly changed, when staff changes, or when a holiday season comes. Employees can learn to be more productive despite having to deal with those challenges, as well as deadlines, meetings, interruptions, phone calls, e-mails, and crises, which are all part of each team member’s day-to-day tasks.
Businesses can help employees learn to work smarter – not harder – to manage the limited available time with time management coaching.
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Inability to make an impact and successfully resolve issues
Employees want to make a difference and handle problems on their own. When their hands are tied and they can’t make on-the-spot decisions, frustration sets in. By changing rules to allow frontline staff to problem solve on their own, they feel empowered and their work feels like it’s contributing to the company’s broader goal.
What About Internal Customers?
Co-workers are dependent on each other, as well as the larger systems in which they work. When an employee considers their co-workers to be internal customers, the work they do and the attitude with which they do it changes tremendously. It’s reasonable to think that developing an internal customer service culture will be productive and profitable for the business.
Preventing another employee from performing their job well can affect your own or other teams in the company. Similarly, employees would never tell their customers that they are “busy” and that they should come back to them with the same request later during the day. Instead, they should go above and beyond to help them. Unfortunately, in a company where there is poor internal customer service, this type of attitude is common.
These “interruptions”, which can take employees away from their tasks for a short while, are vital to the company’s success, as they help another employee serve the external customer more efficiently. In one way or another, all company employees work for the external customer – directly or indirectly. Adequate internal customer service enhances employee morale, productivity, employee retention, external customer service, and, ultimately, the bottom line.
“There is no firm without each other,” Forbes’ Micah Solomon argues. “We empower our coworkers to assist their customers and make magic happen by serving them. We acquire respect and raise overall value with others within the organization as a knowledgeable and approachable person by enhancing our internal customer service skills.”
Avoid the Risk of Customer Dissatisfaction With a Customer Service Skills Test
As we’ve seen, the cost of poor customer service can be huge. And providing quality customer experience is not an easy task by any means. According to a study by Accenture, 87% of organizations agree that traditional experiences no longer satisfy customers. Due to ever-growing competition, increased brand loyalty, and online presence on social media, customers today have incredibly high expectations of businesses. A staggering 68% of customers reported they would be willing to pay a premium for products and services from a brand, if they were sure they would receive stellar customer support.
This statistic shouldn’t come as a surprise, as the majority of US customers are grossly dissatisfied with the quality of customer support they received, as reported by the CCMC’s National Rage Case Study.
Businesses lose more money attempting to gain new consumers than they would if they just improved client retention. Giving clients no reason to take their business elsewhere is a foolproof approach to do this. Customers are more loyal to firms that respond to and resolve their complaints, as reported by 83% of customers. Businesses that prioritize better customer service experiences can raise revenues by 4% to 8% over their market competitors.
As customers’ LTV decreases and the conversion rate of leads plummets, poor customer service has a tremendous impact on the bottom line. Businesses should strive to find the top talent for their customer support team and provide them with proper training so the team is able to better serve the customers.
EmployTest provides a number of pre-employment assessment tests to assist with adequately testing candidates for these critical skills.
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