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The Impact of Poor Customer Experience on Business Success

Published September 18, 2013

As executives, we all want to deliver the best experiences to our customers. While this is an intuitive response because we want customers to feel good about interacting with our firms, there’s a strong fiscal rationale for doing so as well.

Broadly written, customer experience includes every interaction a customer has with a company. The challenge is that the way your customers feel about their experience is the most important aspect of their experience.

And in a world where disruptive innovation is leading to perceptual commoditization in many industries, customer experience is one of the greatest opportunities for differentiation there is. So what happens when your customers “feel” an experience was poor?

Pretty simple – they turn and walk away and do so in ever-increasing numbers.

The research driven facts: Poor experiences drive defection

In 2006, Right Now Technologies published its first annual Customer Experience Impact Report, which showed that 68% of consumers will never go back to an organization after a negative experience. Fast forward 5 years to their 2011 report. In that report, research showed that basically 9 out of every 10 customers (89 percent) would walk away following a poor customer experience and began doing business with a competitor

smart-phone-shopperAt MCorp Consulting, our research shows that this increase in likelihood to walk away from a company after a single poor experience has trended closely alongside consumer adoption of smartphones. Put another way, the ‘smarter’ the average customer becomes, the greater their likelihood to leave after a poor experience. And why not? Almost everything about your competitors are in their pockets. It’s a click of the mobile browser to find an acceptable alternative.

If you’re in a B2B industry, you might be thinking this doesn’t apply to you. You’d be wrong. In early 2013 ZenDesk conducted a survey aimed at better understanding the impact of customer service–a very important aspect of the typical customer experience across industries–on customer lifetime value. Among other insights, their study quantified the impact of poor service experiences on B2B customers, finding that 66 percent stopped buying after a single bad customer service interaction.

Losing customers is expensive. Don’t do it.

The cost of losing a customer is higher than you might think. Not only is there the obvious economic loss a customer represents, there’s also the cost associated with replacing them. Depending on your KPIs and which perspective you subscribe to, the cost of acquiring a new customer is 5 to 10 times greater than the cost of keeping an existing one.

Another difficult-to-quantify (but very expensive) result of poor experience includes the impact of negative word-of-mouth, with a generally accepted “rule of thumb” that a single unhappy customer tells about 10 others of their poor experience. This doesn’t take into account the reach of social media, of course, or the power of one really upset customer to get the word out.

You’ve heard the story of “Dell Hell”, where blogger Jeff Jarvis famously reached millions with his message of dissatisfaction, eventually teaching Dell to become one of the smartest “social listening” firms in the world? Or protest song “United Breaks Guitars” by singer/songwriter Dave Carroll, resulting in a video that’s garnered 13.3 million views as of this writing?

The power of social influence takes that 10 person rule of thumb and blows it right out the window. How many prospective customers might you lose as the result of a negative story about your company?

The solution? Find where your customer experience is broken – and fix it.

My point is, you don’t want to lose your customers. (Thanks Captain Obvious.) Looking at this through the lens of customer experience, the solution is actually pretty straightforward, even though it’s not always simple.

About this time last year, I wrote an article titled Six Steps To Customer Experience Improvement. And while each of these steps has multiple components, all of which we’ve proven out over the last decade, it comes down to one pretty straightforward piece of advice.

Look at your company through the eyes of your customers. By understanding what they need to go through to accomplish their goals–whether product purchase or customer service–you’ll see where problems occur and have the ability to fix them.

The bottom line is that it’s frighteningly easy (and very expensive) to lose customers to a poor experience. So take the steps needed to find out where you’re losing them and why, and plug the gaps. It’s nowhere near as costly as continuing to lose customers. And if you do the job well enough, you just might be the place customers turn to, when they have a poor experience somewhere else.

This blog originally ran on CMO.com, where Michael Hinshaw writes the weekly “Get Customer-Centric” blog.

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