What Is the True Cost of Poor Customer Service?

What’s the cost of poor customer service?

About $75 billion annually, according to a 2018 report by NewVoiceMedia — a $13 billion increase from 2016.

Given this tremendous financial loss, you’d think organizations would be scrambling to find the cause and stop the bleeding. But, unfortunately, it’s not as easy as it sounds.

In most cases, businesses aren’t facing one single issue but several internal missteps coupled with shifting consumer behaviors and expectations. Together, the problem is compounding and costing organizations across every industry a lot of money.

So what can you do?

Here are a few hidden ways customer service pitfalls are costing you dearly and what you can do to turn it around:

Customers Remember the Bad Over the Good

If I asked you to recall the last poor customer service experience you endured, you’d likely have no problem listing the ways a company frustrated or disappointed you. But if I asked you to share the most recent positive brand encounter, you’d probably find that a little more challenging. Why?

Unfortunately, human beings are hard-wired to recall bad experiences more than good ones. And that’s because negative stimuli have a more significant impact on the human brain than positive ones, according to a study shared by the Association for Psychological Science.

Scientists hypothesize that this has something to do with our innate survivalism. If we remember bad things more clearly, we’ll strive to avoid them in the future. In terms of customer service, though, this means people who have a negative brush with your company may forever associate your brand with that unpleasant memory — and take their business elsewhere.

Customers Won’t Wait

Nobody wants to be put on a lengthy hold or repeat the same information multiple times when contacting customer service. In fact, 66% of consumers cite “having to repeat myself” as a key frustration when communicating with businesses.

“The main problem organizations are having is keeping up with customer demand,” said Paul Taylor, an innovation coach for Bromford Lab, which designs and tests new products and services for clients. “They need the ability to meet demand for immediate and personalized service and to get away from traditional call centers. Customers are unable to get through to someone straight away who knows their issue and their problem.”

In addition to eliminating the need for customers to repeat themselves, a fast response time is key to good customer service. Failing to quickly connect customers with real people who can answer their questions leads to frustration. In fact, two thirds of customers have hung up on an automated system after getting annoyed with their inability to reach a live person. This poor customer service can lead clients to switch to the competition and avoid doing business with brands for several years (or longer).

Bad Customer Experiences Are Becoming More Public

People aren’t just more likely to remember bad experiences than good ones — they’re more likely to share them through online reviews, too, according to data from ReviewTracker.

And those reviews are taken seriously. According to the same ReviewTracker survey, a whopping 94 percent of respondents say an online review convinced them to avoid a business. And few people trust brands with anything less than a 4-star rating.

Whether they’re making a purchasing decision for their business or personal life, buyers rely heavily on third-party reviews. In many cases, this feedback offers a level of honesty and transparency buyers don’t always feel they’ll receive from sales and marketing messages.

Not only does low-quality service drive existing customers away, but it can prevent potential prospects from engaging with you in the first place. In other words, the ripple effects of one negative encounter can block countless new relationships from developing.

It’s Easy to Find Other Options

What’s the first thing you do when you’re highly dissatisfied with a brand experience? (Aside from leaving a scathing review on social media, of course.) If you’re like most buyers, you’ll immediately begin seeking other options.

Today, it’s easier than ever to find other brands to replace a provider. If a customer ends up getting transferred between multiple customer service agents or sitting on hold for minutes at a time while an agent looks for the information they need to help them, the customer may decide it will be faster and less aggravating just to take their business elsewhere.

With one simple Google search and a few spare minutes, a buyer can identify several alternatives, compare offerings, and—depending on the product or service and gravity of the purchase—make the switch.

41 percent of people who have stopped buying from a company and switched to a competitor did so in the last year, and 38 percent changed two or more times over the year, according to the previously mentioned report by NewVoiceMedia. And when asked what they would do after a poor customer service experience, 37 percent said they’d change their supplier.

The reality is, in a time when consumers complete most of their buyers’ journey without speaking to a single human being, brand loyalty is hard-won and easily lost. People can (and do) hop from brand to brand in favor of more convenience and better support.

5 Ways to Avoid the High Cost of Poor Customer Service

The good news is that by making a few upgrades to your current customer support processes, you can overcome the high cost of poor customer service. Here are five steps customer service leaders can take immediately:

1. Ask Customers What They Want

There are two ways to discover what your customers want from you. The first is to read their mind (and we’re guessing you don’t have that power). The second is to simply ask them—and there are a few reasons this will benefit you:

You can avoid being left in the dark without feedback

Rarely does anything good come from a blatant assumption. When you’re deeply involved in customer service, product development, sales, or marketing, it’s easy to feel like you know what customers want. But unless you explicitly ask them, there’s no way to know for sure. And basing all your decisions on assumptions means you’re depriving your company of critical feedback that could help you surpass competitors and lead your market.

Asking customers directly what they want, need, and expect from you helps illuminate your path forward and ensures you develop clear goals and directives.

You can stop wasting resources on less important problems

Nobody likes wasting time and money. But, if you’re not asking your customers what they really want, there’s a good chance you’re bleeding resources somewhere on something that isn’t helping at all.

For example, imagine your company makes insulated tumblers, and you’re spending thousands of dollars on developing tumblers that are larger, stronger, or come in a wider variety of colors. But when you ask your customers, you find that they’re perfectly satisfied with the current size, strength, and color selection. In fact, all they really want is something slim enough to fit in a standard car cup holder. All along, you’ve been focused on solving a problem that wasn’t a problem at all. Meanwhile, you were missing a glaring opportunity. And all you needed to do was ask.

You can show customers you care and earn their trust

Everyone wants to feel important and recognized. Asking your customers shows them you value their opinion and want to do more to meet their wants and needs. Just the mere act of asking someone, “how can I do better?” proves you’re dedicated to improving the relationship.

Additionally, if you’re experiencing significant customer turnover, it’s crucial you identify the leading causes fast. One of the best ways to get to the root of the problem is to send out surveys. 

Example Survey Questions

Here are a few suggestions to help you get started:

• How do you think we could improve our service?
• Does our product/service help you achieve your goals?
• Were you satisfied with your most recent customer service experience? Why or why not?
• If you could change anything about our product/service, what would it be?
•  What is your favorite feature about our product/service?
• What is one feature you wish our product/service would include?

In addition to surveys, be sure to scan reviews to look for trends and, when possible, engage in direct conversations with people leaving for other providers. It’s hard to fix your process until you know for sure why customers are running away.

2. Improve Your Customer Service Culture

What’s the secret behind successful brands like Southwest Airlines and Chewy (who are known for consistent, high-quality customer service)? These organizations provide a positive culture and ensure their reps feel empowered.

For example, Southwest includes its employees when making big decisions that affect them (like designing new brand uniforms). And Southwest employees are provided the same concern, respect, and caring attitude within the organization that they are expected to share externally with every Southwest customer. By modeling the behavior, it trickles down to customer interactions.

Chewy is committed to customer service rep autonomy and career-building efforts, which helps employees feel empowered and secure in their jobs. As a result, reps are confident and professional when engaging with customers.

A great customer service culture can help you boost employee retention, engagement, and job satisfaction, which inevitably impacts how your customer service reps interact with your customers. Plus, it helps you factor the customer experience into every decision.

To improve your customer service culture, focus on three things:

• Prioritize customer-centric decisions
• Foster cross-team alignment
• Keep experiences consistent across

3. Lead Empathy Training

Empathy, or the ability to understand and share other people’s feelings, is essential to better customer experiences. Customer service professionals can display empathy in many ways, from using phrases like “I understand” or “I see where you’re coming from” to expressing genuine concern for a customer’s plight.

But, when reps are busy and overwhelmed, they may not appear as compassionate as they feel. And that’s when empathy training is most valuable.

Empathy training is a method for helping people learn how to better relate to others, feel their emotions, and better communicate those feelings to others. In this training, employees learn to listen without judgment, connect with other people, and reflect on their own thoughts and feelings.

When employees demonstrate empathy at work, it improves all interactions (both internal and external). People become more effective communicators, which leads to better outcomes for everyone.

By including empathy as part of your customer service training to all new reps (and refresher sessions for existing employees), you can help ensure service agents are demonstrating empathy in ways that make customers feel acknowledged and respected.

4. Address Negative Reviews Head-On

A negative review is a blemish on your brand’s reputation and can potentially scare away otherwise highly qualified and interested prospects. But, it can also be an opportunity to show others you’re committed to improvement and customer satisfaction.

Turning Around Negative Reviews

Responding to negative feedback in a way that exhibits patience, respect, and understanding can help you overcome those effects. Not only can a well-written response turn an unhappy customer around, but it shows prospects reading those reviews that you’re dedicated to making things right.

For example, imagine a customer left a highly critical review claiming your company made them wait for a long period of time before helping them with their issue. To resolve this, start by checking into the problem. Find out how long the customer was on hold and how that compares to typical wait times. Then, chat with the rep who took the call and/or the manager on-site during that time to determine what happened.

Next, identify what’s being done to prevent the issue from happening again and hold people accountable for making those improvements.

When you respond, thank the customer for their feedback, be honest about the issue, and use empathy.

For example, in this case, you might say, “Thank you so much for bringing this to our attention. We’re very sorry you were on hold for so long, and this isn’t the type of experience we strive to provide for our customers. We had an electrical outage at our customer service center when you called, but we have since corrected the issue and made efforts to ensure it doesn’t happen again. We appreciate your business and hope you’ll allow us to make it up to you.”

5. Leverage a Knowledge Management Platform

One of the best ways to empower employees, streamline customer conversations, and ensure all reps are providing the most up-to-date information is by deploying a searchable, centralized knowledge management platform. When customer service professionals have easy access to all the information they need to assist customers, they’ll be more productive and confident, and they’ll offer faster resolutions. Democratizing knowledge helps everyone succeed.

Improving customer service experiences can boost your reputation, eliminate a significant chunk of your revenue loss, and boost profits by increasing customer retention. In other words, it’s well worth the investment to fix your process. By taking the five steps above, you can build brand love and avoid paying the cost of poor customer service.

This blog post was originally published in January 2020. It was most recently expanded and updated in November 2021.

About the Author

Sam Schneider

Samantha is an expert in organizational efficiency and effectiveness, drives our customer-obsessed culture, and is a champion for inclusivity at Bloomfire. Her leadership has inspired our team to create products that our customers love, which has been rewarded with great loyalty. Sam focuses on operational excellence, particularly in customer success organizations.