Bad service equals lost revenue

We have discussed this before on Regard ARMA: giving bad customer service has a cost. We know it turns away customers, and makes them not buy from a company again. Further, it has the added “bonus” of spreading negative feedback about the company.  One customer has many associates (business partners, friends, family). So the damage from a bad customer service interaction is exponential.

As is reported by Jan Norman this article from the Orange County RegisterGenesys has quantified the monetary damage caused by bad customer service at $83 billion a year.  That is a staggering number!

Norman writes that:

In the United States, 71% of consumers have stopped doing business with a company because of a poor customer service experience. Each lost customer costs a business, on average, $289 a year.

This means that more than two-thirds of consumers make business decisions based on customer service.

Each business is losing on average of nearly $300 from each customer, and as we mentioned above, each customer should be multiplied by the number of associates he/she influences.  This number can add up quickly depending on how upset each customer is and how many people regard him/her as an information source.

It seems obvious then that businesses should keep revenue in mind when they make customer service decisions. If there is money to be lost for each poor customer service interaction, the obverse is true too–there is money to be made from positive customer service.

It always helps to look at the numbers.



There is a financial cost

We have plenty of anecdotes about lost business due to poor customer service, but now we have proof. According to a new multinational study entitled “The Cost of Poor Customer Service: The Economic Impact of  the Customer Service and Engagement,” there is indeed a dollar cost to poor customer service. The study claims that $338.5 billion is lost each year due to poor service.

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The top customer service complaints from study respondents were:

  • being trapped in automated self-service;
  • waiting too long for service;
  • callers having to repeat themselves; and
  • customer service representatives lacking the skills to answer inquiries.

Read more about this study on the website, in a post by Christopher Musico.

Simply put, bad customer service costs companies lost revenue whereas good customer service increases customer retention.

Your thoughts?