The True Cost of Bad Customer Experiences - Feedbackly (2023)

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  • Jaakko Männistö
  • September 17, 2018
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Imagine this: You’re doing everything you can to grow your business. You’ve redesigned your website, you’re sales team is working hard, and you are indeed getting new customers. But your customer churn is through the roof, and you don’t even know if your customers are satisfied. What’s worse, you’re running out of ideas and your investors are looking for a reason to keep the cash flowing. The issue is that you’re not thinking about the big picture because you’re too focused on individual systems and interactions. You’re not thinking about customer experience. What the concept of customer experience forces us to do is look at a customer’s entire perception of your brand as a fluid and evolving thing – shaped by each and every interaction they have with it. Let’s look at the true cost of bad customer experiences.

Customer experience is an abstract concept in the same sense as “design” or “innovation”. It refers to how your customers interact with your brand as a whole, and across the entire customer journey. Your customer experience is dictated by a series of interactions, any of which can make or break your business in the eyes of the customer. While there are many KPI’s used to measure customer experience, we often turn to customer satisfaction (% of customers who are ‘satisfied’ based on predetermined criteria), and NPS (Net Promoter Score).

A good way to benchmark your business’ customer experience is to first create a customer journey map. Your customer journey map will differ depending on your business model but a basic customer journey map may contain these stages:

  1. Awareness

  2. Consideration

  3. Purchase

  4. Service

  5. Loyalty

The True Cost of Bad Customer Experiences - Feedbackly (6)

What customer experience strategies allow us to do is measure customer satisfaction at every stage of the customer journey. This not only ensures that we are maximizing the potential happiness of our customers, but it also tells us where exactly we need to improve. By breaking the customer journey into stages, we can see where our pain points lie. For example, if 80% of your customers are satisfied in the purchase stage but 49% are satisfied in the service stage, then you know that you need to seriously reconsider our customer service systems and protocols.

There is a nearly endless amount of research done about the benefits of a good CX strategy, and some of the statistics are beyond shocking. Luckily, we’ve compiled some of the main benefits into one blog post with all of the relevant numbers so you can read for yourself.

If you don’t have time to read the full post, here are some key stats:

  1. CX leaders delivered compound annual revenue growth rates (CAGR) of 17% compared to just 3% for CX laggards in the period of 2010 to 2015.
  2. 86% of customers are likely to repurchase from a business after having a good experience compared to 13% of those who had a bad experience.
  3. 73% of companies with above average CX maturity are performing better financially than their competitors.

Hindering Marketing Efforts

All it takes is one unsatisfied customer to permanently damage the reputation of your business. The last thing your business needs is for the marketing budget to be bloated in order to rebuild your lost reputation among potential and existing customers. If you are not evaluating your customer experience and using customer journey maps to put yourself in your customer’s shoes, you may be overlooking a critical system error or service bottleneck. These cannot happen if you want to maintain a consistent level of customer satisfaction.

Research by American Expresssuggests that Americans tell an average of 15 people about a poor service experience, versus the 11 people they’ll tell about a good experience. Both of these numbers are significant because it shows that people are more likely to spread the word about negative experiences than positive ones, at least in a commercial setting. This means that it is doubly important to prevent customer dissatisfaction.

Lost Customers

Your customers are under no obligation to re-purchase from your business, and this is especially apparent in a competitive environment. People are always looking for the best option, and if your business fails to meet their expectations even once, they may have all the incentive they need to switch to a competitor. In some cases, the switch is derived from frustration and the desire to ‘try something new’.

In the same study by American Express,33% of Americans said they would consider switching companies after just a single instance of poor service. A figure that, to some, is not surprising. Customers have more power than ever. Everyone has the opportunity to compare multiple businesses in a matter a minutes with a quick Google search, and savvy consumers can pick out the best fit for them in no time at all. So it makes sense that one bad service failing will prompt them to switch – because it’s easier to switch than ever.

A good customer experience strategy is meant to ensure that your customers never feel as though they are missing a better opportunity by not exploring other options. They are happy with your business and will continue to be your customer so long as their expectations are being met or ideally exceeded.

(Video) Webinar: Emotional Experience – A New Way To Measure Your CX | Feedbackly

Effects on Revenue

Bad CX is bad for your bottom line. This should come as no surprise of course, as we’ve already talked about the potential to lose customers. Every year, Americancompanies lose more than $62 billion due to poor customer experiences, and more than half of Americans have scrapped a planned purchase or transaction because of bad service. When you lose customers, you sell less – it’s that simple. Few companies have a strong leadership team that is willing to invest in a comprehensive customer experience strategy for long-term success. This may be due to the culture of short-term, morale boosting, but often unsustainable management outlooks that some companies have. The reality is that customer experience strategies take time to implement and require support from all levels of employees. If the management team can get the whole company on board, the positive effects on revenue will follow suit.

Wasted Opportunity to Engage Customers

The difference between happy customers and engaged customers is huge. A customer can have a positive experience with your business, but may exhibit no allegiance to your brand whatsoever. They have no problem buying from you one day, and your competitor the next day. The goal of a customer experience strategy is not only to increase your overall customer satisfaction, but also to engage them. In other words, turn happy customers into loyal ones.

Feeling unappreciated is the #1 reason customers switch away from products and services (New Voice), so make them feel like they are important. Better yet, actually BELIEVE that they are important, because they are. The core of any good customer experience strategy should lie a rock solid customer feedback system. Collecting feedback from your customers is a good way to make them feel heard, as well as interacting with them to make them feel appreciated. A good customer experience software should have customer feedback capabilities built-in so you can create and publish surveys on the right sales and marketing channels. An excellent customer experience software will have sales and marketing tools built-in so you can communicate with your customers in real-time or send them promotions and upsell offers. This is the best way to create customer loyalty.

If you want to build a customer experience strategy, it needs to be built on strong foundations which are robust enough to evolve and change with your business without needing to be rebuilt from scratch. Your strategic planning, program governance structure, and change management efforts go a long way toward building your success.

But you also need a flexible CX software to support your work. Remember, even if your strategy is in its early stages now, it will grow and evolve, as will your company. To scale your CX strategy (and your success), choose the right system to support your long-term needs. Ensure that you choose a CX management software which fits with the needs of your company, and ticks off all of the major requirements for success in a modern market landscape.

We’ve done the research for you, and listed the key features that need to be include in your CX software in order to enable you to be a customer experience leader! Read our post here.

We built the world’s only feedback and customer journey software with built in marketing and sales tools.

Create highly customizable surveys and publish them anywhere. Use the Feedbackly iOS app to collect responses on your iPad, or publish your surveys with any one of our many software integrations.Our vision is to revolutionize customer experience management by making it easy and affordable to measure your customer’s emotions and turn that insight into actions. Above all, we enable companies to boost sales using their customer feedback.

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What is the cost of a poor customer experience? ›

Estimates of the cost of poor customer service range from $75 billion to $1.6 trillion per year.

What are the effects of poor customer experience? ›

The key consequences caused by poor customer service are customer dissatisfaction, difficulty to attract new customers, incurring additional costs, and losing revenue.

How much do companies lose due to poor customer service? ›

According to Newvoicemedia, U.S. companies lose more than $62 billion a year due to providing poor service. A study by American Express showed that customers in the United States were willing to spend 17% more on companies they felt provided excellent service. That number has been steadily increasing as time goes on.

What is the cost of poor customer service in today's marketplace? ›

Loss of Prospective Businesses

As you can observe, individuals like sharing their views, and low ratings and negative reviews push present customers away. Not only a low-quality customer service makes customers shift to your competitor, but it can also impede prospective prospects from connecting with you.

What are the four main costs of losing a customer? ›

The true cost of customer loss is made up of four key cost factors: direct costs, acquisition costs, social costs, and operational costs.

How do you address poor customer experience? ›

7 Steps to Fixing Customer Service Issues
  1. Listen to the customer and show genuine empathy. ...
  2. Assess the situation. ...
  3. Ask for the customer's needs and preferences. ...
  4. Offer a solution and give options whenever possible. ...
  5. Deliver the solution. ...
  6. Follow up with the customer. ...
  7. Address the issue within the company.

What is the impact of customer experience? ›

#4: Customer experience strengthens customer loyalty.

By acting on customer feedback, addressing gaps in the customer experience, and closing the loop with customers when issues arise, product and operations teams have the chance to make their offerings more valuable to customers and increase loyalty.

What are 2 dangers of poor customer service? ›

Poor customer service can be extremely damaging to a business. It is likely to lead to dissatisfied customers who are unlikely to purchase products or services from the business again. It can also lead to the business gaining a poor reputation via word of mouth or through reviews on social media or other websites.

What is the impact of poor customer communication? ›

On of the most disastrous effects of poor communication is a dissatisfied customer. As dissatisfied customers are more likely to go elsewhere, costing your firm money.

What are the costs of losing customers? ›

According to research, acquiring a new customer can cost five times more than retaining an existing one. The costs associated with lost revenue and increased marketing costs can quickly add up, negatively impacting the bottom line.

What could be the possible impact of poor customer service? ›

Ignoring customers' needs and providing bad service experiences ultimately results in losing customers to the competition. Consequently, bad service leads to lost revenue and lowered profits. According to the Serial Switchers report, poor customer service is costing businesses more than $75 billion a year.

How does poor customer service impact an organization? ›

Poor customer service typically results in fewer customers, which translates into lower sales and profits for your business. This can initiate a vicious cycle in which a company tries to save money on staffing or customer service training, which makes service levels spiral downward even further.

Why is customer service so draining? ›

Customer service isn't an exception. If anything, customer service representatives are more likely to experience stress that could lead to burning out. Having to deal with dissatisfied customers and complicated scenarios on a daily basis is a job that is emotionally more grueling than most.

What are costly customer service mistakes? ›

Here are the top customer service mistakes that cost companies relationships, reputation, and revenue: Not knowing your customers. Not listening. Not providing multiple service channels.

What are the possible costs that a business might face as a result of poor quality? ›

Lost customers (expensive to replace – and they may tell others about their bad experience) Cost of reworking or remaking product. Costs of replacements or refunds. Wasted materials.

How many bad experiences does it take to lose a customer? ›

More than half of consumers – 54% – said they would stop using a brand after just one bad experience.

What is negative customer acquisition cost? ›

What is Negative CAC? Negative CAC is a go-to-market and product strategy that enables companies to acquire a net new customer at no marginal cost as an extension of the paid functionality that their software delivers to existing customers.

How much is customer experience worth? ›

The Temkin Group found that companies that earn $1 billion annually can expect to earn, on average, an additional $700 million within 3 years of investing in customer experience. For SaaS companies in particular, they can expect to increase revenue by $1 billion.

What is customer perception cost? ›

Price perception is the perceived worth of a product or service in the consumer's mind. It is one of the leading variables in the consumer's buying process. Buyers are unaware of the true cost of production for the products they buy.


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