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How much is one negative experience costing you?

12 May How much is one negative experience costing you?

We can all agree that no business owner wants a negative customer experience. Disappointed customers have never been good for business, and now that social media has us more connected than ever before, you simply cannot afford to have subpar customer service.

Beyond a missed sale or lost upsell, there are many other things a negative customer experience can affect. What if your customer never comes back? What if they tell others? There’s a never-ending list of questions about customer experience that directly relate to your bottom line.

Keep it simple.

Focus on answering one question: do you know what your negative customer experiences are costing you?

Meeting expectations 

A 1993 study found the best way to think of customer experience is in terms of customer expectation. Your customer has a certain expectation for their experience, and if those expectations aren’t met, it results in a negative experience. If they’re met or exceeded, that’s a positive experience.

Think of a time a business didn’t meet your expectations – did you have a good experience? Probably not.

Despite the study being more than 20 years old, it has two important findings that still apply today.

First, experiences that do not meet expectations leave a much greater impression on customers than experiences that exceed expectations. In other words, a negative experience will stay with your customers much longer than a positive one.

This one’s easy. Think of a peer, co-worker, or boss who’s given you dozens of kind words about your work. As much as you try to let it go, one piece of criticism that comes out a little too harsh sticks with you way longer than the compliments ever did.

Second, companies that have consistent rates of high customer satisfaction have a lower “elasticity for purchase intentions.” This means that if your customers have consistently positive experiences, one bad experience might not scare them away.

In 1993, you couldn’t track down every customer with a bad customer experience.

But that’s no longer true. Some companies still think they can accurately measure their bad customer experiences from complaints, but research shows as little as 5 per cent of customers will go through the complaints department. That doesn’t mean they’re keeping the experiences to themselves, in the connected world of social media, every grievance is made public. Another study by Temkin Group found 97 per cent of customers admit to sharing a negative experience with either family, friends or social media. With a robust social media strategy, you can pick up those grievances and start damage control.

Let’s talk money 

So how much is bad customer experience costing you?

It turns out, that number is increasing every year, even if your service is unchanged.

In 2006, Right Now technologies published their first Customer Experience Impact Report. At the time, 68 per cent of customers would not have went back after a negative customer experience. In two years, that number jumped up to 87 per cent. In 2011, it was 89 per cent.

This means that more customers than ever before will now leave your company after a single negative experience. To put that into economic terms, if your company had a million customers spending $100 a year, your total revenue would be $100 million.

If 1 in 3 customers has a negative experience, 89 per cent of them would leave. That’s 296,000 lost customers – $29.6 million in lost revenue.

If you’re in B2B, you’re not exempt either. A 2013 ZenDesk survey found that 62 per cent of B2B customers stopped buying after a single bad customer experience.

The infamous bad review 

Even harder to quantify is the impact of a bad review. The retail environment is fiercely competitive right now, especially with an increase in online shopping options. Brick-and-mortar businesses need to pay special attention to each customer in order to reduce the number of negative experiences, reviews, and rumours.

One single negative experience, if it happens to someone with enough social media clout, can turn away dozens, if not hundreds of customers.

On average, a single negative online review will cost you 30 customers, according to a 2009 Convergys Corp. study. That’s just from a single review. Even if you only have 100 bad customer experiences in a year, and only one tenth of them decides to write about it online, that means you’re losing 300 potential customers.

And it turns out more and more people are willing to write about their bad experiences. A 2008 Harris Report found that 84 per cent of U.S adults would share a bad experience. This was up from 74 per cent in 2007, and 67 per cent in 2006. This means more than 8 out of 10 people who have a bad experience with you will tell others about it, and take away about 240 potential customers.

Here’s a good example of how one bad review can cost you much more than one lost customer.

When Jeff Jarvis, a blogger, had a bad experience with Del in 2005, he wrote a blog entitled “Dell Lies, Dell Sucks.” He chose the headline with care: he wanted someone who searches “Dell sucks,” presumably to see what kind of bad customer experiences people have witnessed. The blog became viral, and Dell would be haunted by the experience for the next two years. The words “Dell Hell” became a commonly-used phrase and sales tanked.

The story does end well, kind of. Eventually, Dell completely revamped their social media strategy and started relating to customers on a much more intimate basis.

After nearly two years, Dell was able to recover and provide an improved customer experience.

Now your company name may not rhyme with hell, so you’re already ahead of the game. But you probably shouldn’t wait until something goes sour like Dell did. Take proactive measures to constantly improve your brand experience based off what your customers are saying, act as soon as you hear of a negative customer experience, and develop strategies to communicate customer feedback internally.

The 2011 Harris Customer Experience Impact Report showed that 50 per cent of customers give brands a week to respond to a question before they stop doing business with them.

The Harris report has some tips for avoiding these problems. First of all, pick up the phone and respond to emails. 58 per cent of customers in the survey said their expectations were not met because the company wasn’t available by email or phone. Technology has advanced to a point where people rely on automated services because of efficiency or lack of resources. Automated services simply don’t compare to genuine people when it comes to fixing a customer’s problem. And we all know how frustrating it is when you feel like you’ve pressed every number going to follow a step-by-step guide instead of just hearing a “Hello? How can I help you?”

Pay attention to the details. 51 per cent of customers in the same survey said companies were impersonal, even getting the customer’s name wrong.

Somehow, a certain well-known coffee shop seems to be the only one who can pull off getting your name wrong, and not totally ruining your experience. Mostly because it’s usually a hilarious spelling mistake you can share with all your friends.

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