How important is customer experience in your business?

Just How High Is The Price For Delivering A Poor Customer Experience?

by Michael Hinshaw
Managing Director
MCorp Consulting

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 feelabout their experiences is the most important aspect of their experiences.

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 percent of consumers will never go back to an organization after a negative experience. Fast-forward five years. Its 2011 report showed that basically nine out of every 10 customers (89 percent) walked away following a poor customer experience and began doing business with a competitor

MCorp Consulting’s own 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 the 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, then 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 life time value. Among other insights, its 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 replacement. Depending on your KPIs and which perspective you subscribe to, the cost of acquiring a new customer is five 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 his 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 the protest song “United Breaks Guitars” by singer/songwriter Dave Carroll, resulting in a video that has 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 of 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. Duh. 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 proved over the past 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 this: 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.