Poor Customer Service Costs Companies $83 Billion Annually

by Jack Loechner, Feb 18, 2010, 8:15 AM

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Genesys, with research firm Greenfield Online and Datamonitor/Ovum analysts, measuring the cost of poor customer service in the U.S., found that enterprises in the U.S. lose an estimated $83 billion each year due to defections and abandoned purchases as a direct result of a poor experience. Nearly two-thirds of consumers said they had ended a relationship due to customer service alone. The survey participants said that when they end a relationship, 61% of the time they take their business to a competitor.

The $83 billion overall cost of poor customer service in the us came from:

• Business abandoned and lost to entire industry, $32.4 billion
• Customer churn and defections within industry, $50.6 billion

Furthermore, the problem has become more complicated as customer interactions move beyond the contact center. According to numerous industry researchers, more than 90% of all transactions initiated over the Web are abandoned before any transaction is completed. And virtually no researchers have accurately measured the value of customer service across communication channels, says the report.

Across 16 key economies (countries), the total loss for poor customer service  in US dollars is $338 billion annually or  the average value of each customer relationship lost to a competitor or abandoned of $243. In addition, 86.4% of consumers would welcome extended offers or help during self-service transactions.

The biggest losers at the industry level are in cable & satellite TV, financial services, and consumer products. Nearly one quarter of consumers in the US said they abandoned a cable/satellite company in the past year, resulting in over $12 billion in lost revenue. And financial services companies suffered more than $10 billion of losses alone. Industries that were previously safe from competition, such as utilities in deregulated regions, are also feeling the pain, with $1.75 billion in lost revenue.

In the U.S., 71% of consumers have ended a relationship due to a poor customer service experience, and the average U.S. customer surveyed had 11 interactions each year and ended 1.2 relationships. The average value of lost relationships in the U.S. is $289 per year.

Younger consumers differ sharply from older consumers in their willingness to switch:

• Consumers aged 27-43 terminated relationships most frequently, at 1.52 times per year
• Consumers under age 26, at 1.43 times per year
• Ages 44-62 did so once per year
• Those over 63 years old did so 0.71 times per year

Assisted service is well developed, with 78% of consumers saying their most satisfying experience occurred because of a capable and competent customer service representative. But self-service lags because it is not often intelligently integrated with assisted service. Consumers feel the most significant root causes of poor service are: 

• Repeating themselves 
• Being trapped in automated self-service 
• Forced to wait too long for service 
• Representatives don't know my history and value 
• Cannot switch between communication channels easily

33% cite voice self-service  as the most challenging channel compared to only 1% who find it most satisfying. And 38% of consumers said it is critical to improve voice self-service to make it more intelligently integrated with human assisted service. Where they were trapped in an automated system, consumers spent, on average, more than 9.5 minutes trying to reach a human.

When thinking of their most satisfying experience, consumers said competent service representatives played the largest role, while proactivity makes a significant difference. Consumers satisfaction is increased when four key needs are met:

• Competency
• Convenience
• Proactivity
• Personalization

Consumers felt that companies had done much more to improve in the area of competency than any of the others..

The Most Significant Factors In Satisfying Customer Experiences (% of Respondents)
Experience	% of Respondents Wanting
Competent customer service representatives	78%
The communication channels were convenient	48%
The company was proactive in reaching out to me	37%
The transaction was personalized	38%
Source: Genesys, October 2009

Consumers overwhelmingly said they would like more proactive outreach. More than 83% of consumers said they would find proactive engagement either a "strong benefit" or would "welcome proactive assistance" when they were stuck on the Web or in self-service.

Consumer Views of Proactive Contact

• "No Thanks"   9.5%
• Strong plus   48.8%
• Welcome   41.7

In prioritizing improvements cross-channel conversations, consumers want companies to enable them to: 

• Start in voice self-service and get assistance from an agent 
• Start on the Web and get voice assistance or chat from an agent 
• Receive an e-mail and then get assistance from a contact center 
• Schedule callbacks to avoid wait times 
• Add chat or instant messaging to Web interactions

In conclusion, the report notes that poor customer service has a clear and immediate impact on a company, and the first step should be to understand and measure the direct business impact of customer service, and identify the gaps between the customer experience and expectations.

Please begin a browser search here to access The Cost of Poor Customer Service Executive Summary and The Economic Impact of the Customer Experience in the U.S..

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0 comments on "Poor Customer Service Costs Companies $83 Billion Annually".

1. Les Blatt from Freelance New Media Person
   

   commented on: February 18, 2010 at 9:24 a.m.

   Right on the money, and it echoes what I (and a lot of people) have said for a very long time: customer service is the primary business of virtually every business. Ignore it (or outsource it to incompetents) at your peril.

2. Paula Lynn from Who Else Unlimited
   

   commented on: February 18, 2010 at 10:24 a.m.

   Companies look at the costs on a financial statement and contributes to the value of that company. Poor customer service is not reported on the balance sheet. Outsourcing to people who have a difficult time understanding English, not trained beyond what is in the manual in front of them, cannot connect you to the right person, cannot transfer you back to someone in the US, cannot help, being paid $11,000/yr with no benefits adds to stock profits. Training of telco reps whether here or there stands out. And the circle of competition is rather small with all doing the same.

3. Howie Goldfarb from Howie Goldfarb
   

   commented on: February 18, 2010 at 5:45 p.m.

   I agree. Aside from the numbers being quantified, everyone knew this. I will NEVER use a Spring phone because of trauma I had with them in the past. I once had my luggage taken by accident from JFK at midnight after a long flight from LA and American Airlines had no option for an operator when I called to tell them the culprit realized it and was bringing to them.

   Here is where I disagree with the CFO. They always marginalize customer service when there is pressure to make the numbers. As usual short term gain (bonus) vs long term loss (customers).

4. Mark allen Roberts from Out of the Box Solutions, LLC
   

   commented on: February 19, 2010 at 12:58 a.m.

   An article I plan to share,

   The root starts based on a "sales" or "market" driven focus. Sales driven companies drive and tell customers..

   Market driven leaders know their buyers, buyer needs, and create a buying experience to meet those needs.

   Mark Allen Roberts
   

5. Leanne Hoagland-smith from ADVANCED SYSTEMS
   

   commented on: April 7, 2010 at 10:58 a.m.

   The focus on customer loyalty has probably taken the focus off the exceptional Customer experience which is probably why these numbers continue to grow.

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