• by Tanya Gazdik , March 24, 2011

One in five U.S. consumers says a bad customer experience leads him/her to switch brands, according to a Satmetrix study.

These findings suggest that companies can improve customer retention and acquisition by reallocating a portion of their advertising budget toward programs that improve customer experience and increase positive word of mouth, according to the San Mateo, Calif.-based company.

Of the more than 22,000 U.S. consumers surveyed nationwide, the 2011 Net Promoter Industry Benchmarks study found that bad customer experience prompted 22% of consumers to stop doing business with a provider during the second half of 2010. The study also found that word-of-mouth endorsements from friends or colleagues are the most trusted form of information when purchasing products or services, far more trusted than advertising. A majority of consumers reported that they had actively shared their customer experiences with others.

Businesses are expected to spend $214.3 billion on advertising in 2011, according to SNL Kagan. But only 4% of Americans trust advertising the most as an information source when choosing products or services. Instead, the Satmetrix study finds that consumers most trust recommendations from independent sources (83%), especially those with whom they have personal relationships.

Half of consumers cited personal recommendations from friends, family or colleagues as the most trustworthy source of information. And, approximately four times as many people trusted product test reviews (18%) or consumer opinions posted online (15%) as compared to advertising.

"Companies still need to advertise to create market awareness, but market trends such as the increased use of social media networks and consumer reviews online are all increasing transparency about the actual experiences that companies deliver, and what customers think of them," says John Abraham, general manager of Net Promoter programs at Satmetrix. "You just can't hide any longer behind bad quality. Advertising and marketing messages need to line up with customers' real experiences. So, first and foremost, you have to get the experience right."

Factors that have an immediate impact on the customer's personal experience with a company were the primary reasons consumers gave for defecting. Interacting with a rude or disinterested employee was cited most frequently (34%), while one in five consumers said they switched because of unexpected charges or fees and the same number listed poor product or service quality as the main reason. Factors with a less immediate impact caused fewer defections, for example, having an unfavorable return or refund policy was cited by only about 3% of consumers.