An organization that has poor customer service standards runs the risk of losing out to competition. The effect usually take years before it begins to manifest, and the eventual outcome is usually corporate extinction. Most of the time, companies are reluctant to invest resources necessary to make improvements in their service standard or customer’s experience because –
The link between customer satisfaction and loyalty can be hard to quantify, and often requires the services of professionals
The fact that a certain percentage of satisfied customers still defect gives them further excuses for inaction
Thus they pay little attention to things that negatively impact on their customer’s experience, and fail to see the clear business gains that can be obtained from embracing a customer focused culture which inevitably leads to higher service standards and more satisfied customers.
Here are four consequences having poor service standards can have on an organization.
#1. NEGATIVE BRAND PERCEPTION
Negative brand perception occurs when a business doesn’t live up to customers’ expectation – it’s service standards are poor and the customer feels undervalued or even cheated. It doesn’t matter how many marketing campaigns the company runs, if word of mouth or online reviews about the brand are majorly negative, those efforts are in vain. Sure they will be able to win new customers if the Adverts are brilliant enough, but you can bet they won’t be able to retain those customers for long.
Although your customers won’t love you if you give bad service, your competitors will
– Kate Zabriskie
Dimensional Research carried out a survey of 1046 people who had experiences with the customer service of a mid-sized company and found out that –
95% of the respondents share bad experiences
54% share bad experiences with more than 5 people
58% are more likely to tell others about their customer service experiences than they were 8 years ago (Read full report)
This means over 900 of the respondents tell someone about bad experiences, when you factor in social media, the numbers skyrocket to millions of people.
In 2013 British Airways passenger Hasan Syed paid for a “sponsored tweet” to broadcast his frustration directly to British Airways 302,000 Twitter followers. (Read here)
It might take years for the airline to recover from the negative perception this single tweet has generated.
#2. HIGH CUSTOMER ATTRITION RATES
The more competition a business has, the higher their customer attrition rates when service standards become poor. The 2011 Customer Experience Impact Report conducted by Harris Interactive revealed that – 89% of consumers began doing business with a competitor following a poor customer experience. You cannot have a loyal customer base, when your service is poor or your customers feel undervalued.
The only businesses relatively safe from high attrition rates as a result of poor service standards are monopolies, but even at that, they are leaving a vulnerable gap for would-be competitors to exploit. As soon as their customers experience better service elsewhere, they will not come back.
#3. LOSS OF REVENUE
With high attrition rates comes profit decline, when customers start taking their business to competitors, it means the company is not making as much profit as it’s supposed to. The company is not just losing customers, but prospects too. Insights from the IBM State of Marketing 2013 survey revealed that – in the United States alone, roughly US$83 billion is lost each year as a result of poor customer experiences. That amount is a huge sum of inflow lost as a result of poor service standards.
#4. DISENGAGED EMPLOYEES
Poor service standards leads to higher complaints rates, this takes it’s toll on the employees who have to deal with upset customers. No employee enjoys having to deal with upset customers, and even the most passionate employees do not enjoy being yelled at, if complaint rates are high, it could lead to burnout.
Nobody enjoys working for a company that feels like a sinking ship, top performers are likely to jump ship and this could further worsen the sad situation, as the company either spends more money to hire and train new employees or tries to manage with inadequate staffing, leading to even poorer service standards & over worked staff.
A report published by customer intelligence firm walker revealed that – By the year, 2020 customer experience will overtake price and product as the key brand differentiator. This makes it important that companies consistently seek new ways to improve their service standards & customers’ experience in order to remain relevant and profitable.