Is Bad Customer Service Killing Your Company?

Long wait times, unsatisfying or frustrating interactions, and employee disengagement may signal the need for resource reallocation

We’ve all experienced bad customer service, and more of us are experiencing it far more often.

You call into a company and sit on hold for over 30 minutes, only for someone to transfer you to the wrong department or hang up altogether. Or you speak to a representative who doesn’t address the problem and is surly, stressed, or has trouble communicating. Then there are the in-person conversations, where an overwhelmed employee treats a loyal customer like an annoyance.

Think of how you’ve felt during any of these interactions. Now, if you’re a business owner, consider how your customers feel if and when your company does it. The costs of poor customer service can be high, resulting in reduced loyalty or outright aversion to a business. Here’s a look at this trend, its negative impacts, and why company owners and managers should address these challenges before they cause serious harm. Fortunately, there are solutions that revolve around culture shaping, human resource initiatives, and people quality.

A growing customer-service problem

A February survey conducted by the AI voice technology firm Replicant found that “91% of consumers reported they have experienced poor customer service in the last six months.” About a third of respondents said the trend worsened during the pandemic. In addition, the latest annual “National Customer Rage study” found that “66% of consumers surveyed in 2020 […] experienced a problem with a product or service,” and “most of those who complained said they weren’t satisfied with the result.”

Many of these issues, especially regarding call centers, were exacerbated by COVID, as companies struggled with fewer resources and more demand for remote services. But the problem clearly predates the pandemic and extends to in-person interactions. In 2019, a Forbes contributor noted “The Decline of Customer Service in America,” including “a steady decline in the customer service levels of nearly every type of business.” Also in 2019, two business professors attempted to answer the question “Why Is Customer Service So Bad?” in the Harvard Business Review.

Those are just a tiny sample of headlines and research reflecting this trend, and citing statistics might be unnecessary. Nearly everyone has had terrible experiences interreacting with various businesses, from cable companies and insurance providers to local restaurants and retailers.

How much does bad customer service cost?

The financial impact of these negative interactions on all companies, primarily due to “customer switching to other providers,” varies. Estimates range from $75 billion to $494 billion to $1.6 trillion, depending on the research and methodology. The Replicant survey mentioned above found that 76% of respondents reported that a “poor customer service experience negatively impacts their perception of a brand and one in three [said] it affects loyalty.”

Also, consider these customer-service stats aggregated by the CRM platform Salesforce:

• “A customer is four times more likely to buy from a competitor if the problem is service-related rather than price or product-related (Bain & Company).

• The majority of Americans have decided not to make a purchase because of a poor customer service experience (American Express).

• It takes 12 positive customer experiences to make up for one negative experience (Ruby Newell-Legner’s ‘Understanding Customers’).

• It costs 6-7 times more to attract a new customer than to retain an existing customer (Kolsky).”

Clearly, bad customer service is a threat to businesses — but perhaps with one ‘big’ exception.

Researchers attempting to answer why customer service is so bad found that companies that are big enough to be near-monopolies can get away with it, to some extent. “[C]ompanies with few competitors may find it worthwhile to alienate angry customers in order to save on redress costs.” So, there’s a reason an organization like Comcast Cable (now branded Xfinity) can be routinely called “The worst company in America” and still be in business.

Nevertheless, unless you own or manage a massive airline or cable provider, treating customers poorly will likely hit the bottom line hard.

Identifying problems — and the chief customer-service goal

Many businesses have trouble delivering adequate service due to resource constraints, something that’s grown worse with The Great Resignation and the higher salaries and worker shortages resulting from it. And other companies fail to even recognize a problem until losses of loyal customers and revenue become apparent.

Recognition is the first step in addressing poor customer service. There are several ways to gain this visibility that vary based on the business and its interaction models. For example, a retail store or restaurant manager must pay attention to the number of complaints brought to their attention while directly observing employees and tracking sales statistics. In contrast, managers can measure virtual and phone services through reviewing sample interactions and a much greater quantity of data: hang-ups, resolutions, survey results, and complaints.

These investigations should be matched up with a clear definition of what good customer service is. The past maxims are that “the customer is always right,” and businesses should always attempt to “delight customers.” But several researchers writing in the Harvard Business Review argue that exceeding expectations isn’t a realistic goal anymore, nor something customers really want. Instead, businesses and their reps should aim to “make it easy:”

“[T]he key implication of our research: When it comes to service, companies create loyal customers primarily by helping them solve their problems quickly and easily.” In today’s bleak customer-service landscape, making things as convenient as possible may be viewed as going above and beyond.

Structural solutions and resource reallocation

From an HR perspective, how many employees are dedicated to customer service is key. And how well they are trained, incentivized, and engaged often directly impacts how they interact with customers. Research by Tempkin Group, a customer experience research firm, regards “employee engagement [as] one of four customer experience core competencies — in other words, if your employees aren’t engaged at work and in your business, the customer experience will suffer.”

In addition, the National Business Research Institute notes that employees’ inability to offer good customer service reduces their engagement and lowers their opinion of their employer, “eroding your company from the inside.”

Thus, owners and managers should evaluate staffing levels covering customer service issues, whether those resources are in-person representatives or leveraging call centers that must handle a certain volume. Recruiting the right people and training them properly increase the quality of customer interactions.

From there, it’s valuable to realistically assess employees’ workloads while creating a positive, customer-oriented culture and incenting individuals to provide better service. Various measurable, performance-based inputs can inform an incentive program, from surveys to complaint stats to customer retention rates. The important thing is implementing a quantifiable program and then actively managing and assessing it.

Remember, unless a business is a monopoly, customers can always go somewhere else. And they often do so after only a small number of terrible interactions with a company.

Fortunately, owners and managers who allocate enough resources to keep employees engaged, well-compensated, and incentivized — within a reasonable workload — can avoid this threat. Happy, engaged, and well-trained employees or contractors usually mean satisfied customers.

Karp HR Solutions helps businesses attract, retain, and motivate people through creative solutions and strategies that master the mix of finance and human resources. Contact us today for a free consultation.