With the internet and globalization providing customers nearly limitless choices, power has shifted from businesses to consumers. Consequently, it’s the customers that are making the call now. This major shift in power has made it extremely tough for businesses to sustain differentiation on the base of price or product alone. This has left businesses with the last resort to capitalize on distinguishable service and customer experiences, which adds more value to the product or service.
Great experience comes from great service which occurs when a business meets or exceeds customer expectations. But what happens when a business fails to meet customers’ expectations? According to 2011 CEI survey, 89 percent consumers switched to a rival company for business after having a poor customer service experience. This translates that poor customer service adversely affects revenue growth of businesses. Companies often end up neglecting the multiple impact poor service can have on their market reputation.
Following is a list of ways in which delivery of poor customer service can affect businesses and their market share:
Word of Mouth Effect
When consumers with concerns are mistreated by customer service representatives, they not only take their money elsewhere, but they also look to voice their opinion regarding the negative experiences. There is no better or convenient way to do this than by turning to social media, review sites and forums to express anger and disappointment. These platforms have tremendously bolstered the frequency of such messages, as many today have developed the habit of reading online reviews before buying a product or service.
Several studies have revealed that customers have the habit of sharing their bad service experiences with family, friends and other contacts.
Damages Company Image
Negative word of mouth can seriously damage the repute of a business besides ruining the sales because when the word hits the internet it spreads rapidly. Once the business loses goodwill it will also lose its value because in any economy 70 to 80 percent of the market value comes from intangible assets like goodwill, brand equity and intellectual capital. The worst part is that once goodwill is lost it is hard to reclaim it. According to “Understanding Customers” by Ruby Newell-Legner, customers require 12 good experiences to recompense for one bad experience.
Harms Market Share
Once the goodwill is stained, it won’t take your competing businesses much time to take over your clientele. Even most loyal and forgiving customers will take their business away from you if they experience poor level of customer service. The NewVoiceMedia’s survey has shown that 44 percent of more than 2000 customers in US had left a company after they were poorly treated. Of these, nearly 90 percent shifted once or twice during 2013.
Poor service reputation will prevent potential customers from doing business with you. Unpleasant experiences such as a rude representative, late response, long queues and untrained employees etc. compel new customers to walk out of a store even before making a purchase.
Decline in Revenue
Loss of customers typically leads to reduced business profits which adversely impacts stock value and shareholders. This initiates a negative sequence in which companies take measures to save money by reducing costs incurred on hiring and training. As a result, the customer service level further spirals down and makes it even more challenging for a company to enhance its proceeds. In such a scenario, it gradually starts becoming difficult for the company to meet its financial needs.
Reduces Employee Confidence
When a business fails to meet financial demands, often it looks to cut the cost by reducing number of employees. Such a move gravely effects employees’ morale and confidence, since lack of job security diverts their focus from work. Once the attention is shifted, their productivity also slides down. This leads to increased absenteeism, mistakes and more customer complaints. Therefore, it becomes a vicious cycle.
All in all, poor customer service effects a business in several ways and makes it tough for business owners to bring things back on track, if they continue to ignore this core issue.