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How much does poor customer service cost your business?

January 03, 2020 at 12:50 PM

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For many organisations, customer service is considered nothing more than a cost associated with doing business. This, as evidence has shown, is a near-sighted perspective that ends up costing businesses a lot and sometimes results in their complete failure.

While it’s possible to get away with lacklustre customer service in some industries or market segments where customer expectations are low, these are exceptions and customers will generally reward businesses that provide a hassle-free experience for them.

With great customer service, you can easily overcome the constraints of poor marketing. It’s, however, very difficult (and costly) to compensate for bad customer service even with the most effective marketing tactics.

In this post, we look at the impact of poor customer service on businesses to help you improve and guide your business to prosperity.

Reputation damage.

Reputation is very much like trust: it takes years to build but can be destroyed in just an instant.  This makes your brand's reputation an important part of your business that should be protected at all costs.  

In today's interconnected world, your reputation will be the first thing to suffer whenever you’re having extended streaks of dissatisfied customers. That’s because, through the internet, all a customer needs is a few minutes and they can leave your business damaging reviews and even make their frustrations known to their colleagues, friends, family and the entire world at large through their social media.

These in-public negative feedbacks will not only lose you potential customers who come across them but will also reduce your reach with word-of-mouth marketing – one of the most important marketing channels available to a brand.

Poor lead conversions.

Having poor customer service will reduce your business’ ability to convert leads into sales. It’s easy to assume that “customer” service only applies to the customers that you have already acquired, but actually it also covers your interactions with leads and prospects. 

If potential customers are having a difficult time trying to get their inquiries answered by your salespeople, it’s only natural for them to assume that the customer service will only deteriorate once they have actually completed the transaction and paid their bill. Because, if you’re already treating them poorly when you’re trying to get their money, what will happen once you have it?

Poor customer service upfront creates a negative first impression and scares prospects and leads from doing business with you.

Decreased customer-lifetime value.

Anyone who has been in business for more than a day understands the fact that customer acquisition is significantly more expensive than customer retention. In other words, it will cost you more to get new customers than to keep those you already have. 

Customers who have engaged with your business and had a bad experience will not want to deal with it again in the future. This means that your business will lose all the future sales that could have come from that customer.

If it persists, bad customer service will have the effect of straining your marketing budget as you will need to do more to attract new customers.

 

Loss of quality employees.

Poor customer service will not only lose your business customers but if untreated, it could also end up losing you the best among your employees. That’s because your best employees will be forced to put in more work to cover their bad counterparts whenever there is a problem with customer service. 

This might not be an issue in the short-term, but it will cause dissatisfaction and burnout among those good people that you rely upon most leading to their unnatural attrition. Additionally, your top performers might start noticing that the company is developing a poor reputation and jump ship before things completely fall apart   

Consistent loss in profits.

Above everything else, poor customer service will lead your business into a profit-sucking cycle. After your reputation is damaged, you will have a hard time generating new sales – especially those that come from referrals. With time even your most loyal clients will start to go. 

As a result, you will either need to reduce costs or increase marketing to get new clients, in order for your company to remain in the black.

Cutting costs means you’ll still need to improve on customer service by recruiting new staff or training your workforce – which will cost you resources. Throwing money at marketing, on the other hand, might get you new clients, but it will only aggravate the issue as you scale up.

Losing a customer is always costly to any business, but this cost can become tremendously high if the reason for losing the customer was as a result of negative customer experience. That’s because the effects of losing a customer to a bad experience can linger on for years with customers avoiding the culprit-company long after their negative experience.