The Cost of Bad Customer Service

Our Renaissance Executive Forums CEO Groups in DFW read the Book Raving Fans and talked about how this can help us create a perfect vision of customer service based on the customer. Bad Customer service is costing businesses billions of dollars each year. How much is it costing you?

Effects of Bad Customer Service

It’s only normal for small mistakes to happen or to encounter customers that are impossible to deal with. These are generally small bumps in the road and don’t constitute bad customer service. 

These situations, however, are usually considered universally unacceptable:

 • Long wait times and slow response times.
 • Poor attention to detail.
 • Company reps with a lack of experience, knowledge, or character.
 • Unprofessional and impersonal interactions.

Companies who are guilty of these bad customer service traits often face negative consequences, many of which are difficult to overcome.

“It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you’ll do things differently.” – Warren Buffett

1. A Damaged Reputation

Your brand’s reputation is incredibly valuable and not something you want to lose control of. However, especially with the internet, your reputation is the first thing to take a hit when you have an extended streak of bad customer service.

Customers today are quick to write negative reviews online when they have a bad experience with a company. In addition to leaving critical reviews, customers also vent their frustrations on social media for the entire world to see. This will have an effect on future orders.

2. Leads Don’t Convert

Bad customer service kills conversion. Imagine what your leads are thinking when they request a consultation and never hear back, when they have to wait on hold forever, or when sales reps are slow to respond.

“If this is the service I get when they’re trying to take my money, how are they going to treat me once they have it?”

Customer service departments already have a negative stigma associated with them as a whole, so why not surprise people with a positive experience? Make it a Raving Fan experience! Great customer service upfront leaves an awesome first impression and gets leads excited about doing business with your company.

3. Your Customer Lifetime Value Drops

Acquiring new customers is usually more expensive than keeping your current customers and that is one of the primary reasons delivering great customer service is so important. 

 • 9 out of 10 customers are willing to pay more to ensure a good customer experience.
 • 70% will continue to do business with you if you resolve a complaint.

Bad customer service can destroy your average customer lifetime value, putting more strain on your marketing budget to attract more customers. Good customer service can actually save these relationships. 

Marketers often get caught up in focusing solely on customer acquisition, when customer retention generally has a higher ROI.

The Cost of Bad Customer Service

4. You Lose Your Best Employees

Bad customer service has negative side effects in all areas of business. Not only do you lose customers, but you run the risk of losing your best employees who won’t put up with the stress of dealing with unhappy customers.

When your company has a customer service problem, your best employees are forced to pick up the slack for bad employees. This leads to burnout and dissatisfaction from the people you rely on most. If your company develops a bad reputation, your top performers may also jump ship when they realize things are going south. 

Reward your best employees and don’t keep bad employees around.

Great customer service starts with great company culture.  

Average employees will perform to the level that’s considered “normal” in your company culture. When bad customer service is normal, they don’t feel incentivized to improve. However, a company culture where quick, friendly, and professional customer service is expected sets the bar higher for average employees to step up or step aside.

The positive side effect of great company culture is that it attracts better employees and gives them a reason to stick around, which ultimately improves all areas of business, including customer service.

5. Bad Customer Services Eats Up Profits

Bad customer service creates a downward spiral for profits.

 • First, your reputation gets damaged and you start losing new sales, especially from referrals, then even your loyal customers start to leave.
At this point, you’re forced to decide, do you cut costs and try to ride it out or do you double down on marketing to attract new customers?
 • If you cut costs to make up for the lack of revenue, you still have to improve your customer service through training or recruitment, which requires more resources.
 • On the other hand, trying to outspend your poor customer service in marketing might attract new customers, but the problem only gets worse with scale.

Be proactive today and assess your team to see what you need to do to build a Raving Fans level of Customer Service. If you need help with this contact me.

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