Inflation, low morale among frontline workers, and a reluctance of consumers to give feedback contribute to a 19% increase in lost revenue.
Remember that time you had a terrible experience with a company? Maybe a rude interaction with customer service, a frustrating website, or a product that just didn’t work? Turns out, your frustration is costing businesses big bucks. A new study by Qualtrics XM Institute reveals that globally, companies are putting $3.7 trillion at risk annually due to bad customer experiences, a steep increase of 19% from last year.
That’s right, one negative interaction can mean losing a customer and their future business. Consumers reported having very negative experiences 14% of the time across various industries, from fast food to airlines. And guess what? After a bad experience, more than half (51%) stopped spending with that brand. This number jumps even higher (over 60%) for industries like fast food and delivery services, where switching is easy.
It’s not just a customer satisfaction issue anymore, it’s a financial one. Consumer trust in businesses is at its lowest point since 2016, outside of the pandemic slump. While companies are reporting slightly fewer negative experiences, the total spending at risk is higher due to increased consumer spending overall.
“The price tag on delivering a bad customer experience has surged,” says Bruce Temkin, head of Qualtrics XM Institute. “While some industries reduced the frequency of bad experiences, the cost of those mistakes has ballooned.” So, companies need to be extra cautious in 2024 or risk losing customers to competitors.
The good news? Investing in happy and empowered frontline employees pays off with better customer experiences. However, research shows these employees (cashiers, servers, etc.) often have the worst morale and feel unsupported. This contributes to high turnover, with only a third of new frontline employees planning to stay beyond three years.
So, what’s the answer? Many companies are turning to AI, hoping to ease the burden on workers and boost productivity. Employees see AI as a tool to automate routine tasks, allowing them to focus on more complex work. But there’s a catch: consumers want AI for simple tasks like checking order status but prefer human interaction for complex issues like medical advice.
“AI can be a powerful tool,” says Temkin, “but with consumer trust low and employee job security concerns, companies need to tread carefully.”
The study also reveals a shift in how customers provide feedback. While only a third offer direct feedback after a bad experience, many express their frustration indirectly through calls, chats, reviews, and social media. AI can analyze this unstructured data, giving companies a richer understanding of customer needs and expectations.
Also Read: How Sweat Economy Revolutionizes Customer Loyalty through Rewarding Physical Activity
The bottom line? Happy customers equal healthy businesses. By investing in empowered employees, using AI responsibly, and listening to direct and indirect feedback, companies can avoid the high cost of a frown and build long-term customer loyalty.
