How Much Does Bad Customer Service Cost?

Written by Howie Fenton,
Senior Technology Consultant, NAPL

A few weeks ago, the first show from the consolidation of NAPL and AMSP occurred. I had the chance to talk about the importance of listening and being responsive to your customers. I dusted off an old presentation I had not used recently and it was very well received, because it talked about the cost of bad customer service.
The presentation was designed to motivate people to use tools such as focus groups, one-on-one customer meetings, and surveys to help create an early warning system to prevent customers from leaving. We also talked about using the voice of the customer in the strategic planning process, as well as some important survey trends such as Net Promoter Index (which is a tool that gauges the loyalty of a company’s customers), made famous by Fred Reichheld in the Harvard Business School article, “The One Number You Need to Grow” and the book, “The Ultimate Question.”
But what received the most interest was the opening slide which talked about the cost of bad customer service. We polled the audience and asked them to answer a series of questions. Here are just a few.

1. How much more does it cost to attract a new customer than to keep an existing one?
2. If you resolve issues on the spot, what percentage of customers will return?
3. What percentage of customers do not complain?
4. The average unhappy customer will remember the issue for how many years?
5. For every complaint, there are how many others with same complaint?

We got a wide variety of answers to these questions and, in most cases, people were surprised by the results. It was clear by the sounds and the number of people frantically taking notes that this was of great interest.
But, before you glance down to see the responses, try writing down your own answers. More often than not, you will be surprised at what you learn.

1. It costs 6 times more to attract a new customer than to keep an existing customer.
2. If an issue is resolved on the spot, 95% of those customers will continue ordering.
3. 97% of customers do not complain, even when they are unhappy.
4. The average unhappy customer will remember for 23 years.
5. For every complaint that’s lodged there are likely up to 25 more people with the same complaint.

A bad customer experience can result in the loss of that customer, but ongoing monitoring of your customers’ satisfaction can provide an early warning system about an unresolved issue…then give you the opportunity to resolve the issue without losing the customer.
We closed the presentation by talking about the cost/benefit ratio of better listening to customers. In other words, what is the cost to actively listening to customers and what are the benefits? An entry level campaign that automatically sends out short surveys with every job can cost a few thousand dollars a year. In most companies, a few thousand dollars is less than the revenue of your average customer. That means if you prevent just one customer from leaving, it would pay for itself.
Two parting questions for you to consider:

• If you look back over the last few years, how many customers did you lose because something happened that you never had a chance to address?
• Could that be different if you had a mechanism to monitor your customers’ satisfaction?

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Howie Fenton is a consultant and business advisor at NAPL. Howie advises commercial printers and in-plants on benchmarking performance against industry leaders, increasing productivity, and adding digital and value services through customer research. For more information click here.