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Poor Customer Service Costs Billions
A new multinational survey attributes $338.5 billion in lost business to flawed customer service efforts.
Posted Dec 4, 2009
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Oftentimes customer service supervisors and managers have run into difficulty when asking members of the c-suite for additional money to invest in technology and people to help improve customer service, because the metrics traditionally measured by contact centers just don't translate for senior executives.

A new study, "The Cost of Poor Customer Service: The Economic Impact of the Customer Experience and Engagement," may finally put the damage bad service can create into a language executive boards understand -- dollars and cents. According to the survey of 8,880 consumers across 16 countries, poor customer service cost an aggregate of $338.5 billion per year, the average value of each lost relationship across all countries surveyed costing $243.

For the purposes of the study, commissioned by Genesys Telecommunications Laboratories but carried out by Greenfield Online and Ovum, losses were defined as transactions taken to a competitor -- accounting for 63 percent of the total -- or ones abandoned entirely, accounting for the remaining 37 percent.

Daniel Hong, lead analyst of customer interaction technologies at Ovum, was surprised at just how high the final figure ended up being. "I didn't know that customer frustration actually translated into this much lost," he admits. "Once you see this across the board, you realize this is really a problem. Companies need to think twice about their customer service strategies. This study speaks volumes."

According to study findings, companies in the financial services and telecommunications sectors should take special notice. Statistics reveal that financial services firms lost more than $44 billion, while cable and satellite television providers lost upwards of $37 billion. Wireless carriers and Internet service providers each lost $36 billion, with landline carriers posting $33 billion in lost revenues.

Speaking specifically about financial services, which has had a rollercoaster year with massive consolidation and external economic pressures, Hong says the vertical is interesting because many have a love/hate relationship with their banks. He also believes the consolidation and migration strategies haven't always worked as planned. "Obviously there are disparate back-end systems that must also be integrated seamlessly, and that takes time," he says.

David Radoff, Genesys spokesperson, explains the banking sector is at greater risk due the growing use of online banking, and the expectation the sector will be a leader of new technology. "It's under the microscope more than other industries, but it has also invested more than others in trying to fix issues," he adds.

The study seems to back up these claims. When respondents were asked to select industries that did the best and worst job of customer service, the financial services sector was among the highest rated verticals, along with consumer products and travel/hospitality. "Customer satisfaction can be really high amongst customers with their banks, or they may absolutely hate them," Hong says.

Financial services and otherwise, the most significant reasons for poor service according to the study are:

  • being trapped in automated self-service;
  • waiting too long for service;
  • callers having to repeat themselves; and
  • customer service representatives lacking the skills to answer inquiries.

Consequently, what then ended up at the top of many respondents' wish lists for customer service improvements included better integration between self-service and assisted service, including voice and Web. Hong says integrating multiple communication channels is only recently possible, but still expensive to tie together point solutions from disparate vendors via professional services.

While purchasing suites from vendors can ease that integration, Hong adds office politics still can rule the day. "Different departments still don't speak with each other, and that process has to change," he says. "Say you call into a contact center for a bank to find out how much you have in your account, and you have some questions about navigating the Web site. Many agents can't answer that and have to transfer you to a Web team. The left hand doesn't know what the right hand is doing."

Now add in consumer fervor for social media use into the mix, and there could be potential for disaster. While Hong says Ovum is "bullish" on social media, it will take awhile -- he estimates within the next 10 years -- for it to become a major communication channel. It doesn't mean companies should shirk having a presence in social media entirely, but prioritize. "You need to focus on the majority of interactions, and that's not social media," he says. "You must integrate the basic channels you before moving onto social media."

News relevant to the customer relationship management industry is posted several times a day on destinationCRM.com, in addition to the news section Insight that appears every month in the pages of CRM magazine. You may leave a public comment regarding this article by clicking on "Comments" at the top; to contact the editors, please email editor@destinationCRM.com.

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