NewVoiceMedia Report: Service Failures Cost $62 Billion Per Year

A new report from NewVoiceMedia estimates that poor customer service cost U.S. businesses $62 billion in 2015. 

That's a 50 percent increase from 2013. The short version of what's happening is customer service is getting worse and customers are defecting at a higher rate.

The real question is what does this mean to your business? And, what can be done about it?

Here are some key findings from the report along with some solutions and resources. You may also download the full report here.

The Big Problem: Customer Churn

A few months ago, I published a list of 13 ways to calculate the cost of customer service. Right at the top of the list was repeat business.

Customer churn, retention, turnover, or whatever you want to call it is a big issue. If a customer is doing business with your company and then takes that business to a competitor, you've lost money.

NewVoiceMedia cites an 11 percent increase in customers leaving a company due to poor customer service. It's helpful to do the math to see just how big a problem this is in your company.

I'll use a service failure example from Adobe Connect. I tried eight times to renew my subscription without success, but finally gave up due to their poor service.

Start by calculating your customers' average lifetime value. That's how much the typical customer spends per year multiplied by how many years a customer may reasonably do business with your company.

Here are my Adobe Connect numbers:

  • Annual revenue = $540
  • Years as a customer = 7
  • Lifetime value = $3,780

Next, calculate the number of customers you've lost over a given time period. 

Finally, multiple the number of lost customers by your customers' average lifetime value. I don't know how many customers Adobe Connect has lost due to this issue but I can show you the financial impact at various levels:

  • 100 customers lost = $378,000
  • 1,000 customers lost = $3,780,000
  • 10,000 customers lost = $37,800,000

NewVoiceMedia found that customers are getting even less tolerant of poor customer service. The report revealed that 33 percent of customers switched companies more than once in the past year due to poor service. And, 25 - 34 year-olds are 68 percent more likely to switch than the 55+ crowd.

 

The Culprit

In an age of technology, our technology is causing a lot of problems.

Self-service isn't easy or it doesn't work. One system doesn't talk to another. Agents don't have access to essential information. We still have to give the phone agent the same account number we just punched into our phone.

For Adobe Connect, I tried using self-service to renew my subscription but came up short. Next, I tried chatting with a service rep, but he didn't have access and couldn't help me. I also tried tweeting my issue without success. Both the chat rep and the twitter agent asked me to call.

This type of shoddy service drives customers to call your business for issues they'd be perfectly happy solving themselves. 

The NewVoiceMedia report found that 70 percent of customers thought calling was the quickest way to resolve an issue, but only 58 percent said the phone was their preferred channel. 

For many companies, the phone is the most expensive channel to serve. So, not only is poor service driving customers away, the customers we do keep are costing us more.

To address this issue, I recommend making a list of the top ten reasons that customers call your customer service department. Next, identify ways you can prevent those calls from happening in the first place. 

Here are just a few sample solutions:

  • Fix the issue that causes people to call.
  • Improve access to self-service on your website.
  • Make your website or app more intuitive.
  • Empower agents serving other channels to do more.
  • Proactively engage customers on known issues.

That last one looks like this:

Let's say you're a cable company and your service suddenly goes down in a neighborhood. This would normally trigger a flood of phone calls. You could reduce those calls by emailing affected customers, posting an update on your website (right by your phone number), and sharing the update via social media.

There will still be some customers who call. When they do, the 2015 National Rage Study from CCMC found that the number one thing these customers want is to be treated with dignity.

This means making sure your agents are trained to work with upset customers and are fully empowered to handle issues.

 

Resources

These resources can help you stem the tide of defecting customers.

The Effortless Experience is a great book that outlines how to make things easier for your customers to do business with you, and why that's an essential part of customer loyalty.

You can revamp your customer service survey or start up a customer listening program to identify reasons customers are unhappy before they leave. Here's a video-based training course that can help you.

A customer service assessment can help you take an internal look at your service operation. You can try the self-service starter version or request a consultation for a full in-depth assessment.

Finally, give your team phone-specific customer service training to help them prevent customers from leaving. You'll need a Lynda.com account to access the full training video, but you can get a 10-day trial.