How Many Customers Does Your Business Lose to ‘Poor Customer Service?’

These are the numbers … and they make tough reading

Jason Deane
Jun 17, 2020 · 9 min read
How we all imagine our customer service rep to be …. Photo by Vinicius “amnx” Amano on Unsplash

We’ve all had to deal with bad customer service at some point.

If we’re honest, there’s some of us who know we’ve given it, perhaps because we were disillusioned with the company or because upper management turned a blind eye so long as targets were met. In any event, we can all agree that we don’t like it when we get it.

To be clear, I’m not talking about when something happens that we don’t like but is clearly not the fault of the company we’re dealing with.

I’m sure all of us have been in situation where someone near us is complaining in a loud voice to some poor company rep about something that bears little or no resemblance to any form of reality, presumably because they enjoy picking a fight or want to try to get an unwarranted discount.

These people cite ‘rights’, ‘want to see the manager’ and huff about in a way that makes us feel uncomfortable as they do so, behaviour that is often the subject of the ‘being a Karen’ memes currently doing the rounds on the internet, which, although I can’t help giggling at in a slightly childish way, does feel a tad unfair to those who are named so.

Instead, I am referring to something that a company has clearly and obviously done wrong, but refuses to man up and apologize for in a way that absolutely defies any sort of logic — a sort of ‘reverse Karen’ situation, if I may coin a phrase.

In my experience, this is far more common than it used to be. Presumably, this is due to a number of reasons to do with increased anonymity of the serving staff (remember the days when they used to give you their full name and direct phone number?) or fear of lawsuits if any sort of admission is made publicly. There also seems to be a general sense of irrelevance to the individual both by the company — which is often vast — and the customer, who has learned to have low expectations anyway.

But it’s not just direct contact where we now come to expect the worst.

Up until a few years ago, you were rewarded if you stayed with a company year after year. Now, in a turn of events that appears to make no sense at all, you are actually penalized.

Take any form of insurance, for example. When I first started driving, way back in the late eighties, my insurance company would give me a loyalty discount, on top of my normal ‘no claims’ discount, each year I stayed with them. It was the same for my house insurance.

These days, no-one would dream of staying with the same supplier because everyone knows that they will hike your bill and rely on your laziness not to notice, a practice each and every company has been slammed for and yet continues to do quite openly.

The most curious part of this is what they stand to gain. These companies must now bear the additional cost of constant administrative changes from lack of loyalty and embark on persistent advertising to win new customers, if only for a year at a time. Wouldn’t it make more sense to retain them year after year and cultivate a relationship?

One thing we know, especially with big corporates, is that it’s all about the money. If they are all doing it, we can safely assume the maths works in their favour. In other words, the profit made from those of us too lazy to change our policy each year (and pay more as a result) clearly outweighs the loss of those who spot they are being punished for loyalty and move suppliers, only to repeat the cycle ad infinitum for the rest of their lives.

It’s the modern-day — and more socially acceptable — equivalent of Ford’s 1968 infamous ‘Pinto memo’, where company officials did the maths and realized it was much more cost-efficient to let people die in a flawed vehicle and pay damages to the grieving families than it was to do the right thing and fix the fault before the cars left the forecourt. We may not let them die anymore, but the message appears to be still the same — it’s more profitable if we don’t look after the customer.

It’s gone from cultivating long term relationships between customer and supplier to a cutthroat battle of wits with each party trying to get the better of each other— why on earth would we expect good customer service then? It no longer fits the model.

But is this actually true?

You do, actually.

You’d much rather deal with a company who respects you, listens to your (genuine) concerns and does the best they can for you in terms of pricing and the service they provide. The total irony is, I bet you’d even pay a small premium for that. And pay it willingly.

In other words, you could find yourself in a position where you would still be paying more to stay with a company, but for different reasons.

On one hand, you’re dealing with an organisation who is deliberately using underhand tactics to try and take advantage of you when you stay with them, and on the other, you might have a small company who doesn’t have the economies of scale of the first. In the latter case, you end up being close to the same price anyway, except that now you have someone to go to who is much more likely to take action to solve a problem.

If it costs the same, which would you prefer?

The best analogy I can think of for explaining the difference between these two is the same difference between being told do something and being asked nicely and respectfully to do it. The two things might have the same outcome, they just have different emotions attached.

And it’s those emotions that many companies are seriously underestimating these days.

Back in the 1990s, I attended a training session through Microsoft intended to teach key personnel the importance of good customer service. At the time, Microsoft's image was of an uncaring behemoth that treated its customers with disdain and we were learning to deal with it.

Out of the many slides presented that have long been forgotten, one stuck in my mind and still does to this day. It’s a slide that we can all understand and relate to immediately. It’s a slide I have presented at countless Customer Sat meetings over the years since with my own companies and staff. It’s a slide we all know is true.

The slide was entitled “Why Companies Lose Customers” and was the result of some extensive research carried out by Nordstrom, a higher-end, well establish department store based in the US.

It read as follows:

Image: Author, based on Nordstrom findings 1990s

Clearly there are not many companies can do about people dying or moving away (although this must have become less relevant as the internet has proliferated), but the other 96% are all actually within the control of the organisation to one extent or another.

You can improve your product, you can prevent loss to competition by being better, you can even influence friends to some degree (either through marketing or direct experience) but the most obvious area of concern is, of course, the last entry.

Over two-thirds of people are lost due to how employees treat their customers. Of course, some of these will be ‘Karens’ who will never be satisfied anyway, but most will not be.

‘Indifference’ is a wide definition. It not only includes staff who may be less than helpful when someone asks where the toilet paper is in a supermarket, it also includes those who use logic-defying tactics to avoid taking responsibility for something that was clearly done wrong by the company in question.

I have hundreds of personal examples of this. Some of the cases are so outrageously ridiculous, if I was to repeat the stories you’d look at me in disbelief — you may well have your own similar experiences. Worse, most of them are basic failings which either show a complete lack of training by the company in the best case or, in the worst case, are a blatant attempt to save money by relying on consumer ignorance.

In my case, because my degree specialism was law, I have always been able to show that when, for example, a company delivers a faulty product they do, in fact, have to pay the postage to return it, despite how much they may protest. This really irks me, because these companies clearly know this is a fundamental part of UK law, but are clearly hoping that people will give up and pay for the postage themselves, thus saving the company the money.

Another common one is making a refund very difficult, again in the hope that the affected party will give up and take the loss.

For example, I am fighting a company that overcharged me a measly £16 in April 2018. What I thought would be simple refund and apology when I flagged it turned into a two-year battle that still rages. Whilst they agreed that they had overcharged me and it was their error, they have so far steadfastly refused to pay it back unless I follow a complicated three-week application procedure involving my bank directed by their finance department. This huge company has no facility to make payments to anyone’s bank account. At least that’s what they told me.

Needless to say, I always remained skeptical about this claim, especially as last month I applied my statutory rights and added late payment charges and interest to the amount, bringing it to £62. For the first time, I immediately received an email response offering to pay the original £16 on receipt of my bank details, which, incidentally, they already have. I also, for the first time, received a proper apology.

What did the company gain from this two-year charade? The administrative cost to them of forty or so emails and internal consultations with managers was probably hundreds of pounds. We will never have a relationship again. They have negative PR, and all for £16, they admitted they owed? Why?

And this is where the second part of Nordstrom’s research comes in:

A satisfied customer will, on average, tell FOUR people of their experience, whereas a dissatisfied customer will tell TEN.

These were figures from before the internet was entrenched in our lives, so how much bigger do you think they are now?

I personally don’t subscribe to this model of treating customers like numbers and relying on ever bigger numbers to replace those that leave. I never have. Perhaps I’m simply ‘Old School’, but even as a young man I could barely understand it and always strived to do the very best I could for everyone.

My own experience both as a consumer and as someone who has served customers is that retaining them is far most cost-effective than finding new ones and, even better, a portion of those customers you look after will do the marketing for you by telling people how great you are.

Unless, possibly, you are a huge corporation where the maths works differently, as we’ve seen. Even there I am skeptical and would like to see those numbers for myself one day.

But better than that, it’s the right thing to do, i.e. treating your fellow humans with a little respect, something that may some way to helping some of the situations we unfolding around us now.

However, if even that is not enough to convince you, here’s an actual real example of the difference it can make:

For nearly two decades I own and ran a chain of internet cafes and games zones in the south of England. During that time, we were shortlisted for ‘Customer Service’ awards on so many occasions I can’t even begin to count them. Every year, at the awards ceremonies, we were either finalists or winners. It created enormous PR and bought in droves of new customers looking to experience a level of service they just didn’t get elsewhere. And we retained those customers.

As the years went by, we took all the business from our local competition and in every town where we were based, we were the only operation that not only survived but thrived.

How did we do this? Simple. We made sure we were good at customer service AND we relied on everyone else being terrible at it, something they seemed happy to do for us. The net effect of two contrasting positions was so extreme, it secured our position then and in the future, even though some of them were better funded and more centrally located.

In short, customer service won out over location, facilities and price. It really is that important.

But, of course, none of this is a surprise to you, is it? You’re always going to give your business to people you like or who look after you. It’s always been the case, even though most companies have lost sight of this for the time being whilst competing over price alone.

So imagine what would happen if your company started going above and beyond in every customer interaction while your competitors didn’t?

Imagine indeed.

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Thanks to Niklas Göke

Jason Deane

Written by

I blog on things I am passionate about: Bitcoin, writing, money, life’s crazy turns and being a dad. Lover of learning, family and cheese. (jasondeane@msn.com)

The Startup

Get smarter at building your thing. Follow to join The Startup’s +8 million monthly readers & +724K followers.

Jason Deane

Written by

I blog on things I am passionate about: Bitcoin, writing, money, life’s crazy turns and being a dad. Lover of learning, family and cheese. (jasondeane@msn.com)

The Startup

Get smarter at building your thing. Follow to join The Startup’s +8 million monthly readers & +724K followers.

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