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Cost of poor service

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Case studies and papers

 


Cost of poor service - the economic truths

The success of a business, a government department or a public sector body, is either measured in financial terms, or limited by financial budget constraints. But a disconnect often occurs with investment decisions because although customer satisfaction, loyalty and advocacy is key to any organisation’s success, it is seldom expressed in financial terms.

Cost of poor service

Five economic truths of customer satisfaction quantify the financial returns on service investment

Working paper

 
Our complimentary working paper - “Counting the Costs of Bad Customer Experiences” cuts through the rhetoric of “customer satisfaction” summarises the “bottom line” impact of poor service to help quantify the financial risks of inaction and justify the imperative for improving customer satisfaction. 

Working paper

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Let’s talk

 
If there’s a specific customer challenge we can help you with and you’d like to meet for a discussion, in person, or by phone, or via Skype, please let us know. We would be delighted to learn more and explore ways we can help.

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Local government:

 
Our complimentary
local government working paper -
“Using satisfaction measurement to Improve Service and Reduce Costs” looks at how some councils achieved incremental improvements by building the customer into their service quality improvement programmes and turned satisfaction measurement into a source of management actions.

 Request a copy

   

Getting CX Right (Podcast Series)


Join us in our podcast series where we’re tackling some of the big challenges that often block the path to delivering effective customer experiences.

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The intuitive link between customer satisfaction and loyalty is one that can be hard to quantify. The fact that even satisfied customers defect has done more to drive companies to inaction than it has to demonstrate the clear business gains that can be derived from maximising customer satisfaction and harnessing the link between customer and employee value, satisfaction, loyalty and profit.

CTMA has found that dissatisfaction amongst customers and employees has a significant and measurable impact on financial outcomes for the organisations. For businesses it has a direct impact on growth and places revenue and profit at risk. For public sector organisations, poor service can significantly increase costs and sometimes lead other negative social and community outcomes.

By quantifying this impact, an organisation can prioritise their investments in service and establish a financial framework for customer-driven value creation.

The cost of customer dissatisfaction

There are five key economic truths that quantify financial return on investments made to customer service.  Organisations wishing to improve their corporate bottom-line must factor these into investment decisions and growth strategies:The relationship between customer satisfaction and loyalty

 

As satisfaction levels drop, loyalty drops faster

There is a significant drop in loyalty between “very satisfied” and “somewhat satisfied” customers - sometimes as much as 50%. A dangerous policy in many organisations is to ignore this fact and simply add together the percentage of “very satisfied” and “somewhat satisfied” customers to get a “better satisfaction score”.

Problems drive customers away

Customer loyalty varies from one industry to another but there is typically a 25% drop in loyalty among customers who experience a problem. In revenue terms this can be the equivalent of losing some, or all, of the revenue from one in every four customers who have experienced a problem.

More customers have problems than you think

For many organisations, the only measurement of problem-experience comes from their complaints department. Research shows that as many as 50% of your customers may actually be experiencing problems, even though only 5% of those may complain to your complaints department. As many as 95% of customers who experience a problem may say nothing to you at all.

Unhappy customers spread the word!

Our research confirms that customers typically to tell twice as many people about a bad experience with customer service than they do about a good one. Depending on the industry, between 5 and 10 people are told about an bad experience. Today, the dangers of negative word-of-mouth have been greatly amplified by the Internet and the power of social networks.

Effective customer service and response pays

CTMA’s research also confirms the importance of effectively responding to customers when they do complain. Customers can be very demanding but, with an effective response, it is still possible to obtain a more loyal customer afterwards - than you had before they experienced the problem!

Customer dissatisfaction with public sector services

Local governmentCTMA has worked closely with a number of public sector bodies to help measure and manage service quality and improve customer satisfaction.  The challenge for central and local government is often to justify investment in service improvement when their customers in many cases have nowhere else to go for the services they provide.

However, when the impact of poor service is measured in terms of its impact on the strategic outcome objectives of the public sector agency, the “cost” of poor service can be assessed in the context of the investment required to improve it.

For example, much of the work done by local councils is to respond to customers’ requests for service to address the ongoing maintenance of public infrastructure and amenities.  For these types of requests our research has identified four key factors that can lead to escalated service costs and reduced support and advocacy from customers.  These factors are:


By adopting an approach to customer experience measurement and service quality improvement, a transformation can occur that enables informed decisions to be made that maximise strategic and tactical returns on service quality investments.  In many cases, savings can be achieved and significant improvements made without incurring any additional service costs.

Request a copy of our local government working paper “Using satisfaction measurement to Improve Service and Reduce Costs” and learn more about the costs of poor service in local government and how to turn customer experience measurements into management actions. 

Request a copy

 

The cost of employee dissatisfaction

Employee dissatisfactionEmployee dissatisfaction can also be measured in financial terms. When employees experience problems and concerns with their employer or their job it can have a serious impact on:

 
Since customer satisfaction and employee satisfaction have such a direct influence on each other, when correctly managed, this can have a positive influence on profitability and growth.

Conversely, endemic dissatisfaction can quickly spread and lead to increased costs, reduced profits and corporate decline.

 

© CTMA New Zealand Ltd.

 
How we can help

Getting CX Right with CTMA - PodcastCTMA’s portfolio of consulting and research services is dedicated to helping organisations address these risks and help turn customer feedback and customer satisfaction measurement into management actions. We work internationally with organisations to help them achieve business success, reduce risk and build customer loyalty and advocacy.

Upcoming events:

From time-to-time we also run workshops, masterclasses, roadshows and online training courses to help organisations accelerate their progress towards being tuned success. Please check here for information about our upcoming public events.

 

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Additional resources

Calculating what you stand to loose - On-line tools

We have created a number of tools and calculators to assist in the calculation of the lifetime value of the customer, the revenue at risk from poor service and the cost of multiple call-backs from customers.

Please visit the Tools & Resources part of this web site for these and further insight into how customer dissatisfaction may be impacting your business.

 

Counting the cost of bad customer experiences - Working paper

Counting the cost of Bad Customer ExperiencesAt a time when most organisations are searching for ways to reduce their costs, a major challenge is how to justify investment in service quality and improving customer experience.

This paper cuts through the rhetoric of “customer satisfaction” and reveals the compelling financial reasons why business today is ALL about Customer Experience. It summarises the “bottom line” impact of poor service and identifies six key economic truths of customer experience that can help quantify the financial risks of inaction and justify the imperative for improving customer satisfaction.Request a copy

 

Local Government:

Local governmentUsing satisfaction measurement to Improve Service and Reduce Costs

Responding to customers and actioning their requests for service is a mounting cost for local councils. Managing the process to produce a satisfactory outcome for both customer and council is becoming an increasing and costly challenge.

This case study looks at how some New Zealand councils achieved incremental improvements by building the customer into their service quality improvement programmes and have turned satisfaction measurement into a source of management actions.Request a copy




Let’s talk

If there’s a specific customer challenge we can help you with and you’d like to meet for a discussion, in person, or by phone, or via Skype, please let us know. We would be delighted to learn more and explore ways we can help.

Please contact us to schedule some time for an introductory discussion.

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