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What is the True Cost of Losing a Customer?

Posted by Randy Clapp on Apr 9, 2019

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Smart business owners will know that satisfying each and every customer is essential for the long-term success of your business. However, while one negative experience may seem small compared to all of your good customer experiences, the effects of losing one customer is probably far greater than you’d expect. 

In fact, according to a study from Forbes, companies across the US are losing a staggering $62 billion per year due to poor customer service. This is because one bad experience can have a far greater knock-on effect than one good experience.

Here are some statistics on just how damaging a negative experience can be for your business:

  • 89 percent of consumers began purchasing from a competitor following a poor experience (RightNow Technologies).
  • It takes 12 positive experiences to make up for one bad one (“Understanding Customers” by Ruby Newell-Legner).
  • Consumers tell twice as many people about poor experiences than positive ones. (White House Office of Consumer Affairs).

Meanwhile, a recent survey from NewVoiceMedia found that, after experiencing poor customer service:

  • 37 percent of customers would change their supplier;
  • 28 percent would post a negative online review;
  • 26 percent would complain via social media;
  • 13 percent would tell friends/colleagues;
  • 10 percent would inform the media.

This isn’t to say that you can’t turn a bad experiencing around. In fact, good customer service can turn a negative experience into a positive one - but bad customer service on top of a bad experience will only drive customers away further.

What is the direct cost of losing a customer?

The cost of losing a customer isn’t as simple as the amount you lost in one particular sale. It’s important to assume that if the customer experience had a positive experience with both your company’s product/service and your customer support team, then they would not only continue to buy from your business but also recommend your services to others.

To get a better idea of how much each customer is worth to your business, it’s important to work out customer lifetime value (CLV).

CLV is a prediction of the total profit your business can expect from any given customer over the entire period of their relationship with your company. It can be calculated both historically over specific time periods, or it can be predictive.

Say your company generates $2,000 each year per customer, it costs $500 to acquire them and those customers have an average lifespan of 10 years. Your company’s CLV would be $2,000 x 10 - 500 = $19,500.

That means for every customer you lose from a bad experience, you aren’t just losing the immediate cost of the product or service - you are losing $19,500.

What are the social costs?

It’s not just about the direct profits you will lose from a negative experience either. Unhappy customers will tell others about their experience as well, whether that be their coworkers, family, friends or strangers through online reviews.

In an online world where everybody is constantly connected to social media, as well as reading reviews and information on the web before they make a purchase, a bad experience can be particularly damaging for your business. Especially when considering one single online review can reach thousands of readers.

In fact, recent research relating to negative customer experiences and word-of-mouth marketing has found:

  • News of bad service reaches twice as many ears as praise for a good experience (White House Office of Consumer Affairs).
  • 88 percent of customers are influenced by online reviews when making buying decisions (Zendesk).
  • 48 percent of people who had a negative experience told 10 or more people about it (Harvard Business Review).

There’s no real way of quantifying the business you lose through a negative experience that results in unfavourable word-of-mouth marketing, but it can be substantial.

By offering superior customer service through an outsourced contact center, however, your organization can prevent this from happening. Providing a great customer experience is not all about being a perfect business, it’s about being honest and open with your consumer and making their interactions with your company as seamless as possible - if you can do that, the customer service battle is half won.

Remember, it costs five times as much to acquire new customers than it does to retain existing ones.

One solution is to get professional help with an outsourced call center that has a track record of exceptional customer service. Advantage Communications provides outsourced customer service solutions that are custom-designed to be an extension of your business model and your brand.

Are you looking for more information about outsourcing your customer service to a call center in Canada, serving global clients? Contact Advantage Communications today and learn more about how we can help.

How to Outsource Your Contact Center

Topics: Customer Service Trends




Randy Clapp

Written by Randy Clapp

Randy Clapp has sold over $1 billion in the services industry working with leaders such as Hewlett-Packard, Electronic Data Systems, CompuCom and Avis Rental Car. He received EDS’ Inner Circle Award as one of the company’s top 100 performers, as well as the Top Leader Award with CompuCom. He earned his Bachelor Degree in Business Management and Economics from Northwood University. Randy Clapp attributes his success to: “…showing clients how to make or save money in ways they never thought possible”.

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