‘Poor Customer Service Costs $3.7 Trillion Per Year’

Research by Qualtrics XM Institute uncovers the possible consequences of negative customer service experiences

Voice of the CustomerInsights

Published: February 2, 2024

James Stephen

Qualtrics XM Institute has found that poor customer service could collectively result in losses of $3.7 trillion annually.

This represents a 19 percent rise from the estimated cost to businesses of roughly $600 billion last year.

After analyzing World Bank data, Qualtrics’ Experience Management (XM) resource, XM Institute, concluded that more than half the time, consumers are reducing or stopping spending altogether following bad customer experiences (CX).

Bruce Temkin, Head of Qualtrics XM Institute, spoke about the potential impact of negative customer experiences: “The price tag on delivering a bad customer experience has surged, even as many industries managed to reduce the frequency of bad experiences in 2023.

“While many industries reduced the frequency of their bad customer experiences, the price tag associated with those mistakes has surged.

In 2024, companies need to be more careful than ever not to mistreat customers, or they will dig themselves a long-term hole as customers head to their competitors.

Subpar service experiences can reportedly lead to a loss in revenue from just a single negative interaction.

According to the report, consumers have negative experiences with brands 14 percent of the time across a range of industries, including airlines, auto dealers, parcel delivery services, and fast food.

Following these experiences, 51 percent of consumers reduce or stop paying the company in question, with the figure rising to 60 percent for fast food services and parcel delivery providers.

Unfortunately, the XM Institute believes that the high cost associated with low-quality customer service coincides with trust in US businesses being at its lowest point since 2016 for non-pandemic years.

Although negative experiences have only dropped by 2.2 percent compared to last year, the world’s total household expenditure has risen by $7.7 trillion over the same time, which means businesses stand to lose out more as well.

More Findings from Qualtrics’ Report

Qualtrics uncovered in its Top Employee Trends for 2024 report that frontline workers, like bank tellers, cashiers, and restaurant servers, are experiencing low morale, with only one-third of employees who have been employed at a company for under six months planning on remaining there for more than three years.

Businesses can leverage artificial intelligence, Qualtrics suggests, to reduce the workload for workers and increase productivity.

Nearly three-quarters of customers (73 percent) are now happy to be served by a chatbot for straightforward inquiries, although 81 percent would still prefer to contact a human being when it comes to more complex issues, such as obtaining medical advice.

The ideal, therefore, would be to offer customers a combination of both human and AI support.

Temkin commented on the benefits of introducing AI to customer service operations: “Done well, AI can make frontline workers more effective and give customers faster access to the things they need.

However, with consumer trust hitting record low levels and fears of job loss among employees, organisations must take measured steps in incorporating AI into their business.

Qualtrics also found that although only one-third of consumers are giving direct feedback, such as through surveys, organizations can still leverage less direct approaches via chat, product reviews, and social media, which customers are utilizing more regularly.

AI can then be used to analyse customer feedback to help businesses gain a better understanding of customer needs to then make the changes they need to bolster experiences and increase their profitability.



Artificial IntelligenceWorkforce Optimization

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