The Hidden Costs of Poor Customer Service

25 August 2016

Whether you are the CEO, the receptionist or the guard at the gate, customer interaction is an inevitable part of our day. While the pundits stress that any interaction with a customer is a service touch point, the reality is far from it. Receptionists are not always friendly and most guards couldn’t care less.

People want to talk to real people that can help!

We are all aware of the pitfalls of poor customer service, but what are the real costs to a business?  Research shows that bad customer service costs companies $338.5 billion a year, globally. But before we dive into the building blocks of bad customer service. Let’s look at the flipside – what qualifies as good customer service?

The fundamental requirement to providing good customer service is “Knowing Your Customer”. KYC is the cornerstone of any long-term client relationship. If you know your customer – you can provide personalized service and you can provide the service in a manner that is convenient to them.

If you know your customer, and the customer touch points and your employees are competent and responsive – that’s good customer service.

Unfortunately, as a survey suggests, most companies that think they provide good customer service, don’t … in the eyes of the customer.

So why do so many companies fail at providing good customer service and what are the hidden costs of poor customer service?


  1. One of the biggest pitfalls of poor customer service is that most dissatisfied customers don’t complain. You generally hear from only 4% of unsatisfied customers.  As for the rest, they simply find somewhere else to go.
  2. Poor customer service also leads to loss of business – the opportunity cost of this is immeasurable. There is no magic formula that can calculate the dollar amount that you have lost to potential customers.
  3. Word gets around. Today with social media word gets around at the speed of light. This leads to a bad reputation. Your partners and affiliates may back out due to this. Take the recent Ryan Lochte Olympics robbery debacle – four of his sponsors dropped him overnight as it was affecting their brand values and integrity.
  4. Hiring top talent will prove to be challenging. Individuals are brands in their own right. They will never associate themselves with companies that have a reputation of providing poor customer service. Which means the competency required to provide good customer service is no longer available to you.

Let’s look at some numbers associated with poor customer service:


  1. 67% will never use your services again after a bad experience
  2. 49% will not recommend you to friends and family
  3. 34% will share a review online or on social media


With point #1 and #2 the fallout isn’t that great. Point #3 is the worst-case scenario, where if the review states your service is poor, this could have a colossal ripple effect on your business for months, if not years. As you know, once something is published in cyberspace, it is ridiculously difficult to erase.


You might think that your product is so unique that customers have no choice but to come to you. Wrong! Customers rarely remember the product; they remember the service they received when buying the product.  Their positive or negative experience reflects on what and who you are as a business.


In Dubai for example, Sheikh Mohammed bin Rashid Al Maktoum, the UAE’s Prime Minister and Emir of Dubai recently announced that his new cabinet included its first “Minister of State for Happiness”. Why do you think this is?


Dubai is one of the most cosmopolitan cities on the planet, with access to world-class infrastructure and facilities. Why should the government care about the happiness index of people? The government understands that they are not selling facilities, goods or services, they are selling experiences. The ultimate goal of any experience is happiness. If Dubai is to retain the people who move there, then they need to make them happy and keep them happy.


Would you spend money on something that makes you unhappy? Then why should your customers? The cornerstone to happy customers and customer retention is obviously good customer service.


How do you recover from bad customer service?


Whilst we can all agree that technology has made our lives easier, it has also automated many of our daily human interactions – this includes customer service.  More and more customers are demanding live interaction.  You can recover by providing more hands on service, by interacting with your customers via their preferred channels and by providing better content.  These are easier said that done, but over a period of time, they have a positive impact on your bottom line and keep your customers happy J.

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