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$74 billion loss risk for firms from poor customer service
Tue, 13th Feb 2024

Research published by Qualtrics has underscored the financial risk incurred by businesses due to declining customer service performance, exposing an annual risk of AU$74 billion. This report underscores the ever-increasing deliberateness with which Australian consumers are willing to slash spending following the receipt of subpar consumer services.

The report, published following an analysis of several high-profile incidents involving poor customer service by well-known brands last year, seeks to underscore the importance of customer service on business outcomes in Australia. It further provides guidance on how enterprises may enhance their customer interactions to boost profitability and increase customer loyalty.

The study reveals that the sectors leading in customer service are streaming providers, supermarkets, department stores, electronic manufacturers, and online retailers. These industries are reported to have delivered the least amount of poor experiences. Meanwhile, government agencies, property insurers, internet providers, utility companies, and mobile phone providers are sited to have recorded the highest range of poor experiences.

According to Qualtrics' findings, Australian businesses stand to lose AU$74 billion because of poor customer service. A trend accentuated by the upsurge in the number of Australian consumers deciding to limit their spending following a bad customer experience, a trend that has shot up to 55% from the previous 37% recorded 12 months prior.

The research also suggests that customers are encountering fewer bad experiences. It notes that one in every ten interactions with brands currently results in a poor experience, down from last year's one in every five interactions. Moreover, a quarter of the respondents reported general improvements in customer service in the last year, attributing it to more knowledgeable customer service representatives, shorter wait times, and improved product quality.

Interestingly, the research points out that 41% of Australians expect artificial intelligence (AI) to bolster the customer service levels. This sentiment is linked to expectations that AI will provide faster service times, aid in resolving complaints/queries more quickly, and accelerate delivery times.

According to Moira Dorsey, Principal XM Catalyst at the Qualtrics XM Institute, "All it takes is one bad experience or wrong move for an organisation to be punished...that's why in 2024 companies need to be more careful than ever not to mistreat customers.”

It is noteworthy that poor customer experiences are known for their bottom-line impact, understating the importance of AI in this regard. The research demonstrates that bad customer experiences are directly correlated to revenue losses in Australia. Particularly, following 41% of all bad experiences, consumers tend to diminish their spending, even cutting it entirely after an additional 14% of bad experiences.

Dorsey added, “Customers are placing a premium on human connection, and the most successful AI strategies are designing for this... Those that do this will be rewarded with increased sales, more satisfied customers, and highly engaged and productive employees,”.