February 28, 2024

Bad customer experiences could cost organizations around the world $3.7 trillion annually, according to new research by the experience management company Qualtrics XM Institute. This figure is up 19% ($600 billion) from the company’s projections last year.

Qualtrics surveyed about 28,400 consumers during the third quarter of 2023 about their bad experiences with organizations across 20 different industries. The survey revealed that consumers reported having 2% fewer negative experiences compared to the prior year. However, increased consumer spending and other factors has resulted in these bad experiences costing organizations more.

Overall, consumers reported that 14% of their experiences were very poor, and over half (51%) said they have reduced or cut their spending with a company over a negative experience.

Head of Qualtrics XM Institute Bruce Temkin suggested that the increased reaction to negative experiences could be a consequence of the pandemic, when everyone gave each other a little more grace.

“I think a lot of people are bursting at the seam in being nice and accommodating,” Temkin said. “So we’re seeing a little bit of I think an overreaction of people to bad experiences that for a few years they were willing to let slide.”

Where are consumers cutting their spending

Temkin said that consumers were more likely to cut spending at organizations that had alternatives.

Fast food restaurants were the highest sector (64%) in which consumers reported reducing or cutting spending after a bad experience. They were followed by parcel delivery services and credit card providers at 61% and 58%, respectively.

In contrast, public utilities were at the bottom, with only 37% of consumers saying they would reduce or cut spending. College and property insurers came in at second and third to last, at 41% and 45%, respectively.

Some countries are more forgiving

The report also found that there were differences in how consumers in different countries reacted to poor customer experiences.

France, Brazil, and Colombia had the highest percentage of consumers who said they decreased or stopped their spending after a bad experience at 63%, 61%, and 60%, respectively.

The countries less likely to respond that way were New Zealand (37%), Netherlands (39%), and Japan (39%).

“People do respond differently in different parts of the world,” Temkin said.

He added that some countries are more willing to accept whatever experience an organization offers while other countries are more likely to have a view that a company needs to serve their particular needs.

Frontline workers need support

In order to reduce loss of revenue due to bad experiences, Temkin recommends companies train and support their frontline employees better.

“First of all, you need to show them that you care and you have their back so they don’t feel pressured and squeezed when there’s a bad experience,” Temkin said.

He also said that employers need to provide workers with the tools and processes to better deal with problems as they arise.

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