The last few years have seen the pace of consumer behavior changes and technology advances become supercharged. And it’s only going to get faster.  

As the customer journey reshapes around new technologies and behaviors, we’re kicking off a series looking at how the speed of change is challenging the best efforts of brands, who are often left scrambling to keep up.  

We’ll look at the impact of new technology, how you can design optimal customer journeys and operational models, as well as how organizations can manage (and reduce) their costs. Talking of which, we’re beginning by examining the true cost of bad customer experience: what it looks like and how it manifests across the customer journey. 

Investing in the lifeblood of your business – your customers – should be a relatively simple task. But as businesses pore over their balance sheets and expenditure in an effort to find cost savings, customers sometimes get forgotten. Part of the challenge is that not enough companies know what it takes – and how much it really costs – to meet their customers’ needs. 

One thing we do know for certain is that winning and retaining customers is an increasing challenge. Brands exist in a world where any quote or price can be compared to the competition’s offer in seconds, a spotlight shone publicly on a poor experience by  disgruntled customer reviews and social media posts. 

Customers, rightly, don’t understand why their experience should be difficult or why it might hit problems when they switch channels or devices to talk to the same company. Declining tolerance of bad experiences makes poorly designed and executed customer journeys a significant barrier to sustainable growth. In this article we’re looking at some of those barriers. 

What Does Bad CX Look Like?

Let’s start with the basics. As new, nimbler, “digital native” disruptors with the ability to rapidly deploy simple, smooth experiences at scale demonstrate, your customers don’t just want seamless experiences, they expect them.  

To understand what bad CX might be costing you, first we need to understand what ‘bad CX’ looks, and feels like. Quite simply it’s anything that adds unnecessary friction or generates negative emotions for your customer. This can occur at any of the (potentially many) steps your customer takes along their journey to fulfil their mission. 

This can include existing touchpoints, processes, technology, culture, measures and incentives, organizational structures and even your operating model. Keeping customers ‘in the funnel’ is often a function of the experience they receive and the ease of the transaction. 

If You Can’t Measure It, You Can’t Manage It

Plenty of organizations understand their cost of acquisition during the sales process. Rarer is a deep understanding of the total cost to serve the end-to-end customer journey. 

By understanding all of the costs associated with meeting a customer need, the investment and improvements required will become much clearer, allowing you to focus your efforts for maximum return. As the adage goes, if you can’t measure it, you can’t manage it. 

The entire customer journey must be considered, from very early interactions, qualification and disqualification and the costs to serve through the lifecycle. By putting every element of the journey under the microscope, you can understand the exact touchpoints where poor experience is affecting your costs. 

When assessing the cost of your customer journeys, there are three key areas to understand. Firstly, how much it costs to acquire and service a customer. Secondly, the true cost of failure across the business. Finally, the cost of attrition. 

The Cost of Acquiring and Servicing a Customer

For many businesses, the total cost of acquiring or servicing customers is challenging to reveal. MI systems are often not set up to provide these holistic end-to-end views. Only by joining up the dots across the silos, from beginning to end, can you begin to understand the true cost of the customer journey. Your goal here should be to create journey dashboards. showing what customers are actually doing through a journey, and the total associated cost-to-serve as part of a balanced set of KPIs. 

If we understand what’s actually happening in a customer journey (versus the ‘happy path’ we hope for), it becomes possible to achieve a more accurate view of true cost. This provides a means of apportioning costs such as resources, technology, supply-chain etc to a journey. 

By zooming out, you can start to see the trends and what is, or isn’t, delivering value. These trends can help to spotlight less obvious costs of bad CX across the business. Together they make up the true cost that bad CX can inflict across an organization. Let’s take a look at some of them. 

The Cost of Failure Demand

When something goes wrong, what’s your response? Whether it’s a tweet, phone call or email of complaint, there’s a cost to having the right team responding promptly, even as they are making sure reputational damage is avoided. 

Can you identify every person that plays a part in resolving an issue when something doesn’t work as expected? Documenting precisely who deals with the fallout, who is accountable, and how much their time is worth, will reveal a far higher cost than you may have accounted for. 

For example, do members of your product team often get dragged into firefighting mode to make problems disappear? Is your finance team’s productivity affected by making payments to compensate disgruntled customers or dealing with fraudulent activities? 

The Cost of Losing Out on New Market Opportunities

Poor customer experience robs you of brand advocates. You lose a potent tool that could otherwise give your business the opportunity to enter completely new segments and be accepted based on a strong track-record. 

Conversely, frictionless customer journeys open up the opportunity for growth based on unmet needs, support new product development or move your business from one-off revenue to recurring models. 

Take Apple. Its reputation as a design-led, customer-focused technology business, first cemented through its computers, then music players and mobile devices, has enabled it to move into and succeed in new markets like TV and VR, with the backing of a loyal supporter base. Its simple-to-use, intuitive interfaces are applied across its entire product range and it will be interesting to see if its success extends to its recent (but long-developed) foray into VR. 

The Cost of Regulations and Risk

When organizations place the customer at the heart of their work they are less likely to be surprised by change, or incur heavy costs to meet new regulations. In those cases customer journey design often aligns closely with regulation, because handled properly, regulation can be a force for good.  

By taking a step-by-step design-led approach you can reduce many risks, whether financial, reputational, legal or operational, and deliver a consistent and easily repeatable process. 

The Cost of Losing Talent

Research from Warwick Business School has shown that the most powerful impact of good complaint handling was not customer advocacy but employee loyalty. It found staff were more likely to commit themselves to an organization that they truly believed was serious about customer service. 

The flipside of this is a team that doesn’t feel committed or inspired by their company’s dedication to its customers. Where businesses genuinely care about customers, and this is reciprocated, you will create an environment which attracts and retains the right people. The result is a self-fulfilling cycle that creates an open and engaged culture to drive ongoing performance improvements. 

When Bad CX Loses Customers

When examining customer attrition, there are three angles to consider. Firstly, the cost to acquire a replacement customer and the direct revenue lost from a customers’ decision to go elsewhere. 

Failing to gain new customers (and losing existing ones) both affect revenue growth and increase your costs by making it more expensive to recruit new users. Customers who experience high-friction customer journeys will not only leave, but tell others why. Lower conversion rates means spending more time and money trying to win new customers who don’t necessarily stay around for long, all while handling more complaints and potential returns. 

The second issue to consider is the impact that detractors can have on your conversion rates across social media, press and PR, and the cost of this. Public perception is magnified through the lens of social media, reviews, forums and the press. You seldom get a second chance to make a first impression. Reductions in referrals and website traffic views may be symptomatic of larger customer experience issues and, while more challenging to quantify, could ultimately carry a higher value. 

As consumers, we have all endured a poor customer experience that not only prevented us from completing a purchase, but was also responsible for us saying the words “I’ll never buy from them again, and I’m telling all my friends.” Esteban Kolsky, the founder of ThinkJar, reported that 66% of consumers abandon companies because of poor service. You should never undervalue the cost that may be attributed to unsatisfactory customer experiences.

Finally, bear in mind the administration costs associated with a lost customer, such as closing their account. Of course there may be other factors beyond the customer experience, like price, that could be influencing your retention rates so context must play a role.