How a Negative Customer Experience can Erode Brand Loyalty

If you have ever seen a movie from the 1940s depicting the daily operations of a major department store, you might have noticed how customer complaints were handled. There was normally a single window with a clerk who was at best uncaring and at worst extremely rude. Customers lined up for a long wait to return a defective item, voice a complaint about a rude sales clerk, or protest an erroneous bill.

Surprisingly, the store retained most of these customers as their options were limited. If they wanted a particular type of merchandise or the best prices, they had no choice but to return. Customers back then were more willing to accept that no one was perfect and that mistakes happened.

You are not doing business in that era, however. Today you are dealing with customers who are always on, who expect you to be available on multiple channels and who want all of your online efforts to be seamlessly integrated. What might have been an inconsequential “ding” in a customer’s experience 50 years ago can today result in losing a customer — forever.

The damages that can result from a negative customer experience were highlighted in a recent study.

  • After a customer experience failure, 56 percent stopped doing business with the company or brand.
  • 80 percent of those who abandoned the brand stated they would never return.
  • Failures did not need to be major to have a detrimental impact. Almost one-fourth of the respondents classified failures that cost them less than 60 minutes of their time and under $20 to resolve as the “worst.”
  • However, the failure did not have to be fatal. Of those who remained customers after a failure, 85 percent became long-term, loyal customers if the company addressed the failure properly.

The study also showed that whether the customer considered a customer experience failure to be an annoyance or a deal-breaker depended on the customer’s age and location. Millennials, those born between approximately 1980 and 2000, were the most likely to end a relationship with a brand over a minor failure. Millennials are extremely comfortable with technology. However minor, they tend to be very critical of companies that experience “technical issues”. Customers in more-developed countries, such as the United States, Canada and Europe, were also more likely to judge a minor failure harshly.

In the modern economy, every customer experience failure could potentially result in a huge negative impact on brand loyalty, but even a small “win” can increase brand loyalty dramatically. It does not matter whether your internal reports classify issues as major or minor; what matters is how your customers classify them — and how you respond to them.

  • Different customer groups have different expectations. Customers in highly developed economies and the Millennial Generation will be less tolerant, so you will need to plan effective responses that are tailored to the different groups. Emphasize the customer experience from end-to-end and do not forget the importance of the post-sale experience. Leverage integrated systems to expedite all processes, from sales to customer service.
  • Give customers access to self-service solutions for minor customer experience failures. Most minor failures can be resolved at the first level. However, customers dislike long hold times when calling or long wait times for an online chat. Instead of hiring more staff, install options to let customers handle the issue on their schedule and from their preferred location. Updating an address, changing billing information, requesting a return authorization, tracking an order and similar functions should be convenient for the customer.
  • Be active on the social channels. As a group, millennials are especially fond of social networking sites. They expect to find you on these sites where they can interact with you. Keep in mind that they are also prone to posting about both their good and bad experiences, so be prepared to respond to praise or proactively resolve criticisms.

When it comes to the customer experience, it is not enough to try to picture how you would react to an issue. You must know your customers well enough to know how they would react — and then tailor your actions to satisfy their needs.

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