New Data Warns About the $3.7 Trillion Annual Risk Due to Bad CX

Global organizations are facing a $3.7 trillion annual risk due to poor customer experiences, marking a substantial 19% increase compared to last year's projections, revealed a recent survey by Qualtrics. This stems from the impact of negative interactions, where just one unfavorable experience can lead to customer loss and a significant dent in potential future spending.

“The price tag on delivering a bad customer experience has surged, even as many industries managed to reduce the frequency of bad experiences in 2023. While many industries reduced the frequency of their bad customer experiences, the price tag associated with those mistakes has surged. In 2024, companies need to be more careful than ever not to mistreat customers, or they will dig themselves a long-term hole as customers head to their competitors," said Bruce Temkin, head of Qualtrics XM Institute.  

Consumer dissatisfaction spans various sectors, with respondents reporting very negative experiences with organizations 14% of the time across 20 diverse industries. The fallout is particularly seen in sectors like fast food, parcel delivery services, auto dealerships, and airlines. Following a negative encounter, consumers minimize or completely stop spending with a brand more than half the time (51% of negative experiences), rising to over 60% for low-cost switch industries like parcel delivery and fast food.

Poor customer service is proving increasingly costly for businesses, with a simultaneous decline in consumer trust, hitting its lowest point since 2016 (excluding the 2020 pandemic-induced crash). Although consumers report slightly fewer negative experiences, increased spending translates to higher revenue at risk. Total household consumption expenditure globally surged by over $7.7 trillion compared to the previous year, making the impact of negative interactions more pronounced.

Other studies have come to similar conclusions, revealing that 64% of consumers would not return to a brand after a single negative experience.

The benefits of frontline employee investment 

Investing in frontline employees yields positive results in enhancing customer experiences, as revealed by Qualtrics XM Institute. However, frontline workers, including cashiers, bank tellers, and restaurant servers, exhibit the lowest morale compared to other employee types. A lack of support to effectively perform their duties contributes to only one-third of frontline employees staying with a company for more than three years.

Additionally, businesses with frontline workforces are increasingly turning to AI to alleviate the burden on workers and boost productivity. Frontline employees see AI's potential in automating routine tasks, freeing them to focus on more complex responsibilities.

Balancing efficiency and human connection 

As organizations integrate AI into customer interactions, addressing consumer fears about losing the human connection is paramount. While 73% of consumers are comfortable using chatbots for simple, transactional activities, there is a strong preference for human interaction, especially in high-stakes scenarios like seeking medical advice (81%).

Moreover, companies face a challenge in extracting direct feedback from consumers, as only a third provide it following a bad experience. However, customers express their sentiments through indirect channels such as call center conversations, online chat, product reviews, and social media posts. Leveraging AI to analyze these unstructured forms of feedback enables businesses to gain a deeper understanding of customer expectations and preferences, bridging the gap between direct and indirect feedback sources.

Elsewhere, check out the latest report from Qualtrics, which highlights the top consumer trends to expect in 2024.