How Changing Customer Expectations Affect Churn

by Jason Sterns

It’s no surprise to anyone in the contact center industry that customer expectations of service have changed thanks to advancements in technology, such as artificial intelligence, chatbots, and automation.

But those aren’t the only catalysts for change.

In its 2019 Customer Expectations Report, customer service software company Gladly revealed three new trends that are having great effect: consumers care more about the experience than the channel, they want companies to know them and provide personalized service, and they prefer quality in customer service over price.

How Do These Trends Affect Customer Churn?

Of the nearly 1,500 consumers Gladly surveyed, 84 percent said they would switch after three or fewer poor customer service experiences. Seventeen percent would stop after just one bad experience.

Of those who switched after a negative experience, almost half didn’t tell the company before they left, and of the 63 percent who left for better service, 52 percent did so without giving the company any warning whatsoever.

What Is the Cost of Customer Churn?

Suffice it to say, the loss of a customer costs a lot!

A report from call center technology firm CallMiner estimates the cost of customer churn runs into the billions ($136 billion to be exact). It’s an expense that takes several forms:

  • New customer acquisition costs. Research firm Forrester says it costs five times more to acquire new customers than it does to keep existing ones and 16 times more to bring a new customer up to the same level as a current one.
  • Loss of recurring revenue. New customers don’t spend as much as current customers, at least not a first.
  • Loss of expansion opportunity income. Along with the cost of recurring revenue each year, there’s the potential for loss of upsell opportunities.
  • Loss of brand credibility. The negative effect of dissatisfied customers telling their family, friends, and social network connection can damage a brand’s credibility in a way that’s hard to gauge financially but is real nonetheless.