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Nonsense Numbers: $75 Billion Lost Due To Poor Customer Service….But Where Does It Go?

In an article entitled Businesses Lose $75 Billion Due To Poor Customer Service, appearing in Forbes and dated May 17, 2018, customer service “expert” Shep Hyken explains:

NewVoiceMedia’s 2018 “Serial Switchers” report reveals that poor customer service is costing businesses more than $75 billion a year. That’s up $13 billion since its last report in 2016.

That’s a lot of money, particularly when it’s recurring each year. That’s 75 billion this year, and probably more next year, and the next year according to the trends in the “research”.

If you could reclaim that money, and use it constructively, imagine how many jobs it might save, or what good it could do. You could build a wall, even over a few years.

Or could you?

What Do These Numbers Actually Say?

Nothing. Nada, Bupkis. The simple test for this is to ask the obvious question:

Where did/does this money actually go?

After all if businesses are “losing” 75 billion doesn’t the money have to go somewhere?

Of course, even those with limited numeric ability (like Shep and the researchers reporting) will quickly realize that it doesn’t “GO” anywhere. it’s not real money that you could reclaim and use for something else. It’s not “countable” because these losses are illusory. Ultimately, it’s not “lost” at all. Even a modicum of critical thinking tells us that if the money doesn’t go somewhere we can find it, that it’s not lost, and it can’t be regained either, because it’s simply not real.

But, you say, it’s still important. After all, it’s losses in potential business. A customer pissed off at a company will…wait, what will that customer do? Either s/he will take his/her business elsewhere, or the person won’t buy anything at all. Only in the later will potential revenue be “be lost” in any real sense, but that’s not how customers behave.

When customers gets upset at poor customer service, they take their business elsewhere (mostly) to a competitor. They don’t just throw up their hands and stop buying things they want and need due to poor service. No money is lost — it’s simply redirected from one business to another business.

These numbers are bullshit when aggregated across an entire economic system, as are all similar numbers. For example, during the U.S. federal government shutdown in 2018, we heard daily that each day of the shutdown cost six billion dollars. Tell me, what does that mean? That’s also money that isn’t real. We regularly hear of the billions lost each year as a result of “poor employee engagement”, but nobody ever tells us where that money goes. Well, it doesn’t go anywhere, because there is no there there.

There’s no question that an individual customer can lose business, revenue and profits if it manages to upset and alienate its clientele. Nobody is arguing that customer service is not important ALTHOUGH the actual effects on an individual business are usually much over-stated. But why, oh why do research companies, customer service expert (like Shep Hyken) and the media persist in disseminating what are absolutely nonsensical numbers to support the idea that customer service can be a partial determinant of the success of an individual company?

The Bigger Issue: Why These Numbers Keep Getting Used

In a sense they are used because we continue to evaluate these claims hardly at all. For some reason, critical thinking goes completely by the board, whether its about the costs of government shutdown, or the costs of poor service. So long as people recirculate these numbers and treat them as important and compelling, we’ll have “false” evidence of this sort. Researchers, reporters and the media are guilty of propagating these mythical numbers. And our “experts” should know better.

There’s a strong desire on the part of people in the customer service arena to WANT others to support their quests for better customer service. After all, people like Shep Hyken (and the originators of the research) have some degree of passion and commitment to stellar service. It’s even a somewhat emotional commitment, and there’s a confirmation bias operating here. People tend to seek out information (data) to support what they already believe, and to approach that information much less critically than they would for information that contradicts their own pre-existing beliefs.

So, not only is the confirmation bias operating but so is the desire to make a really strong case for better service. After all, what is bigger than the idea that businesses lose 75 billion dollars a year. It’s a compellingly big number that begs being noticed. Except it’s still nonsense.

There’s an additional bias that emerges and operates. People like Hyken, and a number of research firms have a vested interest in making a splash with these numbers, because they derive their incomes from offering advice, services and/or information about how to improve customer service. Research publishers (we’re talking commercial research rather than research done by disinterested third parties) sell their reports, and a headline with the word 75 billion loss in it is much more likely to catch the attention of report purchasers and/or service/consulting advice on customer service. Stating a concrete number, and a large concrete number elevates the issue for those companies in the field. We live in a world that values numbers, but often without requiring that we understand how those numbers are created.

Where Do These Numbers Actually Come From?

So, where do these numbers come from? The cynical among us might suggest that they are pulled out of someone’s bottom, and that they are completely made up. Which actually isn’t the case, although it might as well be so.

The numbers are usually extrapolations from data sets that are almost always survey based, and with questionable assumptions. For example, let’s take take a survey given to 50,000 people asking them about various aspects of customer service. One of those questions might ask: How often have you walked away from a purchase due to poor customer service in the past year? 

Results show that on average, each respondent walks away from purchases 5 times each year. If you know their average spends (what they spend on each transaction), you can do some basic multiplication to end up with an annual loss number (like 75 billion).

Do you see the problem? These are incomplete numbers, because they don’t take into account that the revenue may be lost by one company, only to move to another company. Zero sum. They are based on the faulty assumption that the revenue is lost. It’s lost by one company, but gained by another.

Final Remarks On Aggregated Data And Customer Service Related Money Lost

  • It is irresponsible and unethical to produce and disseminate these kinds of aggregated numbers. Period. The numbers are clearly misleading, and do a disservice to those trying to get companies to improve their customer service by looking at legitimate data.
  • One of the reasons people develop and circulate such numbers is the LACK of real hard core data regarding customer behavior on a corporate level. It costs money for a company to estimate its losses (actual losses) due to customer service failures, and no company is going to do that research, and then publish it to let us know how absolutely wretched their service quality might be.
  • Whenever you see these kinds of aggregated numbers there are two questions to ask:
    • Where did the money go?
    • How were the numbers created?

Postscript: In case you are wondering, the actual cost of poor customer service that a company might experience is far less than one might assume. A company’s losses from this cause will occur in extreme and highly publicized situations, where there’s been a dramatic and harmful (and offensive) break down in service quality. That’s one reason why we continue to get poor service from so many companies; customer service quality is only a single element in revenue creation.

For more on this, take a look at the series of articles under “Radical Customer Service” where we look at this in more detail.

 

 

 

 

 

 

 

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