Close Close
Popular Financial Topics Discover relevant content from across the suite of ALM legal publications From the Industry More content from ThinkAdvisor and select sponsors Investment Advisor Issue Gallery Read digital editions of Investment Advisor Magazine Tax Facts Get clear, current, and reliable answers to pressing tax questions
Luminaries Awards

Practice Management > Marketing and Communications > Social Media

Word-of-Mouth Wildfire: How Customer Service Can Make or Break Your Business

Your article was successfully shared with the contacts you provided.

The old adage that “the customer is always right” is wrong. It may be shocking to read, but it’s true. The customer is, in fact, often wrong.

Think about it: We’re all customers of some sort. We make a multitude of transactions every day with businesses. We buy groceries, stop at gas stations, pick up a cup of coffee at Starbucks, buy clothing at department stores, and so on.

Case in point: A few weeks ago, our dog was sick and I went to a local pet supply store to buy some food that helps soothe his stomach. I’d purchased the product at our local vet before, but had seen it on the shelf of the pet store the last time I visited.

In the check-out aisle, the cashier asked if I had a prescription card for the food. I didn’t, and didn’t know I needed one. She explained that the food was available for purchase only with a written prescription from our vet. Oops. I put the food back on the shelf and proceeded to purchase the other items. The cashier apologized for the inconvenience (no fault of hers), and life went on.

There were two possible outcomes to this interaction. The first possible outcome is what actually happened: I (the customer) was wrong, the cashier was polite, and life went on. Because of the way she handled the transaction, she kept me as a customer.

An alternate ending

This sequence of events could have happened much differently, however. Knowing I was wrong, the cashier could have slammed the cans down on the counter and yelled, “I’m so tired of this. Can’t you read a freaking sign?! RIGHT under the cans it says ‘this product can only be purchased with a written prescription from your veterinarian.’ What is wrong with you? Put it back or give me a freaking prescription card! Moron.”

Cause and effect can be brutal, especially in the retail and service industries. Let’s look at the series of events that would have unfolded had the interaction followed this second scenario. First, the client (the pet supply store) would have lost my business, an average of $500 each year. Second, the nine people within hearing distance of the cashier’s rant would potentially take their future business elsewhere. Suppose each of them spent an average of $500 per year as well, that’s a total loss of $5000 in recurring revenue.

And losing those 10 customers is just the beginning. On average, an unhappy customer will tell 9–15 others about their bad experience with any given company. Even worse, 13 percent of dissatisfied customers will tell more than 20 others about their experience.

In this scenario, 10 people left the store with the intention never to return. Those 10 people went back to their lives. They went back to their jobs, their Sunday school classes, and other social gatherings. Over a few weeks, maybe even months, let’s assume they tell 10 others about the horrible experience they had at that pet supply store. Within weeks, 100 people have an intimate, first-hand knowledge of what happened that night at the pet store. Chances are that many of them won’t ever shop there again. Chances are even better that at least half of those 100 people will tell five others about their friend’s experience. This second-hand recounting of a bad customer service experience has now reached more than 350 potential or current customers throughout the community.

The social media effect

The advent of social media outlets has added an additional layer to this rule. Now, thousands of people can hear about poor customer service experiences through sites like Twitter, Facebook and blogs. Let’s say those initial 10 customers in the pet supply store also tweeted about their experience, posted a status update on Facebook, or blogged about it. The potential damage is now unbelievably magnified.

These statistics show word-of-mouth PR at its best … and its worst. In some instances, customer service can literally make or break your business. All it takes is one exceptionally bad experience and you’ve lost tens of thousands of dollars in potential profit and earned yourself a poor reputation. And if we’ve learned one thing about our free-market economy, it’s that reputation is everything.


© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.