How much does a bad customer experience cost? The number may surprise you.
I read an article on FastCompany.com yesterday that shared results from the Tealeaf 2010 Online Transactions Survey conducted by Harris Interactive.
The survey concluded that online retailers may have lost a whopping $44 billion due to poor online customer experiences. The number is shocking, but not that surprising to me. Online retailers are especially open to people shopping with their customer experience wallets. The next retailer isn’t down the street or across the town. They’re only a click away.
You can read the full article at FastCompany and view the infographic, which I’ve also included here.
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Little Hinges on 
as gururaj on 
In terms of how the numbers are derived, I think a shortcut was taken to arrive at $44B. I would think that there would be a shift either to another site or to brick-and-mortar, rather than a complete abandon of the transaction. The need itself does not go away, the revenue just moves to a different retailer imo. Up to the retailer to ensure a positive experience so that the revenue goes to them rather than somebody else…
If you think that is a big number … think about all the bad restaurant, hotel, and airline experiences you’ve had, and how disinclined you are to rush back.
I wholeheartedly agree with premise of the article that bad user/customer experience is costing businesses a very large amount.
But the way the numbers are calculated does not sit well with me. From what I understood 31% applies to the fraction of the shopper’s who encounter a problem not the entire $144B, which I can only imagine where the $44B is coming from. I don’t know what the actual fraction is but this calculation assumes that 100% of online shoppers face a problem “while attempting to conduct an online transaction”.
This is, of course, not to mention small errors like: you don’t get an odd number multiplying even numbers. i.e. $144,100,362,701 is not the product of 120,083,636 by $1200. It looks like someone at Tealeaf and Harris Interactive was trying to look accurate when in fact they were totally off
The loss numbers due to customer service are essentially made up. Extrapolated from survey data most likely.
So, one question is, where did the $44 billion go? Who, specifically lost it? How could it be lost if customers went elsewhere? Or, did customers not spend that 44 billion anywhere? Mark is right. The money generally goes elsewhere. I don’t understand the point of expressing these numbers which do nothing but mislead.
The $44 billion number is the eye-catcher. It’s what we tend to focus on, but that’s not the number that matters. The important number here is the 31%. Almost 1/3 of shoppers abandon the transaction entirely. That’s a HUGE number.
More than likely, the buying need or desire still exists, but that 31% isn’t buying from the first place they landed. All the work and money that went into getting them to the site has been thrown away, not to mention potential future purchases and negative word of mouth.
Tim, Here’s another thought on the 31% abandon rate. In order for that number to be actionable, we’d need to know where the customer abandons the site from. In other words, you can measure abandon from the home page, through navigation, all the way to the checkout page. Abandons from the home page mean something completely different that those from the check out page. The second element is, from where abandon occurs, were there items in the shopping card or not. Shopping cart abandons mean something entirely different than “window shopper” abandons.The other significant element is the navigation trail. Did I abandon after a linear trail from homepage to someplace else. Or, did I abandon after filling my cart, getting to the checkout page and then going back inside the site to someplace else, and where.This, in my opinion, is the level of detail needed in order for this type of data to be actionable, and allow for site changes that really impact the customer experience in a positive way.
The $44B doesn’t have enough rigor behind it to be unassailable, but it isn’t necessarily made up either. I don’t know that the authors are suggesting that there was $44B in true economic loss that occurred, so much as they are estimating that companies (online retailers specifically) had $44B in missed sales opportunities due to shortcomings in the online experience. Some of that clearly would have been recouped by other means, ($44B feels like it is about 15-20% of all online retail sales) but the point is that getting a customer to notice your offer, become interested and committed to purchase is too tough and expensive a task to lose because your site makes it difficult for them to buy from you.
Here’s another “cost” to consider. Forget, for a moment, whether or not the $44b is accurate. What about the money that retailers spend on advertising on branding — ie., creating a brand image — that becomes negated or wasted when a customer has an experience that is incongruent with the advertised brand image?
This is the thing that drives me nuts. Marketers spend billions on advertising trying to create and project a certain brand image that they often can’t deliver on.
Seems like everone here is in agreement about the manner in which these numbers were derived. I would agree and just addthis. Its Fast Company folks. It’s not the journal of economic statistics. FC is a great rag and very entertaining. But, adherence to statistical methods is not what it’s strong suit.
As for the assertion that the $44b was “lost”, I don’t get that. It wasn’t a macro economic loss. $44b didn’t come out of consumer spending numbers/GDP. Some maybe. But, the majority went someplace. The demand was filled. As Mark stated, it went to brick and mortar or other sites. Those dollars were spend; some of it probably transferred from one sit in question to another.
So, while the message is a good one for all retailers to heed – that poor experience can negatively impact sales and profitability (it’s an experience economy), this is not economic data from which any macro conclusions can be drawn or policy be constructed.
Thx Tim,
Barry
-:” that seems to be a great topic, i really love it ~’”