In a recent global study of nearly 18,000 people across 18 countries, Qualtrics XM Institute examined how consumers respond to a bad experience. We thought it would be interesting to translate that research into some more explicit measures of economic impact. So we decided to estimate the costs to organizations of delivering a very bad experience.
Based on our analysis of that data, we estimate that companies within the 18 countries we examined that deliver very poor customer experiences are putting $3.6 trillion of sales at risk every year.1 To estimate that number, we used:
- Frequency of bad experiences. On average, 18% of consumers report having a very poor experience with companies they interact with. Across countries, this percentage ranges from 10% in Japan to 34% in India.
- Spending changes after a bad experience. On average, 34% of consumers report decreasing their spending after a poor experience, and 19% report that they’ve completely stopped spending with the company. Across countries, the percentage of consumers who cut spending with a company (completely or partially) ranges from 34% in India to 72% in Spain.
- Sales at risk (percentage). When we multiply the percentage of poor experiences and the percentage of consumers that have cut back or stopped spending, we end up with an average level of “sales at risk” of 9.5%. Across countries, the “sales at risk” range from 5.0% in Japan to 15.2% in Brazil.
- Sales at risk (currency). To translate the percentages into currency, we multiplied the sales at risk percentages for each country by household consumption numbers in $US from The World Bank. Across 18 countries, we found a total of $3,572 billion of sales at risk, ranging from $11 billion in Singapore to $1,859 billion in the U.S.
The Global Impact: $4.7 Trillion At Risk
Now that we’ve estimated sales at risk in 18 countries, let’s examine the impact globally. To do that, we went back to The World Bank data and calculated that those 18 countries represent 72% of global household consumption. If we assume that the sales at risk data for the rest of the world is equivalent to the average of our 18 countries, then we find that $4.7 trillion of sales are at risk from bad experiences every year. It breaks down like this:
- Consumers will completely stop spending $1.7 trillion from companies that provide a very bad customer experience.
- Consumers will cut back on $3.0 trillion of spending from companies that provide a very bad customer experience.
The bottom line: Bad experiences can be very, very costly.
Bruce Temkin, XMP, CCXP, is the Head of Qualtrics XM Institute
Moira Dorsey, XMP, is an XM Catalyst with Qualtrics XM Institute
- Our global study examined the percentage of consumers who have had bad experiences across 17 industries and how their spending has changed based on those experiences.