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Sunday, July 30, 2006

"I Can't Get No Satisfaction"

"Shopping For Satisfaction" originally uploaded by samuraiphotog
Customer Service matters. When done correctly, it leads to customer satisfaction which, in turn, leads to LOYALTY! But, there's another angle to consider: the power of dissatisfaction!

The July issue of InFurniture magazine featured a small writeup on Wharton's Jay H. Baker Retailing Institute Retail Customer Dissatisfaction Study, done in conjunction with the Verde Group. This is the release link, and here are the highlights from the release.

Essentially, whereas customer loyalty is the road to profitablity, customer dissatisfaction is the road to ruin. The effects are even more frightening than I had ever imagined! Consider:
More than 50 per cent of Americans report that a negative shopping experience of a friend or colleague will prevent them from setting foot in a store altogether. The Study ... finds that as shopping problems get repeated, they often get embellished and actually become up to five times more damaging to customer retention than the initial negative shopping experience itself.

"This study is unlike anything we've seen before because it shows that for every 100 American shoppers, 64 people will be told about a store's poor products or services and no matter what that store does to entice shoppers - sales, promotions, advertising, marketing - those people will not set foot in their store," says Paula Courtney, President, The Verde Group. Nearly one- third of all U.S. retail customers who have a bad shopping experience will tell four people in such a way that those four people will be more negatively impacted than the person who initially had the problem.

Stephen J. Hoch, the Patty and Jay H. Baker Professor and Chair of the Marketing Department of the Wharton School ... adds that another risk identified by the study is that customers who have a problem are happy to tell their friends in a very powerful way but they don't bother to tell the company. In fact, shoppers experiencing problems are five times more likely to tell a friend about it than contact the company.

"If businesses want to stop the bleeding from negative word of mouth, it's clear that they need to invest in ensuring that each customer experience is first rate - from adequate parking, to trained front line staff, to the right product mix, both in stock and on the shelves," says Dr. Hoch.

Customer Dissatisfaction Study Key Findings:
* 50 per cent of consumers experience a problem. Those who have a problem, experience 3 problems on average.
* 31 per cent of consumers tell one or more friends about their problem. On average, shoppers tell four people about their negative shopping experience.
* Almost half of shoppers have avoided a particular store in the past because of someone else's negative experience.
* Negative word of mouth influences future patronage up to 5x more than the person who experienced the problem first-hand as a result of:

  • Problem embellishment – each time someone tells the story it is exaggerated
  • Risk aversion - why shop at a store with problems? There are many other choices for consumers.
  • Location, exit barriers or general convenience – potential shoppers have no previous relationship with store because it is not close to home, they are not a part of an awards program and so on

Top problems consumers experience are related to the following three areas:
* Time – can't find parking and too long to get in or out of store
* Merchandising – ease of finding product, store layout and product information displays
* Front line staff – poor product knowledge and lack of courtesy

Other findings:
* The bigger the store, the more likely consumers are to experience problems
* Category killers are supposed to be experts, but don't always meet customers' expectations about information and product availability
* Department stores and mass merchandisers have more issues related to
time and/or accessibility
* Men are less loyal than women
* Men and women are remarkably similar in the problems they experience AND their tolerance levels - men are, however, less likely to return to a store if the product they were looking for is out of stock

"U.S. businesses should take note - every instance of customer dissatisfaction has the potential to negatively impact loyalty and ultimately, the bottom line. With this latest study, we now know that negative word of mouth is so powerful that it can deter potential customers from ever shopping at that store," says Ms. Courtney. "But there is hope - by taking steps to better understand the problems their customers experience, retailers can begin to immunize themselves against negative word of mouth."


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