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Dysfunctional customer experiences risk bllions in retail losses

June 3, 2015 – It may seem counterintuitive, but retailers should welcome the irate shopper who vents her frustration in an animated scene on the sales floor. That’s because it’s the mistreated customer who walks out the door in a silent huff who places the most revenue at risk, according to a collaborative study of dysfunctional retail touchpoints conducted by LoyaltyOne and Verde Group with Professor of Marketing and Psychology, Dr. Deborah Small, at the Wharton School of the University of Pennsylvania.

The March 2015 survey shows that approximately half of 2,500 U.S. consumers polled reported experiencing a problem on their last shopping trip. Of those customers, 81% decided not to contact the retailer about the issue. Among these silent shoppers, 32% said they were unlikely to recommend the retailer to friends and family, putting these shoppers at-risk of decreasing their spend with the retailer.

By comparison, the study shows that shoppers who did notify retailers of their poor experience and had their problem completely resolved were 84% less likely than silent shoppers to be at risk of decreasing their spend.

“The results are a resounding confirmation that poor customer experiences have a considerable negative impact on shopper spend and attrition which can run into the billions,” says Dennis Armbruster, LoyaltyOne Consulting Vice President and Managing Partner. “We’re ushering in a new era of customer experience measurement vital to retailers looking to make even more informed decisions.”

Building on its leading behavioral analytics solution, LoyaltyOne Consulting has partnered with Verde Group, a leading customer experience research consultancy. Verde’s proprietary Revenue@Risk analysis will use experience impact modeling to identify the specific customer experiences most damaging to customer loyalty behaviors and prioritize them according to impact on revenue and market share.

Retailers should take note of the importance in identifying specific customer experiences most damaging to customer loyalty as billions of dollars are at risk. Below is the ranking per category:

• Mass merchandisers are putting 25% of potential revenue at risk
• Apparel retailers are putting 16% of potential revenue at risk
• Department stores are putting 15% of potential revenue at risk
• Drugstores are putting 12% of potential revenue at risk
• Grocers are putting 11% of potential revenue at risk

“Our methodology precisely measures the impact of ineffective customer touch points. Insight around the effects of poor customer touch points can help retailers reduce the risk of negative customer experiences, while also enabling them to proactively design experiences that positively influence spend, visit frequency and basket size,” says Paula Courtney, President of Verde Group.

The survey also revealed that big spenders within a category disproportionately experience certain problems:

• Mass Retail “Check Out” Risk: Shoppers frustrated by check out wait times reported spending 23% more than the average mass retail customer ($545 vs. $446 a quarter)
• Department Stores “Not-My-Department” Staff Attitude: Shoppers troubled by an associate’s not-my-department attitude reported spending twice as much as the average department store customer ($543 vs. $261 a quarter)
• Apparel Retailers “Ship Date”: Particularly in their online channel, customers who cited their inability to obtain a specific date or time to receive an online order reported spending 66% more in the category ($416 vs. $250 a quarter)

“In a very robust platform, these partners have taken the psychology of shopping and married it with the economics of shopping. Insights around the impact of the silent customer could prove to be valuable tools for retailers looking to minimize the risk of attrition created from weak customer experiences,” says Dr. Deborah Small, from The Wharton School of the University of Pennsylvania.

LoyaltyOne Consulting Managing Partner Dennis Armbruster, Verde Group President Paula Courtney, and noted academic Dr. Deborah Small are all available to provide expert insights on the research results and discuss how retailers can design touch points that most impact customer spend. Armbruster is in Chicago this week to attend Customer Relationship Management Conference 2015, taking place June 3-5.

The survey results are based on an online survey in March 2015 of 2,500 American respondents. The survey’s margin of error is +/- 1.96 at 95% confidence level.