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Bad Experience Economics – Brand Impact Calculator

Jul 23, 2023 | Blog

What is the cost of a poor experience on a brand, and how can you use a brand impact calculator?

The bad news – the cost of a bad customer experience to a business can be significant and far-reaching. The good news – we provide a brand experience calculator.

While it can vary depending on the severity and frequency of such experiences there are at least seven key negative impacts that bad customer experiences can have on a business. We will list them here then focus on three in separate articles:

The big seven impacts on brand reputation

ONE: Lost Revenue: A dissatisfied customer is less likely to make repeat purchases. In addition they discourage others from doing business with the company, leading to lost sales and reduced revenue.

TWO: Reputation Damage: Negative word-of-mouth spreads quickly, especially with the prevalence of social media. A bad reputation can be hard to shake off and may deter potential customers from choosing your business. Bad experiences tarnish the brand’s image and long-term value.

Reputation damaged by poor customer experience

THREE: Increased Customer Churn and Decreased Loyalty: Dissatisfied customers are more likely to churn, meaning they stop using your products or services altogether. Acquiring new customers is always more expensive than retaining existing ones. Acquisition is expensive!

FOUR: Increased Customer Support Costs: Customers with bad experiences are more likely to reach out to customer support for resolution. This increases support costs for the company, and a distraction from growth.

FIVE: Missed Cross-Selling and Upselling Opportunities: Satisfied customers are more receptive to cross-selling and upselling. Bad experiences reduce the likelihood of customers exploring additional products or services. It is that simple.

SIX: Legal and Regulatory Issues: In some cases, bad customer experiences can lead to legal disputes or regulatory actions. This means increasing costs and potential damage to the company’s reputation.

SEVEN: Impact on Stock Value: For publicly traded companies, negative customer experiences can lead to a decrease in stock value. This happens when investors perceive potential risks to the company’s long-term growth and profitability.

FOCUS – Reputation Damage:

Now lets dive a little deeper – a specifically look at Reputation Damage. We have included an interactive calculator so you can review the impact on your own business.

Instructions –

In the orange cells – enter the inputs for your own business, and check out the brand impact in terms of ‘People Told’ in red.

It is going to be higher than you think!

FOCUS – Reputation Damage – Breakdown:

Now you have a sense of how many people will become aware of a bad experience at your business – lets look at some of the other impacts:

ONE: Negative online reviews and ratings: Unhappy customers are more likely to leave negative reviews on various platforms, such as Google, Yelp, or industry-specific review websites. These reviews can quickly influence potential customers and discourage them from doing business with the company. These are terrible – but we have a guide to help.

Thumbs down negative review

TWO: Social media backlash: Dissatisfied customers may share their negative experiences on social media platforms like Twitter, Facebook, or Instagram, potentially reaching a wide audience. The viral nature of such posts can cause significant damage to the company’s reputation.

THREE: Decreased customer trust: When customers have bad experiences, they lose trust in the company’s ability to deliver quality products or services. This can result in reduced customer loyalty and repeat business.

No trust in the business

FOUR: Reduced customer acquisition: Negative word-of-mouth can dissuade potential customers from trying out the company’s offerings, leading to a decline in new customer acquisition. Moreover the cost of acquisition will likely need to increase to incentivize prospects to try you – so in retail¬† this is now over $10 per new customer.

FIVE: Impact on employee morale: A bad reputation can affect employee morale and engagement, leading to decreased productivity and a higher turnover rate. Employees might feel demotivated working for a company with a tarnished image.

SIX: Difficulty in attracting talent: In parallel with FIVE, a damaged reputation can make it challenging for the business to attract and retain top talent, as potential employees may be wary of working for a company with a negative image. When unemployment is below 4%, any reputational impact will make it harder to get new staff.

SEVEN: Bad Media coverage: Severe customer service issues can attract attention from media outlets, leading to negative press coverage that can further damage the company’s reputation.

Conclusion:

To mitigate these reputation damages, businesses need to prioritize customer experience, promptly address customer complaints, and take proactive steps to improve their products and services continuously. Responding to feedback and taking corrective actions can help rebuild trust and show that the company is committed to providing better experiences in the future. Of course this is the rational for Opiniator, so there is help at hand.

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