Why Bad Customer Experience is more expensive than good Customer Experience.
Kaisa’s own data shows that now, 60% of customers planning to buy Auto brand A end up buying another brand entirely.
Loyalty
We had quite a menagerie of family cars in our driveway over the years. Chrysler Alpine, Hillman Avenger Opel Ascona, Opel Manta, Saab 900, Citroen DS, Audi 100, BMW 5 Series… It was probably something to do with my father working in shipping – importing most of the above models into UK dealer networks, more or less in one piece, from various European manufacturers. Elsewhere on our street, however, things were different. Our next-door neighbour wouldn’t buy anything that wasn’t a Ford. The Scottish couple across the road only bought Toyotas. Three doors down the Swedish family had an ancient Volvo that stubbornly refused to die or be replaced, and there was a guy at the top of the road who only bought Lancias, who ironically, was German.
When it comes to cars people are brand loyal. Unless of course you totally mess up the whole buying experience. Which happens. A lot.
Kaisa’s own data shows that now, 60% of customers planning to buy Auto brand A end up buying another brand entirely.
Lost Revenue the bottom line:
Bad customer experiences directly impact the bottom line. According to research by PwC, nearly one in three consumers (32%) say they would stop doing business with a brand they love after just one bad experience. In the automotive sector, where purchases often involve substantial financial commitments, lost sales due to poor experiences can add up quickly. Data from DealerSocket In the US revealed that the average dealership loses $380,000 annually due to poor customer retention and attrition.
Decreased Lifetime Value
Customer loyalty is crucial in the automotive industry, where repeat purchases and service visits drive profitability. However, bad experiences erode loyalty and diminish the lifetime value of customers. According to a study by Harvard Business Review, acquiring a new customer can be anywhere from five to 25 times more expensive than retaining an existing one. Moreover, Bain & Company found that increasing customer retention rates by just 5% can lead to a profit increase of 25% to 95%.
Negative Impact on Brand Reputation
Reputation is paramount in the automotive sector, where brand perception heavily influences purchasing decisions. A single negative experience can reverberate across social media platforms and review websites, tarnishing a brand’s reputation and deterring potential customers. According to BrightLocal, 86% of consumers read reviews for local businesses, and 91% trust online reviews as much as personal recommendations. Negative reviews can dissuade customers from even considering a brand, leading to lost opportunities and diminished market share.
Increased Customer Acquisition Costs
Acquiring new customers is an expensive endeavor, requiring substantial investments in marketing and advertising. However, bad customer experiences drive up acquisition costs by deterring potential buyers and necessitating additional spending to attract replacements. Data from McKinsey & Company indicates that acquiring a new customer in the automotive sector can be five to seven times more expensive than retaining an existing one. Consequently, brands that fail to prioritize customer experience face escalating acquisition costs and diminished profitability.
Heightened Operational Expenses
Bad customer experiences often result in an influx of customer support inquiries, warranty claims, and service complaints. Resolving these issues requires significant time, resources, and manpower, driving up operational expenses for brands. Additionally, dissatisfied customers may demand compensation or incentives to rectify their negative experiences, further impacting the bottom line. Data from Zendesk revealed that it costs 6 to 7 times more to attract a new customer than to retain an existing one, emphasizing the importance of prioritizing customer satisfaction.
Invest in great CX
The cost of bad customer experience in the automotive sector extends far beyond immediate revenue loss. From diminished customer loyalty and brand reputation to increased acquisition costs and operational expenses, the financial implications are substantial. As competition intensifies and consumer expectations continue to rise, automotive brands need to invest in delivering exceptional customer experiences at every touchpoint cultivating genuine relationships with consumers to drive success and ensure long-term viability.
Because as we know, if you get it wrong your customers will never speak to you again.