What is the Cost of Poor Service?

Posted by Deborah Chaddock Brown on January 22, 2009 under Customer Moments, Loyalty, Resolving Conflict | Be the First to Comment

Yesterday John Spence left a comment on a post a wrote last month entitled A Lost Customer for Life Over a Piece of Toast.

John is – WAS – a customer of a local eatery, frequenting them every weekday with the same order.  After an unfortunate incident in which the management showed, by their actions, that they didn’t feel John’s business was all that important, John wrote them a letter.

In the letter he calcuated the cost of lost revenue due to the lack of customer service:

Now to you this is probably no big deal, you didn’t sell a few egg-whites this morning, so what… but let’s look a little closer. As mentioned above we have been coming there almost every single weekday for the past year (enough so that Sarah and the rest of the staff know our order by heart – which I am sure you do too because our waiter this morning told us we could not have egg-whites, before we even had a chance to order!) so that means we are there about 250 days every year. Our bill is the same every morning: $10.14 – and we always give a $3.00 tip – so that is $13.14 x 250 – or roughly $3,285 in lost revenue to you and your staff.

Ah, but we also bought muffins and cookies for our clients from you and we had been ordering lunch for our entire staff from you a few times every month too, so conservatively that is at least another $1,200 a year we were spending at The Bakery Mill & Deli. Now the total is $4,485 in lost revenue.

However, that is only one year. Since we live right up the road, there is no reason to believe that if we had been treated well we would not have continued to come in for quite some time. But let’s just call it the next 3 years – so a conservative “lifetime value” for us as customers is: $13,455. Which means you just turned away more than $10,000 in future business over probably less than $1 of egg-whites.

Over $13,000 in estimated lost revenue for the next three years when the manager/owner could have walked across the street to the grocery story to purchase a container of Eggbeaters for a few bucks.

Over $13,000 in estimated lost revenue and a tarnished reputation here on the web.  John not only wrote to the owner but also posted the full letter in the comments section of my blog post. 

Over $13,000 in estimated lost revenue within the community. Certainly if someone were to ask John about the benefits of having a meal at the Bakery Mill and Deli in Florida, he would retell this story.

How do you regain your reputation?  How quickly do you gain back the trust?

We need to think twice and three times before we quickly dismiss a customer’s request.  In this age of instant and viral communication, our reputation can suffer almost before the words are out of our mouth!

Have you ever calculated the cost of a lost customer?   What would you do differently if you had the chance to try again?  Anything?