Fifty percent of Americans report that the negative shopping experience of a friend or colleague will prevent them from shopping at a store altogether, according to the Customer Dissatisfaction Study, which was released by Toronto research firm the Verde Group and the Baker Retailing Initiative at Wharton. As tales of shopping problems get repeated, they often get embellished and actually become even more damaging to customer retention than the initial negative shopping experience itself, the study found. Nearly one-third of all U.S. retail customers who have a bad shopping experience will recount it to four people, potentially angering many more shoppers than just the person who initially had the problem. “No matter what that store does to entice shoppers - sales, promotions, advertising, marketing - those people will not set foot in their store,” said Verde Group President Paula Courtney in a press release on the study.
Just as troublesome, 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 frontline staff, to the right product mix, both in stock and on the shelves,” said Stephen J. Hoch, the Patty and Jay H. Baker professor and chair of the Marketing Department of the Wharton School of the University of Pennsylvania.
The study was conducted by the Verde Group, together with Toronto research firm Consumer Contact, and analyzed with the help of the Baker Retailing Initiative at Wharton. It represents 1,200 responses from U.S. consumers who made purchases under $2,500 in the four weeks leading up to Christmas 2005. The average purchase price was $163. Problems, problems.
Negative word of mouth influences future patronage up to five times more than the person who experienced the problem firsthand as a result of:
problem embellishment (each time someone tells the story it is exaggerated);
risk aversion (there are many other choices for consumers; why shop at a store with problems?);
location, exit barriers or general convenience (potential shoppers have no previous relationship with a store because it is not close to home, they are not a part of a loyalty program, etc.)Consumers reported experiencing problems in three main areas: time - can’t find parking and too long to get in or out of store; merchandising - difficulty finding product, confusing store layout and product information displays;
frontline staff - poor product knowledge and lack of courtesy.
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.
Take noteU.S. businesses should take note, Courtney said. “Every instance of customer dissatisfaction has the potential to negatively impact loyalty and ultimately, the bottom line. With this study, we now know that negative word of mouth is so powerful that it can deter potential customers from ever shopping at that store. 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,” she said. For more information visit http://bakerretail.wharton.upenn.edu.