Wharton/University of Pennsylvania is ranked as one of the foremost graduate business school in the world, in some ways, even more respected than Harvard. This article shows why the hidden power of feedback and WOM(word of mouth) is important.--John/theinvisibleheart
http://knowledge.wharton.upenn.edu/a...OKEN=93249314#
Beware of Dissatisfied Consumers: They Like to Blab
Published: March 08, 2006 in Knowledge@Wharton
This article has been read 36,924 Times
It's cold and rainy and the parking lot outside the store is packed, except for a spot way out in the corner. The shopper pulls up, only to find a shopping cart blocking the space. Inside, the store is jammed. The digital cameras are hard to find, and it's impossible to know why one costs $150 and another $300. The two models that are on sale are out of stock, and it takes a clerk five minutes to bring another one from the back of the store. At checkout, the line is stalled while those on either side are flowing smoothly. Finally, when the customer reaches the cashier, he is told his $25-off coupon is not valid until the next day.
Wharton marketing professor Stephen J. Hoch, who suffered through this scenario first hand during a recent shopping trip, says customers are bound to talk about these kinds of experiences. And, according to new Wharton research, such word-of-mouth communication should be a big cause of concern to retailers.
Results of The Retail Customer Dissatisfaction Study 2006 -- conducted by The Jay H. Baker Retailing Initiative at Wharton and The Verde Group, a Toronto consulting firm, in the weeks before and after Christmas 2005 -- show that
only 6% of shoppers who experienced a problem with a retailer contacted the company, but 31% went on to tell friends, family or colleagues what happened. Of those, 8% told one person, another 8% told two people, but 6% told six or more people. "Even though these shoppers don't share their pain with the store, they do share their pain with other people, apparently quite a few other people," says Hoch.
Overall, if 100 people have a bad experience, a retailer stands to lose between 32 and 36 current or potential customers, according to the study.
The complaints have an even greater impact on shoppers who were not directly involved as the story spreads and is embellished, researchers found. Almost half those surveyed, 48%, reported they have avoided a store in the past because of someone else's negative experience. For those who had encountered a problem themselves, 33% said they would "definitely not" or "probably not" return. "This storytelling has even more impact on the people the story is told to than the people who told the story," says Hoch. The data is based on a survey of 1,186 shoppers.
Those surveyed were asked to discuss their most recent shopping experience. Half said they had at least one problem. On average, survey respondents reported experiencing three problems on the shopping trip, during which they spent an average of $163. The top three categories of merchandise purchased were clothing, 23%; groceries, 16%; and electronics, 12%.
Paula Courtney, president of The Verde Group, says
the exponential power of negative word-of-mouth lies in the nature of storytelling. "As people tell the story the negativity is embellished and grows," she says. For example, the first time the story is told, it might be about a customer service representative who was rude. By the time the third or fourth person hears the story, the customer service representative becomes verbally abusive. "To make a story worth telling, there has to be some entertainment value, a shock value," says Courtney. "Storytelling hurts retailers and entertains consumers."
Why don't shoppers confront the retailer directly? "If they were boiling mad, they would complain to the management during the store visit or maybe after, but they don't do that very often," says Hoch. "Some people figure it's going to happen again and they can't do anything about it. They are resigned to it. But the main reason they don't complain is it's too difficult to go out of their way to deal with every service slight."
Indeed, the survey showed that 46% of those who had a problem expect they would definitely or probably experience the same problem in the future.
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She suggests consumers go back the next day or make contact by telephone or in writing. "Be as factual as possible. It lends credibility to your story and makes you not sound like a crazy lunatic."
In addition, consumers should shop around and not return to stores where they had a bad experience. "The erosion of business is the only way to wake up retailers, to get them focused on the customer's experience."
Finally, if a retailer refuses to respond to dissatisfied customers, shoppers should feel free to spread the word. "If all else fails, we do encourage you to tell all your friends and family. Don't tell five people, tell 35 people," says Courtney. "Retailers need to know that if they don't listen, it will hurt their bottom line."
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