Poor customer experiences grow costlier as consumers increasingly cut spending after a bad experience
Businesses around the world risk $3.8 trillion in sales due to bad customer experiences – a figure $119 billion higher than last year. New research from Qualtrics, based on World Bank data and the 2025 Consumer Trends Report, highlights the impact of customer experience on loyalty and spending.
As the holiday shopping season gets under way, consumers are prepared to spend their hard-earned dollars. The National Retail Federation forecasts holiday spending may reach a record level of $989 billion in the United States this year1. But where those dollars are spent will be influenced by whether or not companies can deliver on shoppers’ expectations.
More than half (53%) of consumers say they will cut spending after a bad customer experience, and admit that one in 10 (12%) of their brand interactions don’t live up to expectations. The industry sectors most at risk of cuts in spending after a bad experience are fast food brands (66%), department stores (65%), online retailers (64%), auto dealers (63%), mobile phone providers (59%), and parcel delivery services (56%).
Customers also report their biggest customer experience pain points are service delivery issues (selected in 46% of bad experiences), communication problems (45%), and employee interactions (39%). Price (37%), quality (35%), and after-sales support (21%) are less of an issue, but remain red flags for brands.
“The holidays are a critical sales period and this year the stakes are higher than ever with cost of living pressures expected to impact sales. Customers want to be kept up to date on what’s happening with their orders, know they can trust they’re going to get the product and service they’ve been promised, and see value from their purchase – and they’re rewarding brands that do it well,” said Isabelle Zdatny, customer loyalty expert at Qualtrics.
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Frontline workers under strain
Compounding the customer experience risks for organizations are the findings that despite demonstrating a high-degree of customer focus, frontline employees – such as retail workers and restaurant servers – often report lower levels of engagement, intent to stay, and inclusion. Frontline workers are also less likely to say their expectations at work are met, or that they are paid fairly. These trends are particularly prevalent in physical retail stores and table service restaurants.
|
Global Average |
Frontline |
Global frontline |
Global frontline |
Global frontline |
Global frontline telco |
|
|
Engagement |
71 % |
68 % |
66 % |
62 % |
65 % |
62 % |
|
Expectations Exceeded |
43 % |
36 % |
42 % |
29 % |
38 % |
41 % |
|
Intent to Stay 3+ |
64 % |
60 % |
42 % |
55 % |
60 % |
53 % |
|
Inclusion |
74 % |
72 % |
70 % |
70 % |
67 % |
70 % |
|
Wellbeing |
73 % |
71 % |
71 % |
68 % |
71 % |
68 % |
|
Encouraged to |
72 % |
67 % |
75 % |
70 % |
70 % |
76 % |
|
Paid fairly for the |
56 % |
55 % |
58 % |
52 % |
57 % |
53 % |
“Front-line, customer-facing employees have a dramatic effect on customer perceptions and unfortunately many of these employees are starting this holiday season on the backfoot. There is a well-known reciprocal relationship between employees and customers that can either become a virtuous or a vicious cycle. Kickstarting a virtuous cycle means supporting and meeting the needs of front-line employees, who in turn, will be more likely to create more satisfied, loyal customers who spend more this season,” said Dr. Benjamin Granger, Chief Workplace Psychologist, Qualtrics.
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Five ways to deliver a great customer and employee experience this holiday season
- Ease the pressure on frontline employees – making it easier for frontline employees to meet customer needs is a key factor in exceptional customer experiences. Whether on the shop floor, in call centers, or managing digital chats, they face significant challenges while working to create positive experiences. By streamlining processes, improving communication, and investing in training, organizations can empower these teams and enhance overall customer satisfaction.
- Communicate clearly and often to reduce confusion – customers prefer brands that keep them informed at every stage, from product availability to purchase, delivery, and after-sales support. It’s crucial for organizations to provide the right information at the right time to ensure customer satisfaction and trust, while simultaneously reducing call volumes.
- Make it simple and easy for customers by keeping your promises – the holidays can be stressful, and customers want assurance they will receive the products and services as promised. For example, if next day delivery is advertised, the brand must fulfill this expectation to maintain trust and prevent added stress and uncertainty for the customer. Carefully consider how your brand promise forms customer expectations.
- Stay responsive to customer needs – customer needs, expectations, preferences and behaviors are constantly changing. Brands must stay ahead of these changes by using customer insights captured from surveys, online reviews, call centers, social media, and more. This enables organizations to identify trends and unmet needs, allowing them to seize opportunities swiftly.
- Exceed expectations where it counts – Leading brands focus on prioritizing key moments to exceed expectations for customers and employees in the moments that matter to them, ensuring trust in the information provided, faster interaction completion, and for it to be a seamless experience. For instance, as more customer interactions are complete via digital channels it’s likely to raise the stakes and importance for person-to-person engagements.