Customer Happiness: Once It’s Lost, It’s Gone Forever

This article is an excerpt from the Shortform book guide to "The Personal MBA" by Josh Kaufman. Shortform has the world's best summaries and analyses of books you should be reading.

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Why is customer happiness so important? What are the dangers of failing to meet customers’ expectations?

Ensuring customer happiness is the key to long-term success. Disappointed customers, on the other hand, can damage your business in various ways: eating into your bottom line, staining your reputation, and making you spend more on new customer acquisition.

Keep reading to learn about the importance of customer happiness and what happens when it’s compromised.

The Importance of Customer Happiness

Successful businesses pay as much attention to ensuring customer happiness after a sale as they do on attracting new customers. This is because happy customers often become repeat customers and offer a reliable source of long-term revenue. They also give positive reviews that bolster your reputation—thus attracting even more customers free of charge.

(Shortform note: In addition to offering a reliable source of revenue and bolstering your reputation, satisfied customers provide two benefits: First, they’re more likely to offer feedback and a deeper understanding of their motivations, which will help you to create better products and services. Second, they’re more likely to test or become early adopters of your newest products and services.)

On the other hand, businesses that fail to meet customer expectations create disappointed customers. According to Kaufman, unhappy customers abandon you for your competitors and leave bad reviews that undermine your reputation. This damages your business in multiple ways: It repels possible customers and forces you to allocate resources to repair your reputation and acquire new customers. These extra expenses eat into any profits you do manage to make and get in the way of your success.

It Costs More to Acquire New Customers

Customer acquisition and marketing research backs up Kaufman’s claim that disappointed customers damage businesses in various ways. The following statistics clarify exactly how much it costs to repair this damage—proving that it pays more to invest in making your existing customers happy:

  • 63 percent of consumers consider moving to a competitor after a single bad experience.
  • It can cost five times more to acquire a new customer than to retain an existing customer.
  • The success rate for selling to new customers is 5 to 20 percent, whereas the success rate for selling to existing customers is 60 to 70 percent.
  • 93 percent of consumers base their purchasing decisions on online reviews.
  • 80 percent of consumers won’t buy from businesses with negative reviews.
  • A 5 percent increase in customer retention can yield higher profits ranging from 25 to 95 percent.
Customer Happiness: Once It’s Lost, It’s Gone Forever

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Darya Sinusoid

Darya’s love for reading started with fantasy novels (The LOTR trilogy is still her all-time-favorite). Growing up, however, she found herself transitioning to non-fiction, psychological, and self-help books. She has a degree in Psychology and a deep passion for the subject. She likes reading research-informed books that distill the workings of the human brain/mind/consciousness and thinking of ways to apply the insights to her own life. Some of her favorites include Thinking, Fast and Slow, How We Decide, and The Wisdom of the Enneagram.

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