Marketing is all about the customer experience. You spend a massive amount of time and money crafting cross-channel marketing campaigns that will delight your customers and prove that you really know who they are and what they want from your brand.
As a former marketer, I expended many hours and dollars trying to entice customers to go through the buying journey with me, and my biggest fear was that they would leak out of my well-planned demand funnel – the later in the journey, the more costly and painful to me.
As I have spent more time in the Risk Management business, it’s dawned on me that I might have created a leaky funnel without even knowing it – and I think many e-commerce companies are doing this today.
The leaky hole I discovered is caused by error prone fraud detection; insulting customers at the “checkout counter” so they click away from your online store just as they are about to make a purchase!
Why and how do we insult customers just as they’re about to make a larger investment in our brand?
Let me tell you a story about a man named Ted
Ted met a nice girl named Judy at the grocery store when they both reached for the same flavor of gluten-free ice cream. They bonded over their intolerance for the “real deal” and agreed that this brand was the best alternative.
Ted asked Judy if he could take her to dinner at a nearby gluten-free restaurant and she agreed. When he picked her up for their date he brought her a bottle of wine – the same kind he noticed in her cart when they met. So far Ted was doing everything right. Judy was having the best possible experience.
At the end of the date, Judy asked Ted to go out again. Ted said he’d like that, but insisted Judy send him three personal references first. Woah. Talk about an insult. As you can imagine, Ted never saw Judy again despite the great time they had.
Imagine Ted as your brand
Now think about that story as if Ted were your brand and Judy your online customer. Both Ted and Judy put a lot of effort into getting to know one another. In the same way, you spend time getting to know your customers: analyzing online consumers’ preferences and paths to purchase to instill trust and build loyal customers.
Your customers put forth effort as well. They invite you into their email box and follow your brand in social media.
After working so hard to build that relationship, would you want to insult your online customer as Ted insulted Judy? Of course not. But in an effort to keep out fraudulent online transactions, that might be exactly what you’re doing.
Use our calculator tool to see the true effect customer insult rates can have on your business
Wasting investment in customers with an insult
Think of the marketing dollars you invest in generating awareness for your product and then moving customers through your demand funnel. It costs a lot of money to acquire new customers and turn them into loyal brand advocates.
One of the biggest problems with fraud prevention is using multiple, disjointed fraud systems or tools, resulting in unnecessary friction and poor customer experiences. When your marketing claims to know a customer and aims to create the best possible experience, the customer may feel insulted when asked to jump through several hoops when checking out.
What often happens is that the customer you worked so hard to attract abandons their cart (at the finish line!) for a competitor with an easier checkout process.
The cost of the customer insult rate
North American businesses rejected 2.9% of U.S./Canadian orders due to suspicion of fraud in 2016, up from 2.8% in 2015, according to CyberSource, Annual Fraud Benchmark Report: A Balancing Act, North America Edition 2017.
68% of their survey respondents who track false positives believe that up to 10% of the orders they reject on suspicion of fraud are actually genuine.
At TransUnion, we call these false positives your customer insult rate and our experience puts the customer insult rate closer to 30%.
To give you some scale, Business Insider estimates that retailers falsely declined $8.6 Billion in orders last year, according to The False Declines Report, July 2016. If you consider that alongside the cost of customer lifetime value, you have a monstrous problem on your hands.
Calculate customer insult rate impact on your business
To gauge the effect of your customer insult rate in your business, try the calculator below. It looks at both the cost of losing the sale and the cost of losing the customer. Feel free to plug in numbers from your business to see the real impact of insulting customers.