A good customer experience works because of the "wow" factor, where customer expectations are exceeded. A bad customer experience results from the opposite, where the experience falls short of the customer's expectations.
When companies cut costs in the area of customer experience, they really endanger their long-term relationships with customers.
This is because the long-term relationship can be severely damaged by one bad purchasing experience, one negative thing heard about the company indirectly, or any other small bump in the road. This threatens long-term revenue and it means you have to work harder to acquire customers to make up for those you lose.
A bad customer experience also tends to spiral out of control and lead to an even worse reputation among customers. This is because of word-of-mouth. When a customer has a bad experience with your company, they're likely to tell others.
With social media and review sites today, this is especially damaging, and this is an area where you have no control.