Qualtrics report: AI-powered customer service has high failure rate

Nearly one in five consumers who have used AI for customer service saw no benefits from the experience. That’s a failure rate almost four times higher than for AI use in general, according to the 2026 Consumer Experience Trends Report from Provo-based customer experience company Qualtrics. 

As pressure grows on companies to demonstrate tangible returns on AI investments, the Qualtrics report reveals that efforts to scale service excellence with AI are falling short of expectations and that concerns about how customer data are being used are on the rise. Consumers rank AI applications for customer service among the worst for convenience, time savings and usefulness. Only “building an AI assistant” scores lower in the study.

Misuse of personal data is now consumers’ top concern when companies use AI to automate interactions. Fifty-three percent of consumers share this fear, up eight points over the past year. Half of consumers are concerned that companies’ AI use will prevent them from connecting with a human being, and 47 percent are worried about job losses.

“Too many companies are deploying AI to cut costs, not solve problems, and customers can tell the difference,” said Isabelle Zdatny, head of thought leadership at Qualtrics XM Institute and author of the report. “AI should be used to build connections and enhance the human experience, with capable AI agents managing simple, transactional requests. Then, AI can aid human agents in solving complex customer problems with the relevant background details and suggested solutions.”

Despite AI’s initial shortcomings, global consumer experience improved across every industry measured in the report. Customers reported the strongest improvements in satisfaction, trust and loyalty behaviors in industries where they can easily switch between brands, such as fast food or online retail. Harder-to-switch industries like universities and public utilities improved their consumer experiences at a slower pace, which could make them more vulnerable to disruptors targeting complacent sectors.

Price sensitivity is high for consumers amid economic uncertainty heightened by tariffs and inflation, but companies that choose to compete beyond just prices are rewarded with outsized gains, the report found.

While 46 percent of consumers choose companies for value, those who select brands for great customer service are more satisfied and have higher levels of trust compared with consumers who base their purchasing decisions on value, convenience or familiarity.

“A race to the bottom on prices might win customers in the short term, but price is a temporary differentiator with fleeting impact,” said Zdatny. “Long-term customer relationships will be built on meaningful connections, not transactional interactions that won’t set an organization apart when the economy shifts.”

At a time when businesses most need insights, consumers are providing less feedback, with only 29 percent of customers communicating directly with organizations after bad experiences, down 7.5 points from 2021. Instead, 30 percent say nothing at all, up nine points since 2021.

Nearly half (47 percent) of bad customer experiences lead to decreased spending. This leaves business leaders in the dark when it comes to understanding changing consumer behaviors or reasons for churn, let alone addressing them, Zdatny said.

The silence makes indirect feedback, through channels like social media or reviews, increasingly valuable for organizations to make up for the decline in direct responses. Successful businesses will connect these scattered signals to understand customer sentiment even when it’s not explicitly stated.

“Companies are flying blind while customers vote with their wallets,” according to Zdatny. “In today’s business environment, experience, operational and behavioral data all need to come together to ensure leaders can take action to resolve systemic issues before losing customers to bad experiences.”

Consumers increasingly want experiences tailored to their individual needs — 64 percent want to buy from companies that cater to their individual experiences, up 2.5 points year over year — but most don’t believe the benefits justify the privacy cost. Only 39 percent of people trust companies to use personal data responsibly, and nearly two-thirds worry about the security of their personal data. Fears about fraud (33 percent) and hacking (23 percent) top their worries.

The research identifies a clear path forward: Transparency and control can rebuild trust. Nearly half (46 percent) of consumers would share more data with greater transparency about the data being collected, while 45 percent would do so with better control over data usage or deletion.

“Companies need to stop collecting everything for the sake of having all the data. Don’t ask for more than you need,” Zdatny said. “Understanding customer context wins out over building detailed profiles as it allows businesses to address needs based on current situations. Showing how their data improved their experience, paired with transparency and control, will build a foundation of trust that drives lasting loyalty.”