If customers switch to competitors or share negative word of mouth, what is the likely impact?

• A. It increases government involvement
• B. It improves employee morale
• C. It reduces sales
• D. It increases suppliers' power

Answer: (C)

The main idea here is how customer behavior affects demand and revenue. When customers switch to competitors and spread negative word of mouth, the firm loses buyers and struggles to attract new ones. This directly reduces how much it sells, lowering sales volume and revenue. Negative word of mouth can dampen interest from potential customers, making the decline in sales even steeper. The other options don’t align as closely with the immediate consequence of customer defection and bad buzz: government involvement isn’t a typical direct result, employee morale is more of a secondary effect that would depend on the magnitude of the impact, and suppliers’ power isn’t the central outcome of customers choosing competitors.