Most Australians Say AI Customer Service Made Things Worse. Here’s What Small Business Owners Should Do About It

Half of Australians say AI chatbots made their customer service experience much worse. Not a bit worse. Much worse. That’s the headline finding from a CHOICE survey of over 1,000 Australians published this week, and if you’re a small business owner thinking about plugging a chatbot into your front-line customer service, it should give you serious pause.

Let’s be precise about what the data says. Just 9% of Australians think AI is making products and services better quality. Nine. And 70% disagree that businesses should be trusted to use AI however they see fit. That’s not a fringe view. That’s the majority of your customers, right now, walking around with a pre-existing suspicion of exactly what you might be considering.

So why are so many businesses still charging ahead with AI customer service tools? Partly it’s cost: a chatbot doesn’t call in sick or need a lunch break. Partly it’s vendor pressure: every software platform is now stuffed with AI features, and the sales pitch is compelling. And partly it’s a genuine belief that AI will get better, so why not get ahead of the curve?

Fair enough on all counts. But here’s where small businesses need to think harder than the big end of town.

The big brand penalty doesn’t hit you the same way

When Telstra or a major bank rolls out a useless chatbot, customers are annoyed but they’re stuck. Switching costs are high. Contracts exist. The frustration gets absorbed. When a local accounting firm, a tradie business, or a regional retailer does the same thing, customers just go somewhere else. They find someone who picks up the phone. Word gets around.

Small businesses run on relationships and reputation. A single bad customer service experience can undo months of goodwill. If your AI chatbot sends someone in circles for 20 minutes before they give up and go to your competitor, you didn’t save money. You spent it.

AI fatigue is real and it’s going to get worse

The CHOICE survey also found that 49% of Australians say AI is making the scam problem worse. That’s relevant here, because it speaks to something broader: people are getting suspicious of anything that feels automated. When a customer can’t tell if they’re talking to a person or a machine, the default assumption is shifting from curiosity to distrust.

You’re operating in that environment whether you like it or not. An AI chatbot that’s clunky, evasive, or that can’t answer the actual question doesn’t just frustrate a customer in the moment. It makes them wonder if your whole business is dodgy.

What you should do

None of this means AI has no place in your business. It does. But the CHOICE data draws a clear line between where AI is working and where it’s not. Internal tools (writing, research, scheduling, admin) are not in the firing line. What’s failing is AI at the customer interface. The bit that’s supposed to represent you.

Before you deploy any AI customer-facing tool, ask yourself two questions. First: if this goes wrong, can I fix it fast? Second: does this replace a human interaction my customers value?

If the answer to the first is no, or the answer to the second is yes, put the tool back in the box.

There’s also a timing play here. Right now, being the business that answers the phone is a genuine competitive differentiator. When 51% of people say AI customer service made things worse, being the business that doesn’t make things worse is a selling point.

That’s not anti-AI. That’s reading the room.

The government pressure is coming too. 83% of Australians want laws that protect consumers from AI risks. Regulation is a matter of when, not if. Getting your AI use right now, before the rules land, is smarter than scrambling to comply later.

The CHOICE survey isn’t an argument against using AI. It’s an argument for using it where it helps your business rather than where it helps your costs while hurting your customers. Those two things are not the same, and plenty of businesses are about to find that out the hard way.

Sources

• CHOICE: Not impressed: Less than 1 in 10 Australians say AI is improving products and services (19 Oct 2026)
• AAP: AI customer service giving consumers an error message

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