The Customer Complaints X-Ray

by Colin Shaw on April 19, 2012

It strikes us how focused the majority of businesses are on getting customers through the door, thus spending hundreds of millions on advertising while at the same time not paying much attention to customers leaving from the back door. With the economic stagnation going on in Europe and USA and the sluggish organic growth prospects in domestic markets, focus is shifting to retaining existing customers.

Customer Complaints Management thus becomes a vital part of any customer retention program. Not long ago we conducted a survey among 1015 respondents in USA and UK to investigate the complaints experience. One of the main findings that struck us was that 59% of the people satisfied with the handling have not changed in a negative way their relationship with the organization and only 10% have defected, compared to 42% and 25% respectively for those satisfied with the outcome. That means that customers who get what they want as a result of their complaint are acting in a less favourable to the businesses manor than those that are satisfied with the way their complaints have been handled. Counterintuitive? Maybe, maybe not! We decided to investigate this issue further using advanced statistical modelling. Here are the learning implications for organisations based on what we have found.

1. Make it easy for customers to complain. Very small percentage of dissatisfied customers will actually complain formally. This makes it difficult for managers to realise and address the problem on time and failure to do so could be very costly in the event of a complaint going viral in the social media.

An enlightened company in this matter is the Commonwealth bank of Australia, which invested A$1m to increase the number of complaints they receive. Thus the number of complaints increased by about 3,000 per month (over a period of 4 years) to about 5,000 per month. The bank now reports their staff turnover in their complaint handling department is virtually zero, they are resolving more than 55% of complaints in one day, they are resolving more than 90% of complaints before they go to External Dispute Resolution processes and the changes have resulted in new and revised product offerings and greatly improved staff engagement rates.

2. Reduce the effort needed for customers to submit and follow through their complaints. This is critical to handling complaints successfully and to prevent the domino effect. As you can see from the image, increasing the customer effort will reduce the satisfaction with complaint handling, the likelihood to recommend and so on. This is where many organisations get it wrong. Finance probably takes over and says: “ok, we are going to give them what they want but first we need to make sure that they are saying the truth and are truly eligible to get it”. In other words, we are going to make things complicated for them to get to what they want! But they fail to take into account (a) the costs of handling the complaint at each interaction, (b) the fact that the way the complaints are handled is more important than the outcome and (c) the lifetime value of a loyal customer!

An excellent example here is Amazon, which have recognised that it’s cheaper to send a new product right the way than to argue over the complaints. People loved Amazon’s “no questions asked” policy whereby if the product customers ordered was damaged, they would just get a free replacement and could bin or donate to the local library the damaged product. Now when Amazon also sells big ticket items they have redesigned the process to make it as fast and hassle free for customers as possible while also saving agents time and providing timely advice to their reverse logistics team.

3. Arm your employees to address the emotional side of the customer complaint. Don’t assume that giving customers what they want when they complain will make them happy and they’ll forgive you. As you can see from the image above, there is no statistically significant link between the satisfaction with the complaint outcome and the likelihood to recommend or the future relationship with the organisation (Resultant Behaviour). People are emotional creatures and taking the time to complain about something means they were emotionally hurt. This research provides evidence that to recover from a service failure you need to pay more attention to the way your organisation handles the customer complaints rather than focus on giving customers what they want.

You can read more about the results, how to build a business case for complaints management and tips for profitable complaints management by downloading our white paper on the topic here.

Zhecho Dobrev is a consultant and project manager for Beyond Philosophy. He has worked with a wide array of large corporate companies. Zhecho’s expertise includes customer behaviour analytics, customer loyalty, complaints management and journey mapping. He holds an MBA and Master’s degree in International Relations.

Zhecho Dobrev on Twitter @Zhecho_BeyondP
Colin ShawThe Customer Complaints X-Ray