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Dealing with customer complaints effectively and profitably

Josh Hall

Josh Hall

20 March 2009

Reviewed January 2018

Customer complaints are frequently a business owner's worst nightmare. Faced with an aggrieved customer many small business managers simply shut down, either avoiding the customer's communication or giving unhelpful or unsympathetic responses. This is, in many cases, understandable; receiving your first customer complaint can be a daunting prospect, particularly as many disgruntled punters tend to express their unhappiness in less than civilised terms.

In reality, however, complaints are a great source of valuable information about your business and your customer base. Furthermore, customers who bother to interact with you, even if it is to complain, are likely to remain loyal to your business - but only if they feel their complaints have been dealt with appropriately.

The importance of handling customer complaints

Encouraging repeat custom is vital if you wish to maintain a healthy and profitable business. By most estimates, a single sale to an existing customer will cost only a tenth as much as the process of acquiring a new customer and making a conversion. It is therefore easy to see why holding onto customers is of the upmost importance. Although it may seem counter-intuitive, complaints are a useful means by which you can interact directly with your customers, and therefore build a personal relationship.

Complaint + satisfaction = loyalty

According to research, customers who complain, and are then satisfied with the company's response, are almost 10 per cent more likely to make a repeat purchase than a customer who did not make a complaint in the first place. This is attributable to two separate causes. In the first instance, customers who have received an efficient, personal response to their complaint are likely to feel more of an affinity with the company in question. Customers are not as fickle as some people imagine; most consumers recognise that mistakes sometimes happen. Furthermore, most customers instinctively remain loyal to a company with which they have had some personal contact.

A more surprising fact, however, is that it is your most loyal customers who are most likely to complain in the first place. Customers who already feel some loyalty to your brand are more likely to take the time to get in touch, either because they feel that poor service is a personal affront when it comes from a company with which they have previously done business, or because they wish to remain loyal to the company but require better service in order to do so.

This predisposition for complaint amongst repeat clients gives you the opportunity to learn about the concerns of the most important segment of your customer base. 96 per cent of unsatisfied customers do not complain at all - they simply move to another provider. The remaining 4 per cent provide a vital window into the concerns of your customers, and should provide you with valuable information that you can use to improve your processes and increase customer loyalty.

So, what are the fundamental steps to handle customer complaints effectively?

1. Responding to customer complaints

In order to gather meaningful information from complaints, and in order to rectify them in a manner that is satisfactory for the customer, you must first learn how to deal with these incidents effectively.

Speed is very much of the essence when dealing with customer complaints. It is important that you give a sense of urgency; the customer will want to feel that their complaint is being taken seriously, and that their concerns are being addressed promptly.

If you have a direct conversation with the customer, either by telephone or face to face, you should be prepared for a potentially difficult encounter. You may well think that you are not at fault; if you are a manufacturer, for example, the bulk of your complaints may actually be a result of customer misuse. Regardless of this, you should allow the customer to explain their problems without interruption. If they are particularly ill-tempered, giving them the opportunity to speak uninterrupted will also help to calm them down.

You should also ensure that you record the details of the complaint. It is important that you address every aspect of the customer's concerns, and you must therefore make sufficient notes. If relevant, you should also make sure that you keep these notes with a copy of a sales receipt or invoice.

2. Rectifying the problem

Having identified the problem, you must then negotiate acceptable rectification. There are two schools of thought with regard to best practice in this area; one suggests that companies should give the customer what they want (normally a full refund) without question, while the other claims that the company should barter hard in order that the rectification is as cheap as possible.

At this stage it is worth remembering the importance of complaints and the value of repeat customers, as outlined above. The complaints process is perhaps the only circumstance in which you will have the opportunity to 'buy' customer loyalty, through efficient complaint management and a generous rectification. It is highly unlikely that the cost of this rectification will outweigh the benefits of gaining or maintaining a loyal customer. As such, it is almost always best to give the customer what they want with the minimum of fuss.

Many businesses presume this to be the end of the complaints process. However, you should always consider some sort of follow-up action that will solidify your organisation in the customer's mind and leave them with a positive impression of your company and its customer service practices. This follow-up could be as simple as a letter of apology; the fact that you have taken the time to do this will significantly increase your standing in the eyes of the customer.

3. Learning from your mistakes to prevent future complaints

However, equally important are the lessons that you learn from the customer's complaints. While dealing with a complaint in a sympathetic and efficient manner will increase customer loyalty, this loyalty will soon dissipate if your business continues to make the same mistakes. As such, you should assess the ways in which you can change your practices in order to ensure that your customers have no cause to make a similar complaint in future.

Depending on the nature of your business this may be a lengthy process; for example, if you are a manufacturer and a complaint has brought to light a fault in your product, rectifying this fault is likely to take time. In some circumstances, therefore, you will need to carry out a cost-benefit analysis. If the issues raised in the complaint affect only a small number of customers, and the work required to rectify the problem is significant, you may decide that it is not worth making any changes.

However, in all cases it is important to remember that the cost to your business of an unsatisfied customer is not limited to the lost revenue from that one individual. Rather, every customer who lodges a complaint but is unhappy with the response will tell, on average, ten other people about their experience. As such, you must be very sure of the benefits if you choose to ignore customer complaints.

Complaints management is a vital and intrinsic part of your customer service and sales processes. Complaints that go unheeded can cost your business dearly. However, a prompt, reasonable and efficient response to a complaint can win you a loyal customer, and develop your business's reputation for top quality service.

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