Michael Lowenstein
Managing Director
Customer Retention Associates
lowen1@directvinternet.com
|
Search Our Catalog of Articles
Q: Complaints: Customer Loyalty Torpedoes or Lifesavers?
Nothing can be as effective as complaints at either sinking a customer loyalty or CRM program or giving it new life. Complaints can be a positive or negative influence on customer's word of mouth, as well as intention to remain loyal or to defect. In this column, we'll present the issues surrounding each possibility, beginning with the little-explored impact of unexpressed complaints.
At a time when product and service loyalty continues to decline, consumer advocacy groups report that more than 50 percent of the buying public have problems or complaints with the products and services they purchase. Yet, it has been estimated that only about 5 to 10 percent of customers actually air their grievances to the supplier. Some industries experience notably high levels of customer complaint silence: financial services, food and beverages, pharmaceuticals, and high-tech. It's been well documented why their customers won't complain:
- They're busy, and they can't
or don't want to take the time
- The consider the complaint interaction a hassle and an annoyance
- They see no direct value or benefit to them in making the complaint
- They don't think the supplier will do anything about the complaint
- They can get what they want from an alternate supplier, so they switch
Canadian marketing research firm Hepworth + Company, Ltd. has found that over 40% of the companies in their business-to-business database who had a problem or complaint never informed the supplier about it. Their reasons for not expressing their complaints were remarkably similar to those given by consumers. Even though the rate of expressed complaints is higher in the business-to-business world, the lost revenue potential of unexpressed complaints is significantly greater there because of the lifetime value of each customer. Hepworth estimates that the total amount of revenue at risk due to poor service and complaints is over 11%. This is
30% higher than the last time Hepworth conducted their study, in 1996.
Banc One, a major financial institution in the United States, conducted a study of the loyalty
leveraging effect of expressed and unexpressed complaints on its retail customers. The bank found that
about half of these customers had service complaints. Of those with a complaint, only about half had
expressed them. Those who registered their complaints - and then were handled in a positive manner by the customer service department - indicated a very high level of loyalty toward the bank. On the other hand, those customers who hadn't expressed a complaint (even though they actually had one when asked) had bank loyalty levels about two-thirds as high as those whose complaints had been expressed and positively handled; and the customers whose complaints had been handled poorly had loyalty levels only one-quarter as positive as those whose complaints had been handled well.
When customers
do complain, through customer service operations like the Campbell Soup Company's Consumer Response and Information Center (which takes more than 300,000 calls a year), or the General Electric Answer Center, which is open all day, every day, or by other means such as e-mail or letters, or outbound customer complaint solicitation, how the complaints are received and acted upon makes all the difference in their customer effect.
The potential for complaints to negatively impact customers' future purchase intent and recommendation should never be overlooked. In loyalty research for one of our clients, a major U.S. manufacturer of paper and related products, it was determined that close to 40% of their high volume accounts had serious performance complaints. These complaining customers were fifteen percent less likely to be positive about continuing to purchase from our client than those without a complaint. Other studies show similar negative loyalty effects of complaints.
Hepworth's own business-to-business research shows that only about one-quarter of the customers who complained felt their concerns had been successfully resolved. Two reasons are that, in the minds of customers, resolution often either takes too long or requires too many contacts with the supplier. Hepworth has found that it frequently takes, for instance, three or more contacts for issues to be resolved. Customers experiencing inefficient or insufficient resolution to complaints are not only less likely to repurchase or recommend from that supplier, they will spread their negativism - telling anywhere from two to twenty people about their experience.
With numbers like these, it's little wonder that, left poorly handled or totally unresolved, complaining customers can sabotage even the most carefully crafted marketing or customer loyalty program. The increasing incidence of poor customer service demonstrated by many e-commerce web sites has been
actively reported in the media. In an earlier column on the subject of the Internet, we noted how angry former customers have sought revenge upon two major American companies.
Fry's, a computer and electronics superstore chain on the West Coast, is noted for lack of service and customer responsiveness. One customer, who'd had a particularly bad experience with Fry's, set up an Internet bulletin board with eight pages worth of negative customer comments and active encouragement not to buy from Fry's. Close to 200,000 people have visited that customer's site.
Bally's Total Fitness, a national health club chain, had used questionable retail practice to enforce their customer contracts. A former customer created an actively-visited web site which encouraged Bally customers to pursue remedies regarding their contracts, billing, and debt collection methods.
So, how can complaints complement, and even enhance, a company's customer loyalty
or CRM program? There are three ways. First, encourage customers to contact the company with questions, comments, problems, or complaints; and, make this as easy as possible. Second, identify the root causes of all complaints, registered and unregistered, so that their sources can be identified and corrected. Third, enhance the effectiveness of problem and complaint resolution processes.
If complaint and inquiry contact can be managed in such a way so that it is easy and comfortable for customers, provides authoritative and clear information, and appropriate resolution, this can enhance a company's relationship with its customers and positively leverage customer loyalty. In fact, as we have advocated for many years, customer contact should be approached as a profit center rather than a cost, contribution to the bottom line as much as sales or marketing. This is a very real-world demonstration of the customer-driven company's total commitment to the creation of loyalty
and delivery of optimum customer value.
|