|Lessons In Loyalty|
Nobody likes to hear complaints, but they are actually among the best sources of customer data a supplier can have. Few things are as effective at either sinking a CRM program or giving it new life. However, most companies are only getting half of the complaint enchilada because they hear only those grumblings that customers post via telephone, mail, fax and Internet.
At a time when product and service loyalty continues to decline, consumer advocacy groups report that more than 50% of the buying public has problems or complaints with the products and services they purchase. Yet, it has been estimated that only about 5% to 10% of customers actually express their grievances to the supplier. In fact, some industries experience notably high levels of customer complaint silence: financial services,
- 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 more than 40% of the companies in their business-to-business database who had a problem never informed the supplier about it. Further, they estimate that the total amount of revenue at risk due to poor service and complaints is more than 11%. Hepworth's business-to-business research shows that only about one-quarter of the customers who complained felt their concerns had been successfully resolved. In the minds of customers, resolution often either takes too long or requires too many contacts with the supplier.
Customers experiencing insufficient resolution to complaints are not only less likely to repurchase from that supplier, they will also spread their negativism -- telling anywhere from two to 20 people about their bad experience. 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. Angry customers have posted on specialty complaint Web sites such as uGetHeard.com, PlanetFeedback.com and eComplaints.com. They will even set up their own Web sites so other upset and former customers have a forum for their negative experiences.
Several years ago, Banc One 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. In other words, half of the complaint enchilada was missing.
The potential for complaints to negatively impact customers' future purchase intent and recommendation should never be underestimated. In loyalty research for one of our clients, a major 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 15% less likely to be positive about continuing to purchase from our client than those without a complaint.
So how can these complaints be harnessed to enhance a customer loyalty or CRM program? There are three methods. 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 understood and corrected. Third, enhance the effectiveness of problem and complaint resolution processes.
There is a fourth method to consider when approaching complaint generation and management. And it may be the simplest, and most effective of all. Most companies, in their customer value/performance research, fail to ask about complaints, either those that have been registered or those that haven't. I strongly advocate doing this. Complaints, after all, are a different category of involvement with a supplier than just low performance ratings. They're stronger. If we can identify those complaints that have been registered and how they have/haven't been resolved, and those complaints that haven't been registered and the reasons for non-registration, this represents a complete inventory of customer complaints and sheds new light on the complaint process. Their specific potential effect on customer loyalty can then be modeled for prioritized action.
Returning to the Banc One example, those retail customers who registered their complaints -- and 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.
Having a database of the registered and unregistered complaints gives a supplier the entire spectrum of customer negativity, enabling corrective action to be much more focused and relevant. That's the power of the whole enchilada.
Michael Lowenstein is managing Director of Customer Retention Associates, a customer and staff loyalty program development, research and consulting firm located in Collingswood, N.J. He has three decades of experience in customer and staff loyalty research and has written several books, including Customer Retention: Keeping Your Best Customers, The Customer Loyalty Pyramid and Customer Win-back: How To Recapture Lost Customers - And Keep Them Loyal.
This was first published in March 2002