Customer Complaints:  The Whole Enchilada

By Michael Lowenstein

  Michael Lowenstein, CPCM, is managing director of Customer Retention Associates, a customer and staff loyalty program development, research, and consulting firm located in Collingswood, New Jersey (www.customerloyalty.org).

  With over thirty years’ management and consulting experience in customer and staff loyalty research, CRM, loyalty program development and refinement, customer win-back, service quality, customer-driven corporate culture, and strategic marketing and planning to draw on, he is an active speaker, workshop facilitator, and trainer, and he is a regular featured contributor to three customer loyalty newsletters.  His keynote, general session speaking, and workshop facilitation assignments have been in the United States and Canada, Europe, South America, and Africa.  He also provides expert customer loyalty commentary and articles for several professional CRM sites on the Internet.  

   Michael is the author of two widely-regarded books:  Customer Retention: Keeping Your Best Customers (1995), and The Customer Loyalty Pyramid (1997).  He is also co-author of Customer WinBack: How to Recapture Lost Customers – and Keep Them Loyal (2001).   Additionally, he is a contributing author to Redefining Consumer Affairs (Society of Consumer Affairs Professionals, 1995), The Answer Book for Customer Service Managers (Bureau of Business Practice/International Customer Service Association, 2000), and Customer.Community: Unleashing the Power of Your Customer Base (Jossey-Bass, 2002)

   He has been a customer loyalty instructor for Pennsylvania State University and the American Management Association; and he holds an M.B.A. degree in marketing from the University of Pittsburgh, and a B.S. degree in economics and marketing from Villanova University.  He is listed in several international, national, and professional Who’s Who directories.  His clients include First Union, Toyota, Prudential, Westvaco, Cigna, Charles Schwab, Borg-Warner, Sygma, Comcast, Baptist Health Care, Metropolitan Life, Microsoft, Alliance of Community Health Plans (ACHP), Daimler-Chrysler, and Georgia-Pacific.  

   Customer Retention Associates specializes in helping clients optimize customer loyalty and value through customer and staff loyalty research, loyalty program development and refinement, loyalty action training for front-line staff and management, and customer save and win-back protocol development.  The company is a founding member of the CRM International Consortium (CRMIC), an affiliation of independent CRM and customer loyalty practitioners from around the world, which is based in Europe.  The mission of CRMIC is to offer leading-edge customer loyalty and value solutions.

Complaints are one of the best sources of customer data a supplier can have, yet most companies are getting half, or less, of the complaint enchilada.  Their portion of the enchilada are the complaints customers post via telephone, mail, fax, and Internet.  Suppliers need to have the whole enchilada.

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.

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:

1. They’re busy, and they can’t or don’t want to take the time
2. The consider the complaint interaction a hassle and an annoyance
3. They see no direct value or benefit to them in making the complaint
4. They don’t think the supplier will do anything about the complaint
5. 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. 

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.

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, faxes, 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 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 incidence of poor customer service demonstrated by many e-commerce web sites has been actively reported in the media.   Angry customers have posted on specialty complaint 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.

So, having seen how complaints can hurt, 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.

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.  We 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 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. 

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.