How to handle complaints and not lose customers

Many companies that I know seem to hate dealing with customer complaints. They view it as a necessary evil and something that they have to do but would rather not. They give a false smile to the person complaining but would rather they just go away.

A typical business hears from about 4% of its dis-satisfied customers. The other 96% just quietly go away and 91% of those will never return. A survey on why customers quit, found the following:

3% move away. 5% develop other friendships. 9% leave for competitive reasons. 14% are dis-satisfied with the product. 68% quit because of an indifference in attitude by the owner, manager or some other employee. On average a typical dis-satisfied customer will tell 8-10 people about his problem with you. One in five will tell 20 people. And it takes 12 positive service incidents to make up for one negative incident.

The average business spends 6 times more to attract new businesses than it does to keep existing ones, yet customer loyalty is in most cases worth ten times the price of a single purchase.
Now tell me, what is a customer worth to your business? Have you ever worked this out? Here are a couple examples:

Grocery Store

If you run a grocery store and a local customer spends £10 a week in your shop, you will make £520 from him a year or £5,200 over the course of ten years. If one customer is worth this much to your business and its long term profitability, what will you do to keep him?

Thinking about this in purely financial terms as businessmen and women, it makes sense to replace this customer’s box of rotten strawberries or give him his money back on something he is returning, so that you can keep him as your customer. If you lose £30 on something now with a customer, it is better than losing the £5,200 you could have got if you didn’t lose him in the first place.

And then multiply that ten times for the number of people that he will tell as he bad mouth’s you and causes those potential customers to never set foot in your shop. £5,200 X ten people is £52,000. How does that feel now? You’ve potentially lost this volume of business because you had an argument with a stroppy customer over £10 or £20 pounds. Does this make sense?

Federal Express

Federal Express is another company that focuses on the value of a customer. If a mid-size company sends 30 packages a week (at £20 each) that’s £600 a week or £31,200 for the year. If a customer gets angry over a £20 shipment and switches his business to a competitor, Federal Express loses thousands and thousands of pounds. That’s why every Federal Express supervisor is authorised to grant a £100 refund on the spot, no question asked, for any delayed shipment. £100 is a small price to pay to keep an £31,200 per year customer.

If you handle a complaint immediately and solve the problem for the customer, you will keep them but if you handle their complaint badly, he will leave never to return. You ought to therefore love your customers who complain and you should not see them as troublesome, or irritating people. Love them. Care for them. Let them know that you value their custom.

You should do all that you can to keep a customer. If you are going to lose a customer and therefore £520 on a year on a spend of £10 per week, why not spend £10 or £20 to please him and therefore to keep him instead. Why not offer him a 50% discount, or send her a bunch of flowers with an apologetic note. Why not give him a free gift. If you run a music store, why not ask him to choose two CD’s with your compliments.
If you run a restaurant, why not invite him to dine with his wife for free and a free bottle of wine to go with the 3 course meal. If you are a printer, why not design and print some personalised stationery and offer it as a gift to the customer. Doing these things is far cheaper than losing the customer altogether. It makes business sense to spend £20 to delight your customer by doing some of the examples that I have given you here, than it is to lose their business forever.

You ought to develop policies to measure customer complaints. Measuring customer complaints is crucial because individual complaints are crucial areas to resolve, and also as a whole, complaints serve as a barometer for the quality and performance of the business. You need to have a scheme which encourages, not discourages, customers to complain, to open the channels as wide as possible. Most businesses are too defensive where complaints are concerned, preferring to minimise their importance, or to seek to justify and excuse them. Wrong. Complaints are the opportunities to turn ordinary service into unbeatable service.
Moreover, time and again surveys suggest that anything up to nine out of ten people do not complain to the provider when they feel dissatisfied - they just keep their dissatisfaction to themselves and the provider never finds out there's a problem, even when the customer chooses to go elsewhere. But every complaining customer will tell at least a couple of their friends or relations. Every dissatisfied staff member in the customer organisation will tell several of their colleagues. Unreported complaints results in bad feelings and the breakdown of relationships.

It is imperative that you capture all complaints in order to:

  • Put at ease and give explanation or reassurance to the person complaining.
  • Reduce the chances of them complaining to someone else.
  • Monitor exactly how many dissatisfied customers you have and what the causes are, and that's even more important if you're failing to deliver your mission statement or service offer!
  • Take appropriate corrective action to prevent a re-occurrence.
  • If appropriate (ie for large customers) review Service Level Agreements (SLA's) and take the opportunity to agree new SLA's with the customer.

A customer who complains is your best friend. A typical business only hears from 4%of its dis-satisfied customers. Seeking out and identifying customer complaints is one of the most potentially profitable things that a business can do. Here are 3 reasons why.
Firstly, complaints give you information as to how well you are doing and what areas of improvement are required. You can identify weak spots and take corrective action. A business that does not know where it needs to improve is no better off than ones that cannot.
Secondly, complaints give you a second chance to provide a good service to dis-satisfied customers. Only 4% will complain, the other 96% won’t give you this second chance, they will just smile, take their business elsewhere and tell their friends what lousy service you provide. So who are your true friends, the complainers or your nice friends?

Thirdly, identifying customer complaints is one of the most profitable things that you can do because complaints are a wonderful opportunity to strengthen customer loyalty. 70% of customers will buy from you again and again if you resolve their problem in their favour and 95% will buy from you again and again if you resolve their problem on the spot.
When a customer complains, your strategy should be to reward his complaint with fast, positive action. They will remember how you nicely dealt with them and think better of you, even more than they did before they had the problem. Consider each complaint as a serious one. Keep cool. Don’t act defensively. Be empathetic.

Here are my top 7 tips for doing when a customer complains.

  • Listen with understanding. It defuses anger and demonstrates your concern. Say that you are sorry that they have been inconvenienced. Ask them to tell you what happened so that you can help them. It’s vital to be sincere. Don’t blame others or make excuses. An excuse is a reason with a bad reputation. Take full responsibility for solving the problem and do what you can to fix it as soon as possible.
  • Paraphrase and record what they tell you. It shows that you both listened and understood.
  • Find out what the customer wants. Does he want a refund, a credit, a discount, a replacement?
  • Propose a solution and get his support. State it in a positive manner.
  • If the customer doesn’t like your solution, ask him what he would consider a fair settlement. Only about 10% or less of complaining customers will be unreasonable. This group will never be satisfied because they complain for the sake of complaining. If that’s the case, politely offer them a refund and send them on their way.
  • Make a follow-up call to ensure satisfaction. This will verify if the problem has been taken care of and it will leave the customer with a final impression of your desire to give good service. Right or wrong, customers will remember their final contact with you the most. The last impression is the lasting impression.
  • Never let the customer lose face. Be considerate of his feelings even when he is wrong. Never argue with him. The policy of a customer is always right is great for business.