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Complaint Handling: Where Companies and Customers Both Fail

Why companies fail at complaint handling

Consumers whose complaints are handled well by a company become loyal customers and spread positive word-of-mouth. Yet too many companies fail at complaint handling and then fail again in responding to these failures. Here's why:

How Our Complaining Psychology Leads Customers Astray

When we are dissatisfied with a purchase or a service, the vast majority of us fail to complain to the company or business in question. We are convinced it will require too much time and effort to do so, that the process will be unpleasant and that if we did pursue our complaint, the company or business would be unlikely to resolve the problem to our satisfaction.

Instead, we are far more likely to switch to another company or business and to tell our tale of consumer disappointment to 10-20 of our nearest and dearest, hundreds of our Facebook friends or thousands of our Twitter followers, spreading terrible word-of-mouth about the company or business in question but failing to get a satisfactory resolution to our problem.

However, our fears are usually greatly exaggerated. In other words, voicing complaints to companies and businesses is usually far less laborious and annoying than we anticipate. This is especially so if we voice our complaint to someone with the authority to resolve the matter, such as the manager of a restaurant or a store, or an executive in a company. Call-center representatives are also likely to be more responsive if we approached them with civility and respect instead of holding them personally responsible for our problem.

And yet, each time we interact with a company that has terrible complaint handling procedures, our fears are not only reinforced but they generalize and we become less likely to voice a complaint when next we encounter a problem regardless of the company or business in question.

Why Companies Should Handle Complaints Well

1. Great complaint handling increases customer loyalty.

2. Great complaint handling reduces customer attrition.

3. Great complaint handling spreads positive word of mouth.

4. Poor complaint handling spreads negative word of mouth.

5. It is far more expensive for a company to recruit a new customer through traditional marketing and advertising than to retain an existing customer by improving complaint handling procedures.

6. Customer complaints give companies free and crucial information about problems with products or procedures that are costing them customers.

7. Handling complaints give companies opportunities to have a dialogue with their customers, to educate them about new or existing products and to upsell.

The above factors contribute to significant increases in a company's bottom line, while handling complaints poorly hurts their bottom line. This makes the fact that companies still fail at complaint handling both unfortunate and at first glance, bewildering.

Why Companies Fail to Improve Their Complaint Handling Procedures

Too many company executives view customer complaints as either nuisances that should be minimized (customers' fault) or actual failures (company's fault) and those prompt a variety of defenese mechanisms and other decision making snafus to determine the response to complaint handling failures:

1. Denial: Only a fraction of our complaints typically reach company executives. Many company leaders prefer to believe if they're not hearing about problems, problems must not exist.

2. Suppression: Many company leaders close their eyes and ears to the rising impact of social media and consequently to the damage complaints on Twitter, Facebook or YouTube can do to their company as well as to how their poor complaint handling contributes to customer attrition.

3. Short Sightedness: Investments in customer service and complaint handling typically do not show immediate returns but do show a return on investment over time. Corporations typically think in terms of quarterly profit and loss statements and are hesitant to make long term investments.

4. Concrete Thinking: Concepts such as word-of-mouth and customer loyalty seem abstract and vague to many company executives. Yet, companies can easily quantify the exact dollars and cents value of positive and negative word-of-mouth, and how much it costs them to lose a loyal customer versus to recruit a new one. Unfortunately, few companies do these basic calculations.

5. Diffusion of Responsibility: Which department should carry the cost of training frontline representatives to handle complaints-operations, customer service, marketing? Too many companies lack a structure that allows cooperation and communication between departments.

6. Impulsivity: When companies need to cut costs, one of the first cuts they make is customer service training programs and initiatives because they assume doing so will improve their bottom line despite the opposite being likely.

7. Grandiosity: Many company executives have never spent time with frontline representatives, or listened in on calls from customers because they believe such things are 'unnecessary' or 'beneath them'. Their dismissive attitude toward their employees quickly filters down to their customers.

The bottom line is this: Failures in complaint handling are failures in company decision making and leadership.

Consumers should address complaints to senior executives whenever possible. Perhaps if they heard directly from their customers our message would get through.

Copyright 2011 Guy Winch

Follow me on Twitter @GuyWinch

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