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The way companies handle complaints can mean the difference between success and failure in an increasingly competitive marketplace. Businesses that turn complaints into opportunities for building closer relationships with customers are the ones that are most likely to survive and prosper.Opportunity to improve the company
The complaint is a signal that should not be ignored. When customers complain, they are giving your company an opportunity to fix what is wrong and improve your business. Why? Customers act in their own self-interest, and they are in a unique position to tell your company the unvarnished truth – something your employees are unlikely to do because it might reflect negatively on their performance or they may fear that you might “kill the messenger” rather than listen to the message. Just about every comprehensive study done on this subject points to greater success for companies that turn the negatives represented by complaints into positives.
Ignore customers at your own peril
Back in the summer of 2011, Netflix ignored their customers by splitting its DVD and streaming businesses and effectively increasing prices by 40%. As a result, they lost a whopping 800,000 subscribers, their stock price fell to less than half its previous value, and the company became one of the 10 most hated companies in America.
Customer complaints are marketing opportunities
John Goodman did pioneering customer service research through TARP, the company he founded in 1971. He showed that, while customer service is typically a cost centre in most companies, it could be turned into a powerful marketing force to drive sales, repeat business and greater profits. His research showed that roughly 4% of customers (1 out of 26) that were “wronged” by a company complain. The other 96% (25 out of 26) stop buying and tell 9 to 10 others within a week about their poor treatment. This means that a negative word of mouth pyramid averaging 250 is created.
If the company is able to satisfactorily solve the problems of the 4% that complain (turn the negative into a positive), they will tell 6 to 7 others within a week that the company solved their problem. This will result in a positive word of mouth pyramid of 250 customers that say good things about the company. The positive group will also develop a closer relationship with the company.
What can you do about the other 96%? You can go through your customer list and contact customers that have not bought products from you in a while and ask them why you have not heard from them. This will identify a good number of negatives that you can turn into positives. And, in
cases where there were no negatives, the contact is another opportunity to generate more business.
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In their book, Turned On, Roger Dow and Susan Cook describe the Marriott research done to identify which guests intended to stay at the Marriott again. They divided guest stays into 3 groups A, B, and C.
- A = Nothing bad happened during their stay.
- B = Something bad happened, but Marriott fixed the problem.
- C = Something bad happened, but Marriott did not fix the problem.
The percentage of these three groups that said they would return to stay at the Marriott were as follows:
- A = 89%
- B = 94%
- C = 69%
This corroborated the TARP studies that showed that a broken relationship that is “fixed” creates a more loyal customer than one that was never broken. The more a company is able to fix what is wrong, the more they build a positive reputation.
Opinion Research did studies that showed that when choosing between similar products, 87% of customers choose the product from the company with the better reputation.
How to Create a System to Handle Complaints
How can your company use this information to turn complaints into a powerful marketing force that improves your business and reputation?
- Train all employees to look for complaints and view them as opportunities to neutralize negatives and build stronger relationships with customers.
- Record the complaint so that it can be shared.
- Send it to the decision maker with the authority to fix what is wrong.
- Make sure the responsible party fixes it as quickly as possible.
- Follow up with the customer to insure that they were satisfied with the fix. If not, expedite a solution.
- Give them a code to use when they purchase from you again or refer others.
- Track their repeat purchases and referrals.
- Report statistics on repeat purchases and referrals stemming from the fixed problem.
- Calculate the ROI (return on investment) of the entire process.
As good marketers know, complaints are opportunities to develop closer relationships and improve your business. Don’t sweep them under the rug or ignore them. If you do, they will punish you. Ask Netflix, Bank of America, or the many others that ignored complaint signals.