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Counting the cost of complaints - Part one

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7th Jan 2007
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By Stuart Lauchlan, news and analysis editor

In that post-Xmas phase, we’re inevitably all a tad more fractious – and it’s only made worse by the sudden rush of bills coming through the letterbox instead of Christmas cards, not to mention the dreaded tax return. So it’s hardly surprising if we all feel like complaining a bit more about our lot.

But of course complaints are scarcely limited to the festive season. While the whole point of investing in CRM systems is to boost customer satisfaction and loyalty levels, every company is going to be on the receiving end of complaints at some point. How you manage those complaints is either going to enhance the relationship with the customer or potentially sour it long term.

But a potentially damaging approach companies often take is addressing complaint management as somehow distinct and unrelated to the wider practice of CRM. Too many executives assume that the presence of a complaint-handling module in the technology solution means that that particular box has been ticked. But as we’ve long noted, CRM is not about technology – if your attitude to customers is that they are a nuisance, then all the CRM software in the word isn’t going to improve your relationship with them, simply automate your prejudice.

"Complaints should be viewed as a productive feedback process." Chartered Management Institute

It’s a fundamental error to regard handling complaints as a troublesome subset of CRM. In reality it’s at the very heart of managing your relationship with your customers. There can surely be nothing more important to the long-term viability of a company than addressing problems with customers that might prevent them coming back for return business and lead to damaging word of mouth comment that will prevent new sales from taking place.

“Complaints should be viewed as a productive feedback process,” advises the Chartered Management Institute (CMI). “By managing customer complaints [effectively] you can increase customer loyalty and alert yourself to a problem experienced by other customers who simply took their custom elsewhere. Unless you give them what they want they will go elsewhere. Therefore, it’s important to deal with a complaint quickly and get it right by ensuring that the customer is satisfied with the outcome.”

The flipside of the coin is to regard complaints as a good thing. Complaints are expensive, both in direct and indirect costs, but they can be seen as a opportunity as well as a burden. Complaining is one of the rare opportunities for companies to interact directly with customers at their instigation. Customers who complain and have a positive resolution are actually more likely to remain brand loyal than those who do not complain at all. It’s like being a reformed smoker – the best evangelists will be those who have complained, but then been pleased with the resolution they received from your company.

In addition analysis of complaint and feedback data can expose where products and services can be improved—and identify possible gaps and opportunities that can lead to new product development. An effective complaint management scheme will develop a culture of continual improvement across your products and services. That’s got to be valuable to any company in a competitive marketplace. Best-practice organizations consider complaints as opportunities for improvement.

Regulatory stick and revenue generating carrot

A properly executed complaints management programme, integrated as part of an overall CRM strategy, can decrease customer maintenance costs, increase revenues and improve a company’s ability to track historical customer and product trends – useful to forecast future market, product, and customer needs. An effective scheme will improve the reputation, credibility and image of yoru company while improving customer trust and satisfaction with your products and services as well as leading to an improved customer focus.

"An effective scheme will improve the reputation, credibility and image of yoru company while improving customer trust and satisfaction with your products and services as well as leading to an improved customer focus." Chartered Management Institute

If that’s not enough incentive, then let’s add the regulatory stick to the revenue generating carrot. Post Enron, there are specific regulatory requirements for capturing, investigating, resolving and reporting customer complaints. Rather than regard complaints management as a subset of CRM it might be more accurate to view it as a subset of compliance management.

So what makes up an effective complaints management strategy? There is a theoretical process for handling complaints to global standards like ISO9000:2000. The main ISO9000:2000 process steps are:

1. Analyse the complaint.
2. Derive necessary measures to remedy the complaint situation.
3. Prioritise measures based upon the severity of the situation.
4. Communicate to the customer the results of the analysis and the proposed measures.
5. Make a concrete measure and time plan to:
6. Remedy the current complaint situation.
7. Avoid similar complaint situations in the future.
8. Monitor the measures.
9. Communicate to the customer about the measures and their success.

How does that translate into the real world? For a start you need to be able to distinguish between different types of complaints. Just as not every customer is equal, so too not every complaint from every customer is equal. Record and classify each complaint as it comes in as well as the product and service that the complaint it about. Is the complaint about something external – broken product, undelivered service – or some aspect of internal company policy that has a customer touchpoint – poor communication between different customer-facing sections of the company.

Are complaints isolated instances or are they part of a general trend? If it’s the latter can you see what the root cause is? To do so, you need to carry out trend analysis of complaints to counter any growing stream of complaints at the earliest opportunity. The electricity firms have seen how not addressing repeated customer complaints can lead to criticism and action from the Ombudsman.

The most important aspect of complaints management is of course doing something about the complaints. It’s not enough just to log the complaint and perform your analysis. These are internally facing actions that mean nothing to the complainant on the end of the phone. That person wants to know what you’re going to do about the problem that has been brought to your attention.

And monitor the success of these actions. How much happier are your customers once actions have been taken? Are you seeing a reduction in the number of complaints coming in? And as importantly, is the customer satisfaction level rising after your complaints resolution procedures have taken place. Is your complaints management process working? Ask questions to customers who use the system, including whether or not they view the process as accessible, easy to use, and fair. If you get negative responses, then highlight these as areas for closer examination and improvement.

Complaints are really just opportunities in disguise that can enable you to optimise and improve the inner workings of the business. Whenever a customer complaint or problem arises, remember that it is a human being asking you to treat them as individuals in need of help, not a problem to be filed under pending. When customer complaints are handled well, most customers will remain loyal. But when complaints are discouraged or handled poorly, a loss of customers is certain to follow. Fix the problem and convert an angry customer into your most vocal advocate.

Click here for part two of this feature, in which we’ll look at techniques for complaints management for different types of customer touchpoints with an organisation.

Find out more about Stuart Lauchlan

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By esamb
18th Jan 2007 14:18

Great topic!

Our company introduced a customer feedback system to track written negative complaints; buy-in at key touchpoints has been slow- but recognises it is a must if we are to keep our customers and create positive experiences... Looking forward to your other article.

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By AnonymousUser
16th Jan 2007 16:18

If organisations want to improve their Customers' Experience then the process of Complaints Management is a must!. I have been called out by many companies after customers have defected but please note that its never too late to put in a complaints management process, and the one above is excellent!

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By AnonymousUser
16th Jan 2007 11:12

When will part 2 be available? I work for a very large mobile telecoms company in Ireland and I am currently heading up a project aimed at 'recovering' the experience for those customers who have had a very poor experience and have written in to complain. The customers I really worry about are those who don't even complain but simply leave us for a competitor.

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