The point at which a customer complains is often the greatest test of the relationship between the customer and their service or product provider. So it is surprising that even today many companies fail to recognise the value complaints can deliver to their organisation, writes Ian Huntly, CEO and MD of Rifle-Shot Performance Holdings.
Companies should begin looking at the role and value complaints affect their organisations and should consider them to no longer be a costly inconvenience but a key opportunity to develop more profitable and sustainable relationships with their customers.
Companies must seize every complaint they receive. It’s not good enough to simply process the complaint; they need to leverage every opportunity to create value from it.  Any organisation that adopts this approach will see a real opportunity for complaints and feedback management to become a competitive differentiator and a source of profit for the business.
Customers are a scarce resource and when common business wisdom suggests that it costs up to 10 times as much to attract a new customer as it does to retain an existing one; this provides the evidence of the importance of customer loyalty.
Competition, commoditisation of product offerings and rising acquisition costs has highlighted the importance of customer retention, up-selling and cross-selling across many industry sectors. There would be little disagreement on the overwhelmingly high costs and poor business logic of maintaining a strategy focused only on acquiring new customers.
As a result, organisations are continually looking at ways to identify, nurture and encourage loyalty.  Part of this process is understanding customers’ expectations and requirements to shape a customer-focused, loyalty driven business for the future.
There are many and varied technologies and methodologies available to build customer insight and understand market sentiment but what many companies today fail to recognise is that customers are already giving them vital, free information on how they feel about them, their products and their services – it’s just that nobody seems to be listening.
Customer complaints and other forms of customer-initiated feedback represent a more reliable, more accurate and faster way to get better quality data on customers’ attitudes and, in most cases, come from loyal customers – not disloyal ones, as is often thought.
These complaining customers are offering the organisation an opportunity to recover the failure, to make restitution and then to continue with a mutually valuable relationship. Often a simple apology is all that they are looking for. Customers who do complain about their dissatisfactions are also more likely to re-purchase.  In fact, complaining customers can become a company’s most loyal customers.
Industry research shows that customers who complain and are satisfied are up to 8% more loyal than those who did not have a problem. They are more likely to tell their inner circle (family, close friends and work colleagues) how pleased they are the company addressed their complaint, even if the problem was not resolved to their liking.
If the problem is resolved satisfactorily, they will tell even more people than if they had received good service in the first place. Given this propensity to re-purchase and to recommend to others in their social and peer groups, customer complaints are a leading indicator of customer sentiment and future economic activity.
Companies must make the most of every complaint
In the past, there has been a tendency to assume that “compensation culture” is the main motivator behind customers who complain to their service or product provider. But some companies are now beginning to recognise the value of encouraging all customers with a grievance, to make a complaint.
There are a number of reasons behind this. Many products sold today are taking longer to reach profitability and companies have to work harder to retain their customers. As a result, there is a growing focus on improving the customer experience.
Increasingly, organisations are recognising the previously untapped potential of complaints as a means to identify systemic problems in their products and services.
So the principles are simple to appreciate and it feels right to handle dissatisfied customers well. But many companies and individual executives want to understand the financial impact. It is clearly difficult to put quantitative measures on qualitative aspects of feelings and disposition, but it can be done – at least to a certain degree.
Organisations cannot afford to ignore dissatisfied customers as there is a real risk they will walk away from the company. However, the ramifications do not stop here as customers who have a poor experience with an organisation will tell an average of 10 people – in essence, for every dissatisfied customer, there are a further 10 people who now distrust the company and are unlikely to consider becoming a customer.
So encouraging customers to speak up, making the complaints process transparent and accessible and treating complaints seriously, are key steps to driving up customer retention and, ultimately, profitability.
It is not enough simply to process the complaint – companies need to leverage every opportunity to create value from it. In the past, the majority of companies have tended to view complaints handling as a drain on the company’s resources and profit. Processes have therefore been geared to clearing the complaint with the minimum of effort.
Little attention has been given to understanding whether the customer was happy with the way their complaint was handled and how this could impact the future of the relationship. These organisations take a “minimum standards” approach.
In other words, they do just enough to process the complaint, produce a decision and provide a level of service that takes little or no account of the future of the relationship. If the customer senses that their complaint has been ignored or too readily dismissed, their frustration turns to a grievance against the organisation based upon the perception that the company has no regard for the interests of its customers.
As a result, the customer’s propensity to re-purchase is at risk or, worst case, the customer will take their business elsewhere.
Today, smart companies are increasingly focused on improving the consistency and effectiveness of their complaints and feedback management processes in order to deliver standards of service and outcomes that demonstrate a commitment to their customers. However, there still remains significant room for improvement and only recently have organisations begun to understand the implications and value of complaints for other parts of their business and for other customers too.
Conclusion
Many companies have evolved from a minimum standards approach to managing customer complaints and feedback but few, if any, have yet reached the stage of achieving real competitive advantage.  To do this, companies need to apply the following steps:

* Optimise the accessibility of their complaints and feedback processes.
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Invest in a robust and enterprise-proven complaints and feedback management solution to ensure all complaints are captured and managed effectively and efficiently.
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Listen to their customers’ experiences of making a complaint.
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Perform root cause analysis of complaints and feedback data in order to identify process and service improvements and prioritise business change initiatives.
* Truly place the customer at the heart of their business.
Those organisations who acknowledge every complaint they receive and leverage every opportunity to create value from it, will not only succeed in earning the loyalty and advocacy of their customers but at the same time will build a more customer-focused business, enabling them to achieve greater profitable organic growth.