CUSTOMER COMPLAINTS:
How to Turn Lemons into Lemonade and Protect Your Business
A century ago, the retailer Marshall Field popularized the slogan, “The customer is always right.” Today, customers have more avenues to express dissatisfaction than ever before, including on social media. Yet, some businesses blunder their responses to customer complaints, leading to lost business and revenue, reputational harm, bad publicity, lawsuits, and even regulatory scrutiny.
Consider these examples of how not to handle a complaint:
Amazon reportedly charged a woman $7,455 in shipping costs for $88.77 in toilet paper. She complained six times, including to the CEO. Each time, she received a form letter explaining there would be no refund because the delivery was made on-time and undamaged. Two months later, she was refunded after a local television story went viral.
Frontier airlines failed to notify the parents of two children, ages 7 and 9, that their flight home from visiting their grandparents was rerouted to a distant city due to bad weather. One of the children borrowed another child’s cell phone to notify their parents the flight was rerouted. When the parents complained, Frontier unapologetically claimed that it followed “standard protocol.”
Comcast debited a $1,775 early termination fee from a business owner’s account when he canceled his service. The cable giant eventually admitted the fee was not warranted, but when the business owner complained, he was told to take it up with his bank. He waited two years for a refund. Comcast earned the designation as the “most complained about company in America” because of these types of practices.
Why Customer Complaints Matter.
Failing to make things “right” with a customer can lead to reputation harm. In a study by Microsoft, 96 percent of customers said that customer service is an important factor in brand loyalty. According to another study, dissatisfied customers tell as many as nine to fifteen people about their experience. But satisfied customers who get their concerns resolved will tell between 4-6 people about their experience. For every customer complaint, there are 26 other unhappy customers who have remained silent.
Responding to customer complaints is good for the financial health of the business. A two percent increase in customer retention has the same effect as cutting costs by ten percent, according to one study. A study by Accenture identified poor customer service as the main reason for customer churn. According to a study by Bain & Co., it generally costs six to seven times more to acquire a customer than to retain an existing one.
As important, customer complaints are often an early warning sign of problems with a businesses’ personnel or practices. Paying attention to customer complaints gives a business the opportunity to fix problems before they mount. When ignored, customer complaints can lead to regulatory sanctions and lawsuits. Consider this example: Wells Fargo had an aggressive sales culture in which branch managers and bank employees earned bonuses for “cross selling” services to existing customers. Wells Fargo employees eventually opened as many as 1.5 million deposit accounts and 500,000 credit card accounts without the permission of its customers. From 2011 to 2016, the bank reportedly fired over 5,300 employees for this activity. Yet, the bank did not correct its conduct in the face of customer complaints. In the end, the bank was eventually fined $185 million by federal regulators and faced a torrent of civil lawsuits.
Indeed, if a business does not respond to a complaint, the customer may seek help elsewhere, including from government agencies. A patient unhappy how her doctor handles a complaint may seek accountability from the Board of Medical Practice. A policyholder who thinks his insurance agent gave a deceptive quote may ask the Commerce Department to help him get a refund. A buyer who thinks a realtor failed to disclose a defect in a new home may file a complaint with the Attorney General’s Office.
In an age of social media, customer complaints can quickly “go viral” if not handled promptly. In one recent survey, people indicated that social media is the second most common way they lodge a customer complaint (the first was in-person, the third was by email, and the fourth was by telephone).
As former Minnesota Attorneys General, Lori Swanson and Mike Hatch collectively headed the chief consumer protection agency in Minnesota for 20 years. As a former Commissioner of Commerce, Mike Hatch also headed the chief consumer protection agency in the insurance, real estate, mortgage, and financial sectors for eight years. And Lori Swanson previously chaired the Federal Reserve Board’s Consumer Advisory Council in Washington, D.C., where she made recommendations to the Federal Reserve Board for protecting consumers from harmful financial practices. Lori Swanson can be reached at lswanson@swansonhatch.com, or at 612-315-3037. Mike Hatch can be reached at mhatch@swansonhatch.com, or at 612-315-3037. The firm’s website is www.swansonhatch.com.
How to Respond to Customer Complaints.
Watch for Trends and Problems. Make sure that someone with the proper level of authority proactively monitors trends in complaints and that egregious situations are brought to this person’s authority, This will give the business the chance to correct problems, both the “one off” situations that seriously impact a single customer but also larger trends. Monitoring complaints will tell you what you can do better and also help minimize the risks of regulatory complaints and unnecessary litigation.
Provide an Avenue to Complainant. Be sure customers have multiple ways to complain (i.e., in person, by phone, by email, etc.) That doesn’t happen if you hide your phone number, don’t answer the mail, or make it impossible to bypass a telephone recording for a “real person.” Nothing makes a disgruntled customer angrier than calling a business to complain, only to be placed in the purgatory of an automated phone system with no bypass to speak to a human being. Don’t do this. And make sure your whole team knows where to direct people with concerns. Also have a process to monitor social media in real-time and respond to online concerns.
Listen to the Customer. Make sure that the front-line people who receive customer complaints are trained in how to listen and express empathy. When appropriate, apologize. A study by the Nottingham School of Economics found that dissatisfied customers were more willing to forgive a company when it apologized than when it offered compensation. It is human nature to forgive when someone says, “I’m sorry.” Proper training is important. Even if the customer’s complaint is unwarranted, you don’t want your customer relations staff blaming, belittling, threatening, or talking down to customers.
Be Appreciative. Most people who are affected by a problem do not complain. But they may move their business elsewhere. People who do complain are doing you a favor by giving you an opportunity to retain their business. Be sure to thank them for letting you know about their concerns.
Investigate Thoroughly and Respond Promptly. Be sure that complaints are investigated thoroughly and quickly. Be sure to provide a prompt response to the customer. If you need more time, keep the customer informed of the status and when you expect a resolution.
Have an Action Plan. Be sure your staff is empowered to fix the problems of the people who do complain, or to quickly get authority to do so. If you messed up, besides an apology, consider if there are ways to provide tangible relief to the customer, such as goodwill payments or refunds.
By following these steps, your business can change a potentially negative experience that goes viral or lands on the desks of regulators or a judge into a positive experience for your business and your customer.
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www.swansonhatch.com
431 South Seventh Street, Suite 2545
Minneapolis, MN 55415 612-315-3037
The materials in this article are for informational purposes and do not constitute legal advice, nor does your unsolicited transmission of information to us create a lawyer-client relationship. Sending us an email will not make you a client of our firm. Until we have agreed to represent you, nothing you send us will be confidential or privileged. Readers should not act on information contained in this article without seeking professional counsel. The best way for you to inquire about possible representation is to contact an attorney of the firm. Actual results depend on the specific factual and legal circumstances of each client’s case. Past results do not guarantee future results in any matter.
How to Turn Lemons into Lemonade and Protect Your Business
A century ago, the retailer Marshall Field popularized the slogan, “The customer is always right.” Today, customers have more avenues to express dissatisfaction than ever before, including on social media. Yet, some businesses blunder their responses to customer complaints, leading to lost business and revenue, reputational harm, bad publicity, lawsuits, and even regulatory scrutiny.
Consider these examples of how not to handle a complaint:
Why Customer Complaints Matter.
Failing to make things “right” with a customer can lead to reputation harm. In a study by Microsoft, 96 percent of customers said that customer service is an important factor in brand loyalty. According to another study, dissatisfied customers tell as many as nine to fifteen people about their experience. But satisfied customers who get their concerns resolved will tell between 4-6 people about their experience. For every customer complaint, there are 26 other unhappy customers who have remained silent.
Responding to customer complaints is good for the financial health of the business. A two percent increase in customer retention has the same effect as cutting costs by ten percent, according to one study. A study by Accenture identified poor customer service as the main reason for customer churn. According to a study by Bain & Co., it generally costs six to seven times more to acquire a customer than to retain an existing one.
As important, customer complaints are often an early warning sign of problems with a businesses’ personnel or practices. Paying attention to customer complaints gives a business the opportunity to fix problems before they mount. When ignored, customer complaints can lead to regulatory sanctions and lawsuits. Consider this example: Wells Fargo had an aggressive sales culture in which branch managers and bank employees earned bonuses for “cross selling” services to existing customers. Wells Fargo employees eventually opened as many as 1.5 million deposit accounts and 500,000 credit card accounts without the permission of its customers. From 2011 to 2016, the bank reportedly fired over 5,300 employees for this activity. Yet, the bank did not correct its conduct in the face of customer complaints. In the end, the bank was eventually fined $185 million by federal regulators and faced a torrent of civil lawsuits.
Indeed, if a business does not respond to a complaint, the customer may seek help elsewhere, including from government agencies. A patient unhappy how her doctor handles a complaint may seek accountability from the Board of Medical Practice. A policyholder who thinks his insurance agent gave a deceptive quote may ask the Commerce Department to help him get a refund. A buyer who thinks a realtor failed to disclose a defect in a new home may file a complaint with the Attorney General’s Office.
In an age of social media, customer complaints can quickly “go viral” if not handled promptly. In one recent survey, people indicated that social media is the second most common way they lodge a customer complaint (the first was in-person, the third was by email, and the fourth was by telephone).
How to Respond to Customer Complaints.
By following these steps, your business can change a potentially negative experience that goes viral or lands on the desks of regulators or a judge into a positive experience for your business and your customer.
www.swansonhatch.com
431 South Seventh Street, Suite 2545
Minneapolis, MN 55415
612-315-3037
The materials in this article are for informational purposes and do not constitute legal advice, nor does your unsolicited transmission of information to us create a lawyer-client relationship. Sending us an email will not make you a client of our firm. Until we have agreed to represent you, nothing you send us will be confidential or privileged. Readers should not act on information contained in this article without seeking professional counsel. The best way for you to inquire about possible representation is to contact an attorney of the firm. Actual results depend on the specific factual and legal circumstances of each client’s case. Past results do not guarantee future results in any matter.