A Complaint Is A Gift
by Janelle Barlow and Claus Møller; Published by Berrett-Koehler Publishers

Part I

Complaints: Lifeline To The Customer

When customers feel dissatisfied with products and services, they have two options: they can say something or they can walk away. If they walk away, they give organizations virtually no opportunity to fix their dissatisfaction. Complaining customers are still talking with us, giving us an opportunity to return them to a state of satisfaction so they will be more likely to buy from us again. So as much as we might not like to receive negative feedback, customers who complain are giving us a gift.

If we shift our perspective in this way to see complaints as gifts, we can more readily use the information the complaints generate to grow our own businesses. Customer complaints are one of the most available and yet underutilized sources of consumer and market information; as such, they can become the foundation for a company's quality and service recovery programs. This is no small gift!

In order to better understand complaining customers, Part I of this book examines the behavior and desires of dissatisfied customers. With understanding comes acceptance. We must welcome these complaining customers and make them want to come to us with their feedback.

"Those customers are cunning. They try to trick us into giving them things they haven't paid for."

"That customer is a jerk. There are no limits to what some people will do."

"Can't they see I'm busy?"

"If they'd just read the instructions before calling to complain."

"Can't they ever say anything positive?"

"All they do is complain--and about such minor things."

Imagine that an old friend you haven't seen in years comes to visit you on your birthday with a lovely present in hand. The first thing you would say after greeting him or her would, most likely, be an expression of gratitude. "Thank you. Thank you for coming and thank you for the lovely present." Your entire verbal and nonverbal language would signal your pleasure at seeing your friend and receiving the gift.

What if you then opened this gift and found a book purchased just for you? What would you say? "Thank you. I'm so pleased. I've wanted this book for some time. How thoughtful of you to get it for me. How did you know? I'll think of you as I read every page." Okay, maybe not that profusive, but something along those lines.

Now imagine a customer is calling you with a complaint. "My name is Sally Smith, and I ordered two pairs of slacks, one brown and one blue. I got two blue ones in the mail. How on earth did this happen? I checked my order sheet very carefully." Would you say, "Thank you for calling and telling us about this. We really appreciate it"? Probably not.

But if we receive the birthday present, we do not hesitate. We say, "Thank you." Why do we do this? Because this is a friend who took time to get us a present and is now giving us something that we want. What about complaining customers? Are they friends or enemies? What are they trying to do?

Complaining customers are giving us an opportunity to find out what their problems are so we can help them, and so that they will be encouraged to come back and use our services and buy our products. It is as if they are giving us a "book" (i.e., gift) entitled, "A Chance to Survive: Listen to Me and You'll Stay in Business". So don't say, "Go away. I've already got one book, and I don't want to read another. I'm too busy."

When encountering the customer who complains about receiving two pairs of blue slacks when she ordered one brown and one blue, many company representatives will respond along the following lines: "What is your name? How do you spell that? What is your address? When did you place the order? Do you have the order number? Did you pay with cash or charge it? Are you sure you didn't order two blue ones? Do you know whom you spoke to?" They may blame shipping and say, "I don't know how this happens, but it happens a lot!" If customers are very lucky, they will get an apology. But very few customer service people will say, "Thank you."

What if someone gave you a book for your birthday and you said, "Where did you buy it? Did you pay cash or charge it? Did you pay full price for it or get it at a discount store? How much does it weigh? How many pages does it have? Did you read it yourself? Why did you give it to me if you haven't read it yourself? Based on some silly best-seller list, you want me to spend my time reading this thing?" You would never be so ungracious about a gift. You would say, "Thank you" and you would mean it.

How can we begin to internalize that a complaint is a gift?

What is a complaint?

In simplest terms, a complaint is a statement about expectations that have not been met. It is also, and perhaps more importantly, an opportunity for an organization to satisfy a dissatisfied customer by fixing a service or product breakdown. In this way, a complaint is a gift customers give to a business. The company will benefit from opening this package carefully and seeing what is inside.

On the surface, a customer may complain that his newly purchased sweater shrank, or its colors ran and ruined a load of white clothing. At a deeper level, the customer is giving the store where he bought it an opportunity to respond, so he will continue buying more clothing from this supplier.

On the surface, a customer may complain that the trunk on her just-purchased luxury car does not close well. At a deeper level, she is saying she may buy her next car from the same dealer if satisfied with how the dealer handles this small problem. This customer is testing her car dealer.

On the surface, the customer complains to her grocer that the turkey she purchased did not contain any giblets, which she only discovered on Thanksgiving day itself when the store was closed. At a deeper level, the customer is wondering whether the grocer will take her word for it and how the store will compensate her for her disappointment.

On the surface, customers let their insurance agents know in no uncertain terms that when they call the insurance company to handle a simple question, their calls are not returned for days. At a deeper level, customers are warning their agents they may look at a competitor when their policy comes up for renewal.

What do you suppose most service representatives hear--the surface complaint or the deeper message? We contend that, unfortunately, all too many hear only the direct, surface message. And the end results are mismanaged complaints and loss of customers.

When organizations listen to customers with open minds and more flexible points of view, they can experience complaints as gifts. Unfortunately, most people do not like to hear complaints and we put up enormous psychological blocks to hearing them. Even more fundamentally, as we will discuss later, most customers simply do not grace us with their complaints. They just take their business elsewhere.

Why We Do Not Like Complaints

On the surface, it seems apparent why complaints have a bad reputation. Someone is saying that he or she does not like what took place. Who likes to hear that? Complaints are, in psychological terms, a negative attribution. In layman's terms, attribution refers to blaming behavior.

When something positive happens, people have a tendency to attribute it to themselves or to take credit for their own behavior. For example, a customer buying a dress will likely commend herself for finding it if she receives compliments on it, even if a shopkeeper clearly found the dress, brought it to the buyer, and urged her to purchase it.

Something different happens, however, when a failure occurs. Most of us like to blame other individuals or systems when things do not work out. For customers, this usually means that employees, specifically those most immediately accessible, are to blame when there is a product or service failure. Employees do the same thing. When they hear complaints they tend to blame customers. Most employees understand, however, that blaming customers is an unacceptable response to product or service failure, so employees mask their feelings and try to come up with more acceptable theories as to why things went wrong. A common explanation they come up with is that the organization and its policies are to blame. The employee may say to customers, "I would really like to help you, but there's nothing I can do. Our policy... "

Unfortunately, the strategy of blaming policies does not work for customers because it does nothing to resolve the customer's problems. Nor does it stop customers from blaming the employees. Even if employees indicate they do not agree with the "policies" that are stopping them from satisfying customers, most customers find it difficult to separate employee behavior from company policies. The father of modern attribution theory, Fritz Heider, notes that most of us attribute blame to individuals, rather than the circumstances surrounding product or service failure. For example, if a service provider says, "I know this sounds ridiculous, but I need..." customers will think, "If it's ridiculous, then why are you enforcing it?" Complaining customers tend to blame the service provider when things go wrong, regardless of the cause or circumstances. And who likes to be on the immediate receiving end of blaming behavior, even if it is not being overtly expressed?

To consider complaints as gifts, we first have to accept the notion that customers always have a right to complain--even when we think their complaints are stupid, unreasonable, or cause inconveniences. Vermont's fishing rod and tackle producer, Orvis, Inc., puts it this way: "The customer is always right even if you damn well know he is wrong." Stew Leonard's, the supermarket chain in Connecticut, has two often cited rules carved on six-foot-high granite panels: "Rule 1: The customer is always right. Rule 2: If the customer is ever wrong, reread Rule 1." We suggest that part of the buying agreement customers make is that if they do not like what they purchased, if it does not meet their needs, if it is substandard, or if they have changed their mind, they are buying the right to say something about this.

In order for us to treat complaints as gifts, we need to achieve a complete shift in perception and attitude about the role of complaints in modern business relationships. This requires separating the message of the complaint from the emotion of being blamed, which in turn, means understanding the dynamics of disappointed people and rethinking how complaints can help us to achieve our business goals.

Complaining Customers Are Still Customers

Customers who take time to complain still have some confidence in the organization. "Customers who complain, after all, are still customers." In most cases, it is less of a hassle just to take their business to the competition, so those who do complain are showing some degree of loyalty.

Ask Raytek, Inc., if complaints are a gift. This company initiated a quality control program in 1986, three years after cutting its work force in half and eliminating unprofitable products. Many customers had complained about poor product quality, late shipping dates, and incorrect invoices. Raytek set up a system, discussed in detail later in this book, to learn something from every returned product. As a result, Raytek greatly reduced costly customer returns of its products.

Ask the Savings Bank of Manchester, Connecticut, if complaints are a gift. Customer complaints helped the bank identify the area where a concentration of fraudulent activity was taking place. As a result, criminals who were using a phony automated teller machine (ATM) station to get customers' account numbers and empty their bank accounts were arrested.

Ask Wayne-Dalton, manufacturer of doors and security grilles, if complaints are a gift. The company switched to a new packaging system after customers complained about damaged doors. The customers themselves were damaging the doors, but they were still complaining. The new, more expensive wrap reduced complaints. The big news, however, is that the new packaging system ultimately resulted in a net reduction of costs for Wayne-Dalton.

Ask QuickPark, Inc., a company that manages parking lots in several cities across the U.S., if complaints are a gift. By paying attention to customers who complained that it took too much time to process cars as they left their lots, QuickPark instituted several changes that expedited the processing of exiting cars--pleasing customers and saving QuickPark nearly $500,000 annually.

Ask Frigidaire Co. if complaints are a gift. Frigidaire adopted a form packaging system that promptly diminished customer complaints about damaged parts. Frigidaire further benefited in that the packaging system simplified packing activity tenfold and saved space in its factory.

Ask the ready-to-assemble furniture industry if complaints are a gift. By listening to customers and developing technology for quicker assembly and pre-assembly, retailers report fewer complaints from customers and, most importantly, fewer returns of merchandise.

Put Yourself In The Customer's Shoes

See complaints through the eyes of the customer and you have a better chance of viewing complaints as a gift. Imagine that whatever the customer is complaining about has just happened to you. What would you be thinking and feeling? How would you react? What would you expect from this organization? What would it take to make you happy? What response would be necessary for you to walk away from this encounter and feel good about your complaint and the company?

Are there customers who try to rip the company off? No doubt there are. But companies cannot treat all customers as if they were thieves in order to protect themselves against the few who are. It is estimated that approximately 1 to 1 1/2 percent of customers will systematically try to cheat. Most companies factor this kind of behavior in as part of the cost of doing business. And if someone does try to take advantage of the company through exaggerated claims, chances are that other customers who witness this interaction will be impressed that the service provider did not make the customer feel guilty even though he or she rightfully could have done so. This will leave these onlookers feeling more comfortable about expressing their own dissatisfactions.

An Asian airline recently conducted customer-service training for its complaint department. It hired a consultant who suggested that when a passenger takes the trouble to write an angry letter of complaint about service received, the airline should send a discount certificate for that person's next flight. The airline staff were aghast. "But people will take advantage of us. They will write complaint letters just to get the certificate."

The consultant asked the company to look at the situation from the perspective of customers who have genuine complaints. First, the general public will never know of the policy of the airline to send discount certificates, so the fear of hordes of passengers writing in on false pretexts for certificates is groundless. Second, if you send discount certificates, people are likely to use them, which means that they will become customers again. The airline then has a chance to provide good service, make it up to these passengers, and retain them as loyal customers.

The moment individuals or companies give any hint that they view complainers with suspicion, customers will fight back. Or even worse, they may go away angry and not say anything to the company but tell everyone else they know--when the company has no chance to defend itself.

Some individuals lack gracious social skills and may appear inappropriate when they complain. They get nervous and may seem harsh, angry, or even stupid. The service provider must learn to focus on the content of the complaint and not on the way the complaint is delivered. This is asking a lot of service providers, but if they can see complaints as gifts, then it really does not matter how the gifts are wrapped.

A man in Spokane, Washington, recently made the news with his complaint. Shabbily dressed, he visited his bank, cashed a check, and then asked the bank to validate his fifty-cent parking ticket. This was a service the bank provided. The teller looked him over and decided that she was not going to do this. She told the man that his particular transaction did not qualify for the free parking. The customer complained about the arbitrary decision and asked to see the teller's supervisor. The teller walked over to her supervisor, and they both looked this man up and down in a disparaging manner and again told him that the free parking would not apply to him. He then asked to withdraw all his money from the bank. It turns out he had close to a million dollars in the bank in a simple interest-bearing account! He took the money down the street to a competing bank and deposited it there. The bank, to its credit, said that after this incident it was reviewing its customer service standards.

Case Study: British Airways Caresses Its Customers

During Margaret Thatcher's term in office, the British government decided to privatize several key British companies. British Airways (BA) was identified as one to be sold publicly. In those days BA was so inefficient and had such a bad reputation for customer service that the government decided something needed to be done to enhance BA's value before the stock was available for public purchase.

Sir Colin Marshall was brought in to head up the change process for BA. Marshall instantly recognized that an attitude shift was critical for the airline. In the '70s and early '80s, BA personnel were renowned for the attitude that they were doing the public a favor by allowing them to fly on their airplanes. They did not hesitate to let the public know this, not only in the content of what they said but also in their tone of voice and body language. Unions also played a big role in dictating BA's bureaucratic culture in those days.

One of the first things Marshall did was to invite in the TMI company of the United Kingdom (a part of the Danish-based training and consulting firm that had helped Jan Carlzon turn Scandinavian Airlines around to profitability) to design a program that would challenge all 36,500 BA staff to take a totally fresh look at their attitudes and approaches to customers and to each other. The program was titled "Putting People First" and was the central feature in a company-wide change process.

Over the next 18 months, BA employees from around the entire world attended the two-day "Putting People First" program. Sir Colin Marshall personally introduced over 60 percent of these programs, sometimes flying between the United States and England on a Concorde to say a few words to the participants.

Since 1983 when that initial training took place, BA has followed up with other internal programs, such as "To Be the Best", "Winning of Customers", and "A Day in the Life", designed to educate all departments about the work of the rest of the company and to reinforce the message of superior customer service. Today BA is considered an example of a leading-edge service company, frequently courted by others for advice--a far cry from its previous reputation.

After focusing on attitudes, BA began to look specifically at the role of complaints in retaining long-term customers. First, Marshall installed video booths at Heathrow so that upset customers could go immediately to a video booth and sound off to Marshall himself.

Then, to the tune of $6.7 million, BA introduced a computer system to help analyze customer preferences with the aim of keeping customers for life. The system is affectionately called "Caress". BA says, "We used to try to ignore complaints. We tried to make it difficult for the complaint by insisting telephone callers write in, and by adhering strictly to a rule book that allowed us to tell customers that they were at fault by breaking a BA regulation which they weren't even aware of."

Based on its own customer research, BA says that 67 percent of their complaining passengers will fly with the airline again if their complaints are handled well. Considering that an average business class passenger is worth approximately $150,000 over a lifetime of flying, anything that expedites customer complaints is a good investment. Before "Caress", BA literally had mountains of complaint-related papers. Now they are quickly scanned into the computer, along with any relevant travel documents: tickets, baggage receipts, and boarding passes. "Caress" automatically puts the complaint into a queue based on travel class, threat of legal action or VIP status.

"Caress" makes suggestions as to appropriate compensation for each category of complaints, but customer relations executives can override the system if they feel something different is warranted. It used to take BA about a month to respond to complaints. Now, 80 percent of the time, BA handles complaints in only three days! BA customer surveys show an increase in satisfaction from 40 percent to 65 percent. And while satisfaction has increased, compensation given to upset passengers has actually decreased.

"Caress" is also able to categorize the common complaints BA receives. Over half of them deal with seat allocation, food quality, denial of boarding, smoking/nonsmoking conflicts, seat comfort, ticketing, delays, baggage handling, disruption of service, ticketing, and check-in services. Now BA is attempting to proactively address these aspects of its service.

BA likes its "Caress" system so much that, as a pilot test, it is installing terminals in six of its large corporate customers' business sites so business travelers can complain directly to BA when they get back to their offices. In addition to "Caress", BA has initiated a series of other customer-feedback strategies, including asking customers how they are doing as often as possible. Today, the airline is one of the most successful and profitable in the world because they recognize customer complaints as a valuable source of business information.

Discussion Questions

* How does your company view customer complaints? How do you talk about complaining customers?

* Do staff members see complaints as an opportunity to satisfy dissatisfied customers?

* Do staff members tend to blame policies when they cannot meet customer needs?

* What specific lessons have you learned from your complaining customers?

* What specific strategies does your company have in place to encourage and then learn from complaints?

Chapter2

The Biggest Bargain In Market Research

"It is easy enough to drive customers away. There are many means to this end, and some companies have tried them all. Two of the most common methods are to ignore complaints or handle complaints poorly. Yet well-handled complaints can create strong bonds between customers and organizations."

"You have to get your stuff out of this room immediately," the hotel staff shouted at us. At the conclusion of a particularly energetic TMI seminar in San Francisco, we were ready to say good-bye to our participants and handle last-minute questions and product sales. The hotel staff thought otherwise. They had another function in the same room that evening and were determined we would be out by 5:30 PM sharp.

Without asking our permission, the staff gathered up our supplies and unceremoniously dumped them into the hallway. We lost sales, created a bad impression with our customers, and were left feeling angry and frustrated with a hotel that had, until this incident, given us two days of superb service.

We complained loudly at the time. No doubt we were seen as "difficult" customers by the hotel staff, but our needs were not being met. The following day, TMI's logistics director wrote the hotel's general manager a blistering letter, describing what had happened and saying we would "never again" return to that hotel for our seminars.

Two days later a huge bouquet of roses appeared at the TMI office for our logistics director. She was teased about some secret admirer who must have been desperate to spend such a sum of money on flowers. She said it was the biggest bouquet she had ever received. When she opened the accompanying card, it had the name of the hotel's general manager. A short while later, he called, apologized for the terrible treatment we had received, and told us he definitely did not want to lose our firm's business. He promised the next time TMI held a seminar at the hotel, the rooms would be given free of charge. He also wrote a follow-up letter confirming his verbal agreement and guaranteed us that the hotel would discontinue its practice of booking events too closely together.

On several occasions, various TMI staff have suggested we try other hotels for our seminars, but our logistics director has stood steadfastly behind using this particular hotel that treated us so poorly--and then recovered so magnificently. She became a champion of this hotel.

Because seminars are complex products, the hotels that TMI uses for its functions, by necessity, become partners in the success of our events. We essentially move in for two days and have hundreds of interactions with dozens of hotel staff. The chance for something to go amiss is very high. We have had other problems with this hotel since our harsh dismissal, but each time, the staff has been superb in resolving each mishap--even when it was our fault! The manager of that particular hotel has learned that complaining customers who are well treated can become marketplace allies helping to identify internal practices that create problems for customers.

Complaints Define What Customers Want

Customer complaints tell organizations how to improve services and products--and thereby help to maintain market share. As IBM representative John Davis says, "The selling edge trick is to establish a continuously flowing pipeline from the customer's mind to the salesperson's ear. When you keep track of what customers want and do not want, what pleases and gripes them, you can adjust your sights accordingly and stay a step ahead of competitors" John McKitterick of General Electric goes even further to say that: "...the principal task of the marketing function ... is not so much to be skillful in making the customer do what suits the interest of the business, as to be skillful in conceiving and then making the business do what suits the interests of the customer"

If businesses are able to identify and meet customer wants and needs, customers will generally pay more for their products. The company, in turn, will spend money on developing products that it knows its customers want. "Repeat customers and their repeat business lower per unit sales costs."

Consider L. L. Bean, the successful mail-order sportswear company. It recently planned to expand its warehouse capacity and mail its catalogs to more potential customers. After studying its merchandise return rate--it had climbed to 14 percent per year--it decided to stop expansion plans and redirected its efforts into making its existing customers happier before going after new ones. Merchandise returns are wisely viewed by L.L. Bean as an indicator of customer dissatisfaction, and deserving of attentions because they reflect what is happening in the marketplace.

Better understanding of customer needs can also lead to increased sales and a larger market share. Chris Craft's Vice President and General Manager, Bob MacNeill, is a believer. He has had first-hand experience watching his company improve its products by listening to customer complaints. But sometimes, MacNeill says, you have to help customers along because they do not always voice their complaints directly to the company. Some boat owners report that they do not express dissatisfaction because they are not sure what to ask for, or they fear being perceived as a nuisance by the boat dealer. Other boat owners lack confidence in the dealers' knowledge about the boats they sell or think that everyone has these problems. So Bob MacNeill encourages his dealers to go out and interact with boat owners when they are on their boats to actively solicit complaints.

Time and time again, when companies listen to customers, they learn how to fashion products and services to meet customer needs, how to revamp internal processes for greater speed and accuracy and how to lay the groundwork to better serve the customer.

General Tire, Inc., based in Akron, Ohio, learned by asking how it could improve its operations, that 65 percent of its dealers would buy more General Tire products if they were able to place purchase orders through one order taker. This was a common source of customer annoyance that General Tire only heard about by actively soliciting complaints from its top dealers. As a result of this information, General Tire has undergone a complete reengineering effort, resulting in a revamped company that has cut costs and dramatically improved how it interacts with its customers, or so report General Tire customers.

Wesbar, a trailer accessory manufacturer located in West Bend, Wisconsin, asked for and then listened to bitter complaints about product quality from consumers. As a result, Wesbar developed a range of improved products that have become standard equipment for two dozen of the larger trailer manufacturers. Even today, people say these products are unique in the marketplaces. One of these redesigned products was a two-dollar light bulb on the back end of the trailer that continually failed. Scott Johnson, Wesbar's Vice President for Marketing, notes, "As a manufacturer who sells to trailer builders and distributors, who then sell to dealers, we are a little bit isolated from the actual end-user of the product." Wesbar has to work hard to get their complaints.

In many instances, the information a company obtains through customer complaints is impossible to get through any other means. Even if complaints are several levels away from the consumer, as in the case of Wesbar, companies can learn about specific service gaps and product failures. Companies are being presented with an opportunity to prove their commitment to customers by addressing these concerns, even when the complaint seems minor. Marina owners Nick and John Hoty of Ohio's Hoty Enterprises learned from listening to customer complaints that clean restrooms are the "fastest way to have happy, paying customers, who will recruit more customers."

Complaints that customers bring directly to businesses are the most efficient and least costly way of getting information and understanding customer expectations about products and services. Other more costly and less direct methods for communicating with the customer include reviewing customer expectations in parallel industries; conducting transaction-based studies, such as using mystery shoppers or external auditors; or conducting comprehensive customer expectation research.

Big companies can afford to conduct or commission market research of the type noted above; small companies "must" rely on their customers to tell them what they think about their products and services.

Customers, in most cases, are not going to generate ground-breaking ideas for companies. They will not suggest that Ford invent a minivan; they will not encourage Sony to invent the Walkman. Innovation is the purview of any company's research and development department. But customer feedback can help fine-tune product concepts for particular groups of people. Furthermore, businesses may never understand customer needs until there is some kind of product or service failure. Complaining customers tell the company what does not work once the product has been invented or as it is being sold or serviced.

For businesses that need to be responsive to quickly changing market conditions, listening and rapidly responding to complaints help the company stay in touch with customer expectations. Convenience stores, for instance, sell items that may remain in high demand for just a few months. Customer complaints ("Why don't you carry...?") rapidly communicate changing marketplace interests to the company. Other, less trendy businesses have learned this lesson as well. Market research can be static compared to the complex, dynamic, talking marketplace.

Coca-Cola was blasted with complaints on its 1-800-Get-Coke lines in 1985, when it substituted the "New Coke" for what is today known as Coke Classic. It responded immediately to the outraged public, mollified their shaken customers, and averted a potentially huge financial loss. When a company pays attention to its marketing research, it may only hear part of the story. After all, Coca-Cola had thoroughly researched the "New Coke" concept.

Marketing experts measure what they think is important, especially if the primary means of gathering customer feedback is the typical ratings report card. Hotels ask about cleanliness of their rooms and friendliness of staff. Guests "expect" these things. What "satisfies" them may be firm, nonlumpy mattresses in quiet rooms that have big light bulbs in the lamps next to the beds so people can easily read themselves to sleep. Unfortunately, hotels almost never ask questions about light bulb sizes, or mattress lumps, or even quiet rooms. But if hotels listen to complaints, and even encourage them from guests, they may learn about low-wattage light bulbs, lumpy mattresses, and the noisy elevators or vending machines that can be heard through thin walls. Market research can reveal these kinds of issues if carefully conducted, but complaints will cut to the quick.

In addition to calling attention to product defects, service shortcomings, and poorly designed systems, complaining customers can also alert managers to front-line personnel problems. Customers are usually the first to know when the company is being poorly represented by staff. In fact, managers may never learn about poor treatment of customers through simple observation of staff because employees generally behave better when their managers are around.

The Value Of A Customer Over A Lifetime Of Buying

Loyal customers are not easily produced, though disloyal ones are. The multitude of statistics generated in this area suggest that if customers believe their complaints are welcomed and responded to, they will more likely repurchase. In addition, long-term customers are not only easier to sell to, but they are also easier to serve because they know how to get their needs met; they know your products, your people and your systems for conducting business.

You might say that customers buying inexpensive services are not worth significant sums of money. Here is where the long view is critical. Each dry cleaning exchange, for example, may only be 10 or 15 dollars. Over a lifetime, however, a customer can easily spend around $30,000 on dry cleaning. And this says nothing about the number of friends or relatives a satisfied customer might send to a responsive dry cleaning establishment. Domino's Pizza calculates that over just a 10-year period, regular customers are worth about $5,000. Based on its research, Bain and Co., the Boston-based consulting group, estimates that profits can be boosted 25 to 95 percent--from just a 5 percent decrease in customer defection rates. What easier way to retain customers than by better handling of customer complaints?

Certainly consumer research tells us that a lot more than 5 percent of customers leave because of poor complaint handling. An IBM study suggests that if customers are left with an unresolved problem, less than half say they will repurchase. On the other hand, if customers feel their problems have been satisfactorily resolved, almost all say they will give the company another chance.

Some people refer to selling more to existing customers as "customer share"; "market share" refers to selling to as many customers as you can. For most companies, about two-thirds of sales are from existing customers. At a minimum, companies generally know who their existing customers are or have access to them in their stores. So while it is not free to sell to existing customers, it is frequently easier, more direct, and less costly.

For every year customers are retained, they represent more in profits because marketing expenses can be amortized against long-term sales results. Consider credit card customers, for example. If it costs $100 for a company to acquire a new account, then over ten years the cost is $10 per year. Banks also report that the longer credit card customers stay with them, the more likely they are to pay their bills. As well as lower per-unit marketing costs, loss and delinquency ratios improve with customer retention.

Robert LaBant, senior vice president of IBM's North American sales and marketing, indicates that for IBM, "...every percentage-point variation in customer satisfaction scores translates into a gain or loss of $500 million in sales over five years." He says that developing new business costs IBM three to five times as much as selling to their existing customers.

Noncomplainers Must Be Factored Into Complaint Statistics

Even though complaints can tell a business how it is performing in the marketplace, many companies hide the bad news of complaining customers from themselves. They do not factor the noncomplainers into their statistics. If the frequently cited statistic that 26 out of 27 service customers do not complain when things go wrong is correct, then to get an accurate count of dissatisfied customers, service companies should multiply the number of complaints they receive by 27. One hundred formal complaints equals a potential 2,700 dissatisfied customers in the service industry.

One of our clients, a major bank, bragged to us it had received only 100 complaints during a particular month. This bank is probably only looking at the tip of the iceberg. Most people will rarely complain about bad bank service. They will stand in long lines and grumble to other bank patrons but say nothing to the tellers. They will sigh and get back in their cars to find another ATM to make a cash withdrawal when the machine is out of service, but the bank will probably never learn of the bad feelings generated. Customers may feel uncomfortable with the way the bank teller inspects their identification but most likely will not say anything to a bank manager. And they may not like the way they receive their charge card bills in the mail so late there is barely time enough to pay them before incurring late charges. But most customers will not say a word to their bank, even when they cancel their card. Complaining customers are giving us a gift; we must remember that most dissatisfied customers don't leave us with anything--including their patronage.

The Danger In Setting Goals To Reduce Customer Complaints

Rather than trying to reduce the number of complaints, organizations need to encourage staff to seek out complaints because this will define what customers want. A group of American automobile executives visited a Toyota plant in Japan and began to discuss the Deming quality program in place at Toyota. A plant manager reportedly told the visiting Americans, "The problem with you Americans is that you treat complaints as a problem. You discourage complaints. We encourage them. You try to set your systems up so there are no complaints. We try to get as many as we can. How else can you learn from your customers?" he asked the bewildered auto executives.

If a company's goal is to have fewer complaints this year than last, it is a very easy goal to accomplish. Staff will get the message and simply not report complaints to management. How many times have you delivered a written complaint to the front desk staff of a hotel and wondered if your complaint was passed on to the general manager? Both authors have gone to the trouble to fill out response forms in hotels on a number of occasions, checked the box indicating that they would like a response to their complaint, and then received nothing. Either this is extremely poor complaint handling, or the complaint was never passed on in the first place.

Companies should be very careful in setting goals to reduce complaints. Doing so can be costly. Because a hotel chain was receiving a large number of call-in complaints about cleanliness, the CEO suggested a comment card be made readily available in the hotels to control the call-in complaints that were tying up toll-free reservation lines. The filled-in comment cards were to be collected by each hotel manager, batched, and then sent on to headquarters each month. This approach would both enable the hotel managers to take immediate action to solve the cleanliness problems and would save postage. Reduction in complaints was tied to a bonus plan. After the system was in place for a period of time, the manager who had had one of the dirtiest units received one of the lowest complaint ratings. When asked how he did it, he responded, "I'm the one who mails in the cards, but I screen them first. Why cut off your own legs?" Sometime later, this hotel, which also won bonuses for the least number of complaints, was shut down by the health department. In the meantime, other hotels in this chain had followed the lead of this clever manager who knew what to do with complaints.

An elevator company asked that its clients call a toll-free number to arrange for servicing rather than call a local technician. This would enable the corporate headquarters to track service and, hopefully, result in fewer complaints. Local technicians quickly figured out a way around this system. They told their major customers that calling the toll-free number would actually slow down the service that would be provided and encouraged their customers to call the technicians directly. Very quickly, the corporate office had a completely inaccurate picture of service and complaint levels.

In some cases, a reduction in complaints can signal a positive trend. In such instances, the company is comparing the number of complaints it receives about specific issues. For example, Brooks Brothers, Inc., used to enjoy a positive reputation for producing high-quality clothing until the 1980s. Then management changed hands three times. The latest owners, Marks and Spencer, instituted new quality improvement measures and saw specific complaints about quality of the goods reduced from 25 to 5 percent. That's significant. Still, Brooks Brothers only knows that complaints are dropping; these figures do not tell the company exactly how customers evaluate its products overall.

Southern Pacific Transportation Co. provides another positive example of measuring the details around complaints. It has measured response time on handling customer complaints and now reports a response rate of 96.5 percent for handling customer complaints within 24 hours. Manufacturer Avery Dennison has reduced its response time to process customer complaints from 20 days to just one week. These companies are not running away from their complaining customers by trying to reduce complaints; they are becoming more accurate in measuring their response to complaining customers.

Responsive Companies Create Opportunities For Customers To Complaint

Because of the reluctance of customers to complain (discussed in detail in the next chapter), companies have to go way out of their way to find out what the marketplace is saying about them. Motorola, one of the first winners of the Malcolm Baldrige National Quality Award, holds monthly, all-day (frequently from seven in the morning to midnight) meetings to discuss technical action requests (TARS), or what most of us would call problems. In these meetings, nothing positive is allowed to be discussed--only problems.

Motorola customers are also invited to these meetings and are encouraged to voice complaints. Sometimes they have to be encouraged to "lay it on." Motorola's Vice President of Quality Assurance and Customer Satisfaction says that the presence of customers certainly livens up these TAR meetings. Customers will bring up complaints at these meetings that they will not tell Motorola field service personnel or salespeople. No one at Motorola is allowed to offer excuses or alibis at the TAR meetings. Even with this enormous push to learn from the customer, Motorola will admit, with frustration, that it does not "hear" enough from its customers.

Sometimes complaints are hidden from companies because of the structure of their businesses. As a result, companies have to be creative in how they "hear" about customer complaints. Some amusement parks, for example, outsource critical aspects of their business, many subcontracting their food services, allowing park owners to concentrate on park management. Subsequently, food complaints decrease, or at least, complaints reported by the food services to park management decrease. From the perspective of those who attend the amusement park, however, that bad hot dog or surly treatment by a vendor is not the responsibility of the subcontracted restaurant, but of the park. Park attendees probably do not know that the restaurant is not directly managed by the park. The park, in turn, may know nothing of the bad service and, thus, be unable to fix it.

Some companies conduct customer satisfaction surveys to learn more about hidden complaints. This is a good idea, to a point. But who normally participates in such surveys? Existing customers. Unless the company makes a point to ask everyone who used to buy, it is polling only those people who are still buying. These customers are still sufficiently satisfied that they are staying with the company. "Customer satisfaction surveys are generally not a representative survey of dissatisfied customers." They may give you some ideas, but you need to go after the ones who have left and find out why they left. Then the company can find some real gifts.

(This excerpt ends on page 29 of the paperback edition.)

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