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You are here: Home / Small Business / True Costs of a Customer Complaint
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Customer Complaints: The Income Multiplier Effect
Customer Complaints: The Income Multiplier Effect
By Jonathan Farrington / NewsFactor Network Like this on Facebook Tweet this Link thison Linkedin Link this on Google Plus
PUBLISHED:
MARCH
10
2008



Rarely do organizations consider the "Income Multiplier" effect when thinking about the impact of a customer complaint. Indeed, the cost of an unhappy customer is much greater than the cost of any individual lost sale.

Take this typical example: A potential customer goes into a fitness club that was built last year. The center is trying to build up its customer base. It employs 50 staff members, part time and full time, who have not received much training in customer service and complaint handling.

The customer asks about booking a gym session for later that day. He does not receive a positive reply, and the receptionist's attitude is very much "take it or leave it." The customer shrugs and walks away.

How much has the fitness club lost in potential revenue?

$10 primary expenditure -- the price of a gym session

$10 secondary expenditure -- a drink, sandwich, possibly a swim, etc.

$1,000 lost in potential membership fees

The disgruntled potential customer will tell at least seven people about his bad experience, so $1,020 x 7 = $7,140. It is easy for a small amount of lost income to multiply to dangerous proportions.

Make It Easy for Your Customers To Complain

Customers may well want to tell you they are unhappy about something, but they either feel uncomfortable about doing so, do not know how to go about complaining, or do not have time, so often it is easier to let the issue go.

The answer is to give your customers a choice of mechanisms by which to complain. For example, you could use:

Simple questionnaires with pre-paid postage

Telephone help line

Customer service points

Exit surveys -- face-to-face questions

Comment cards

Let your customers know that complaining is not a waste of time!

What are you going to do with the information you receive via customer complaints? File it away? Shred it for next year's Christmas decorations?

One company I know maintains a whiteboard in the reception area listing the key comments/complaints made by customers, with a note about the action taken, or to be taken, and by whom. Customers really feel they are part of the product and service improvement team.

Customers need to know what is in it for them if they do complain.

Respond quickly to complaints. If you give a number to call, make sure someone is always there to answer the phone. Reply within two days if that is what you promised to do.

Have an "escalation procedure" that allows for the more serious complaints to be dealt with by a senior member of the staff. Directors need to be accessible; hiding away simply creates suspicion.

The "Relationship Gap"

Unfortunately, when compared over time, the customers' interest levels increase while the vendors' interest levels tend to decrease. This creates a "relationship gap" and is due entirely to complacency.

Fact: It costs seven times as much to locate and sell to a new customer as it does to an existing one. That reason alone should act as sufficient incentive for us to attempt to build brick walls around the relationship in order to deter predatory competitors -- and there are plenty of them out there.

We must continually strive to earn the right to receive our customer's business, and one significant stride in that direction is to implement an effective customer care program.

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