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The Bottom Line Value of Complaint Handling

I remember being in the position many times of having to defend my department’s budget to protect it from cuts or having to work four times as hard as other departments to build a case to make minor purchases. That was because I worked for a company that viewed customer service as a “cost center.” Any funds allocated to my department were “wasted” because the department was not revenue generating. I wish I knew then what I know now: customer service is in fact a profit center. While consumer affairs departments aren’t selling products or services, they are selling and making money for the company– they are selling the company back to customers who are dissatisfied or on the brink of defection. Complaint handling is a sales function with proven bottom-line value. Recent research points to five indisputable bottom-line benefits of effective complaint handling:

1. Builds loyalty. TARP, Inc. (now e-Satisfy) has found that 95% of complaining customers will remain loyal if their problems are resolved immediately. And it gets better: The same company’s research revealed that the mere voicing of a complaint (even in the absence of resolution) increases loyalty as much as 10%.

2. Increases sales. Successfully regaining customer goodwill and maintaining loyalty boosts sales because over time loyal customers (the customers you successfully won back) tend to be willing to pay a price premium for your products or services. Research by Bain & Co. found that loyal customers are less price sensitive than new customers.

3. Generates positive word-of-mouth advertising. When service is truly outstanding, customers will tell an average of 5 people about the great service. If the service doesn’t meet the customer’s expectations, they will tell 11 people. But, if there’s a problem and it is resolved immediately, customers will tell 17 people about the service recovery. Getting it right the first time results in 5 people hearing the good news story. If your company blows it, but offers a quick recovery, you can generate more than 3 times as much positive word-of-mouth advertising!

4. Decreases acquisition costs. Most industry experts agree it costs 5-6 times more to win a new customer than it does to keep a customer. When you maintain loyalty after a mishap, you have just reduced acquisition costs.

5. Reduces problem occurrence and customer dissatisfaction. When complaint handling is done right, customer feedback is used to eliminate problems at the root and the data is used to help the company anticipate and prevent future problems from occurring.

In many companies upper management is now requesting that customer service, consumer affairs, and customer care departments demonstrate value-added services. This “show me the results” request is demanding that we provide measurable bottom-line value. Knowing the bottom-line value of your department and being able to communicate this impact positions you to gain visibility, budgetary funding and to create even more value.