May 27, 2011

What do you do when a customer complains about your business? Most small businesses try and fix it, others ignore, and still others just don't care. A survey that I recently ran across indicates there is one simple thing you can do to dramatically increase your ability to convert the unhappy into the happy.

The study had to do with customer complaints, retention, and the like. The survey came to the same conclusion that many of us have heard before, namely, that it costs five times as much to create a new customer as it does to retain a current one.

Given that, it follows that one of the smartest and most cost effective things you can do to build your business is to take care of current customers. The 5-1 ratio is even more important to keep in mind when a customer complains because that same survey contained this statistical nugget: 95 percent of dissatisfied customers would do business again with a company if their problems were solved quickly and satisfactorily.

That is actually incredibly useful information. Given that most people who complain are typically very fed up by the time they get to the complaint stage and their chances of staying on as a customer are minimal, that you can actually keep them given the right effort is amazing. And more importantly, it will cost five times as much to replace them if you don’t.

So what does that mean? Make them happy. Even if you disagree with the complaint and complainer, too bad. The numbers don’t lie—95 percent of your unhappy customers will stick around if you just make them happy this one time.

Let’s do the math. Say that you have a busy store and on average, you get one complaint a week. That’s about 50 unhappy customers a year, and let’s further guess that 40 are mad enough to stay away. It costs you $50 to keep a customer. That means that keeping those 40 customers would normally cost you $2,000. But replacing them will cost you 5x that—a whopping $10,000. That is, of course, unless you resolve the dispute quickly and fairly.

Now, does this mean that the customer is always right? Of course not. But who cares? If you want to save some dough, you may have to swallow your pride on occasion and bite the bullet.

So, just how do you convert the angry?

1. Ask the customer how he or she would prefer the problem be resolved, and resolve it that way if possible.

2. If a customer wants a refund, give it to them.

3. If you are convinced that your business is not at fault, it is still smart to honor a reasonable request. Explain to the customer how similar situations can be avoided, be humble, and express regret that the customer had a negative experience.

4. Even if you disagree with the complainer, offer the customer a gift certificate to make amends. That will go a long way into making them happy enough to stick with you and it costs a whole lot less than the cost to replace them.

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Join the conversation ( 8 )

• Shifra Penkower 9 months ago

  

  I agree with this article on many levels. In addition to the positive financial impact that such practices can effect, there’s another, more psychological angle to the "go-out-of-your-way-to-satisfy-and-keep-an-angry-customer" issue:A pacified and newly satisfied customer may very well end up happier and more likely to become a facilitator for new acquisitions on your behalf. That's a great *external* stimulus for your bottom line. However, when they are pleasantly surprised enough to call or write back in appreciation for that "extra mile," the company representative that was responsible for helping (and retaining) them gets the "warm fuzzies" as well, and is that much more likely to keep up that level of service. That's the kind of good karma that can keep helping your bottom line from the *inside*.Personal anecdote: A third party company with whom we do business recently forwarded me a message from a mutual client having an issue with one of our services. My day-to-day responsibilities do not generally involve direct interaction with our customers, but I called this gentleman to get some more details. I looked into the matter, and discovered that it was a case of "consumer error," but pulled some strings to arrange for an account credit to be granted nonetheless, in acknowledgement of the frustration he had experienced with his transaction. As a result, this customer took the time to write a heartfelt thank you note to me, to the third party company and to my boss. I have no idea whether or not my boss ever received his letter. But I can attest that reading his words of appreciation totally made my day. I have no doubt that this morale-booster has inspired me to maintain a high standard of service, and I will certainly keep it in mind the next time I have the opportunity to help a customer.

• Jeff Frank 10 months ago

  

  This article is right on target. If anything it does not go far enough. My company practices a policy of "extreme" customer service -- providing a level of customer service beyond what our customers expect.Sometimes, however, we mess up (or a delivery service or other associated business messes up) and a customer gets upset. We have found that in every single case we can turn these upset customers into enthusiastic supporters who not only return but will actively recruit new customers on our behalf. All it takes is to find out exactly what is needed to remedy the problem promptly, compensate the customer fairly for their distress, aggravation and any out-of-pocket losses -- and then go a little beyond by offering something extra, something that clearly shows we are doing more than the minimum required to acknowledge our understanding that our customer has been inconvenienced.A simple example from this morning -- A customer was told that she would be called yesterday to verify that a particular item was in stock. She was not called. When she called back this morning to ask why she had not received the promised call, the customer received a sincere apology and was also told she would be sent a free set of throw pillows ($50 retail) as compensation for our error along with her $1500 furniture order. By spending an additional $25 (at our cost) for a free set of throw pillows, this customer was transformed from being slightly annoyed to being extremely pleased and amazed at our level of service. She even insisted that we did not need to send the pillows since it was only a very small error. Those $25 pillows are a tiny investment than can easily pay off with a customer who will return to us again and may send new customers to us as well.

• Robert Hazelgrove 12 months ago

  

  This information is bang on. Respect your customers and move heaven and high water to keep them happy.

• LORI WEBSTER 11 months ago

  

  In her book "I Love You More Than My Dog", author Jeanne Bliss advocates that keeping customers happy is something beloved companies do. Although you might have to swallow your pride, which I've had to do from time to time, it's much better to quickly repair the relationship than not. Who can afford to lose customers these days? If you have a chronic complainer or one who is trying to take advantage, though, I believe that you have the right to make a judgement call. Is the situation bad enough to risk the dissatisfied customer telling several other people about it? If it is - if you think honestly that there's no redemption for this customer, then we as merchants need to "fire" them - never a pleasant experience.

• GAIL ZABEL 11 months ago

  

  I disagree to a certain extent because of 3 scenarios.1. The goal is to create a win/win situation not one where you lose. Don't just give in but see what you can negotiate. Usually, a happy medium can be struck that leaves both the company and the customer happy.2. There are people who will never be happy and are chronic complainers. Do the math because it may cost you less in the long run to let them go. The interesting thing is that sometimes getting rid of chronic complainer is more difficult than you would expect. Sometimes they only want someone to listen.3. Beware of customers who complain just to get a discount or some other form of adjustment. Once they figure out how far you will go, they will keep complaining for their own advantage.Your best tool for all of this is to really analyze the complaint and determine where responsibility lies before giving something away for no good reason.

  • Jeff Frank 10 months ago

    

    Your comments reflect the view of 99% of retail owners and managers that customer service is an expense that needs to be minimized in order to maximize profits. The theory is that by treating customers fairly but not allowing abusers to take advantage of you this balance is best achieved.Over the past decade a new theory has been evolving. Zappos is probably the best known proponent . It holds that customer service can also be utilized as a revenue-generating operation of the company. In order to achieve this however, the company can't settle for achieving a "happy medium." There is still a win/win scenario but it is shifted. By making your customers feel that they are clear winners at a given moment you set the stage where the company becomes a long-term winner. That customer may return even more frequently than before and optimally will even encourage others to patronize your business.It has been shown that even chronic complainers and abusive customers can usually be transformed by these new revenue-generating customer service practices. These people often expect a fight and are more comfortable when they land the first blow. By treating them with a level of respect that is totally unexpected they can usually be disarmed and will become less unreasonable. When all else fails you offer to take back the merchandise and refund their payment.

• Joe 1 year 0 months and 2 days ago

  

  I'm not sure that I completely agree with your assessment. With the 5:1 ratio, where is your marketing spend going?I would counter that it is cheaper to market to your most passionate customers and turn them into brand advocates than it is to try and keep angry customers from leaving.

  • Jeff Frank 10 months ago

    

    Your argument seems reasonable, but I have found that even our angriest customers are usually easy to transform into our very best and most loyal customers. Here is an example from my business that occurred a few months ago:A customer purchased a sofa from our website and was very upset when the delivery driver refused to carry the large boxes into her home, although she was partially disabled and it was obvious she could not do it herself. He left her to knock on doors for half an hour until she finally found some neighbors who agreed to help.Once the sofa was safely installed she liked the way it was made and how it looked, but still couldn't enjoy it. Just thinking about the delivery made her angry all over again. So she sent an email to us venting her anger and letting us know how angry and upset she was, and that she would never again purchase from our company.I sent an email reply sympathizing with her situation and apologizing for the inconvenience and distress she had been subjected to. The email then went on to say that although our company had no direct control over the actions of the UPS delivery driver, we were still responsible for any problems that occurred to our customers. At the end of the email the customer was offered compensation for her inconvenience and aggravation. A series of compensation options were offered including deep discounts on additional products, free accessories or a cash refund check for whatever amount she felt would be fair compensation. This show of concern and action by the company led to a complete turn-around in her attitude.Her next email read, "I anticipated a reply to my email, but I was amazed to read your generous offer. A $50 check is quite sufficient and is most appreciated; especially when Simplicity Sofas wasn't at fault. You have incredible customer service. If there is anything I can do to help you or your company here in the Southwest, please do not hesitate to contact me."