Saturday, 31 January 2009

Increasing complaints equals increased profits

I know it's made the 6 o'clock news, but I couldn't pass up the opportunity to comment on the recent complaint letter sent to Virgin Atlantic.

The letter, reportedly sent by a passenger on a flight from Mumbai to Heathrow describes in a mix of humour and dry sarcasm the inexplicable combination of Indian in-flight food. With comments like "What is this? Why have I been given it? What have I done to deserve this? And, which one is the starter, which one is the desert?" it was clear that things had obviously gone wrong, both with the type of food being served ("The potato masher had obviously broken and so it was decided the next best thing would be to pass the potatoes through the digestive tract of a bird") and the presentation of it ("Luckily there was a small cookie provided…It appears to be in an evidence bag from the scene of a crime. A CRIME AGAINST BLOODY COOKING.")

Now as they say, no news is bad news and some have accused Virgin of creating this as a publicity stunt – especially given their current campaign around their 25th Anniversary. However given Richard's skill at publicity stunts, I'm not sure they would have chosen one which presented both their food and latterly in the letter their entertainment system in such a bad light. It has however got them airtime on the commercial free BBC with large chunks of their current TV campaign being shown.





Better still though it's shown in a really public way how they handle complaints. Richard Branson has apparently spoken personally to the author of the letter to apologise for the experience and invited him to help select food and wine for future flights. Putting my customer retention hat on, I'm betting this passenger will now still be loyal to Virgin. In fact, research has shown that customers who complain and are satisfied are up to 8% more loyal than those that didn't complain and are much more likely to speak positively to friends and family – so increasing word of mouth recommendation.

It's interesting though that many companies still don't handle complaints well – you only have to look at consumer champion programs like Watchdog on the BBC to see people who have come to the end of their tether dealing with companies who appear immovable and arrogant and then only with the intervention of the media finally "show a gesture of goodwill" in resolving the complaint.

As Virgin has demonstrated, at least in part, the trick to handling complaints is to provide a way for people to report them, then to resolve them where you can and finally to change processes, products and services moving forward to prevent it happening again. This approach to complaints can be termed the 3 R's for Report, Resolve and Restructure.

Report

In surveying customers, an airline found that over 1/3 of them were dissatisfied, but that 2/3 of them had never complained. They calculated that for every small percentage of dissatisfied customers they could get to complain, they would retain a large percentage revenue. To support this they made it easier (and acceptable) for customers to complain – from in-flight comment cards to web chats.

What this airline realised is that if customers complain then they are actually taking a positive step - essentially saying "I'd like to continue to purchase from you – but I want you to get it right".

This experience is not unusual – in the book "Complaint Management: The Heart of CRM", authors Stauss and Seidel indicate that on average 22% of customers have a poor experience but 96% of these don't complain. Of this 96%, just over half will actually defect and the remaining customers will essentially be "at risk".

Resolve

As always customers have a choice – they can continue to purchase from you or not – and how you handle the complaint will ultimately determine this. The book Complaint Management goes on to show that up to 40% of customers will defect where they are disappointed with their complaint resolution with the remaining 60% being at risk – at best becoming dormant – at worst becoming a detractor.

Resolution doesn't actually mean you have to "solve" the issue. I recently complained about the waiting time in a queue and although the company obviously couldn't give me back my time, what they did was explain their issues – their EPOS system was playing up resulting in one of their tills being down and they were switching customers from one type of account to another which was taking time with each transaction. They could have done things to mitigate these issues, but having listened to my complaint and explained their issues I left a happy customer.

Using a different example, in a measurement programme I was involved in a few years ago with a large UK high street bank, we measured the customer satisfaction of customers who had complained and noticed a drop in their score where they had complained and had then been sent flowers or chocolates by the branch in response. This seemed initially strange as you'd think customers would have been happy their complaint had been compensated for – however what we found out was that when someone was complaining about an unfair overdraft charge for example, what they wanted was the problem resolved – not simply a token gesture.

Restructure

Not every customer will give you the benefit of the doubt and many will simply switch brands or service providers if you don't deliver the level of service required. Complaints help you to indentify key areas for improvement and allow you to restructure your service provision or product based on this valuable feedback. This helps to ensure that current and prospective customers who maybe aren't as vocal or loyal don't simply move their business elsewhere.

Peppers and Rogers provide a case study around Irish Ferries which in 1999 reportedly had very bad customer service scores and so they restructured their customer service to better empower employees to resolve customer complaints. As part of this they started to interview 100% of passengers on every trip to get their feedback good or bad and empowered employees to spend up to £1000 per customer to help resolve any complaint. By 2003, compliments had started to outnumber complaints 3 to 1.


Virgin's very public handling of the Mumbai to Heathrow complaint is great, but it's not how you handle the single visible and publicised complaint – it's how you handle every complaint that matters.

Many customers don't like the face to face stress of complaining to a brand's employees, or the hassle of writing a letter. Making it quick and easy to report a complaint at the point of purchase and via other channels ensures that customers can get the issue off their chest and a brand can learn how to make their product or service better.

If brands treat customers who complain as "best customers", empower employees to resolve complaints and put in place processes to learn from them, then they will benefit from increased customer retention, share of wallet and word of mouth.

Increasing complaints or at least increasing visibility of complaints really can increase profits.

10 comments:

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