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 25^th 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.

Social Currency Marketing

What do erotic balloon animals and dancing commuters have in common?

They have both been used by brands to provide a social currency which can be exchanged for consumer attention.

As more and more information is created, we struggle to consume it and so give it less and less attention. Simon Herbert first talked of this issue in 1971 when he stated that "a wealth of information creates a poverty of attention". It's ironic though that with all the demands on what is essentially a scarce resource – our attention – we choose to become ever closer and more connected by streaming information on each other through tools like Twitter or Facebook.

But is this really so surprising? As we are increasingly bombarded by external media with its demands on our time and attention aren't we simply forming a virtual "circle of wagons" – huddling together with those we trust (or would like to trust) to present a united front against the wider world.

This does though create a challenging opportunity for information providers - they might have to fight harder for the attention of consumers in the first place, but once they get it from a small number then it can spread like wild fire through the most effective peer-to-peer word of mouth "recommendation" in a matter of minutes. Using this blog as an example, I saw a 700% increase in visits in just one day when one of my articles got linked to someone's status update within twitter - much of that coming within just a couple of hours. And I wasn't even trying.

For a brand that is trying to find ways of breaking into these ever tighter virtual communities a commodity exchange is required that takes them from external threat (or worse still, a nonentity!) to a trusted (or at least accepted) insider. Continuing the analogy of the early pioneers, brands are finding things to trade. And where in the late 1700's it was mirrors, nails and buttons – in the 21st century the shiny objects are access, entertainment and kudos – creating essentially a social currency.

Looking at the recent viral campaign from Durex it's clear to see how this provided a valuable exchange – the video is extremely funny, and for those finding it first and forwarding it on to their friends, there's an element of kudos.

Durex have created an item to trade with potential and existing consumers which gives them access to a viral community and to a share of that most scarce resource – attention. In getting that attention they will have generated unexpected awareness and doubtless approval, as well as reminding people of a brand which of late may have been seen as less relevant than its competitors.

Mobile telco brands have really embraced this. In the UK, T-Mobile recently created an advert set in Liverpool Street railway station, with dancers mixed amongst the commuters who suddenly start dancing. This really captured the imagination of those who were there - sharing the event via their mobile and the video itself being posted to YouTube and receiving over 1.3m hits. With the strap line "Life's for Sharing" its clear they are trying to capture a share of consumers attention with something that can be talked about and traded.

The issue with these types of campaign is that although it breaks into the consumers consciousness, it is very quickly replaced by the next 'cool thing'. By its very nature it's difficult to maintain this kind of awareness through viral activity as the nature of this kind of interaction is that it is always looking for the next new thing, the next cool thing. Repetition is impossible – it's unremarkable – it's 'has-been', or worse still 'me-too' if you're the competitor brand.

Another way of gaining access to these hard to reach consumers is to not try and break in at all but instead to become part of their everyday life. Looking at another mobile operator O2, they have done this through their £6m per year rebranding of the Millennium Dome in the UK to the O2. This has allowed them to provide "access" for its customers such as priority booking for shows – allowing bookings 48 hours before non O2 customers - as well as bringing exclusive entertainment to their phones. They back this activity up with the ability to gain 4 free SIMS, allowing customers to introduce and share O2 with their friends.

With the Orange Wednesday promotion in the UK which provides 2 for 1 cinema tickets every Wednesday for Orange customers, this mobile telco operator has found an innovative way to really become part of their customer's everyday life whilst ensuring that their friends are introduced to the brand as well – providing a social currency through free films. This connection between their customer and their social network really does tie into everything they do, from the inclusion of free Facebook within their Dolphin package to the recent rebranding of Orange around the "I am" theme which focuses on how peoples social connections make up all that they are.

It's clear that brands are increasingly understanding that in the fight for a consumers attention they need to think not just about the consumer themselves, but all of the people they interact with and need to provide some form of social currency which can be traded in exchange for attention – whether this is erotic balloon animals, dancing commuters or free films.

As the recent Orange campaign says "I am who I am because of everyone".

Increasing profits - honestly

I was in Serbia this week and although I knew things had moved on I couldn't help but wonder if there would be any issues –I wasn't overly concerned but I still went on to the UK Foreign Office website to check its status and advice and even registered my travel plans with them just in case. Having now been there I can say quite honestly that it was a lovely place – friendly people, efficient and just like any other European city. However my concern or more precisely my lack of trust meant that I made an extra effort and spent more time planning my journey.

My reason for recounting this is that I'm reading a book at the moment called The Speed of Trust: The One Thing That Changes Everything, written by Stephen M R Covey, son of Stephen R Covey of 7 Habitsfame. What's fascinating is how he has managed to articulate simply what trust means and actually managed to demonstrate how trust affects the bottom line. Simply put he shows how when the level of Trust goes down, the speed of transaction/interaction goes down and the cost goes up – conversely, when the level of Trust goes up the speed goes up and the cost comes down. He then goes on to provide a couple of examples. Firstly discussing how in the wake of the Enron and WorldCom scandals, trust was shattered and so the US implemented the Sarbanes-Oxley Act which essentially introduced additional regulations and audit controls – which slowed things down causing additional work – and increased costs with one estimate putting this at $35 Billion. He then shows an opposite example of where high trust can increase speed and reduce costs – talking about a small vendor in New York who was struggling to serve customers at peak times and so simply provided a basket for customers to put their money in, taking any change and freeing him up to serve more customers (without additional hiring costs).

This example was demonstrated recently in the UK when a man left his shop open on Boxing Day while he went away so that customers who needed something could simply help themselves – trusting that people would be honest and pay for the goods – which they did to the tune of £187 with nothing stolen.

Now I'm not suggesting a new form of retail whereby brands simply open the doors and let customers help themselves, but it does raise some interesting questions about trust and how this can be developed with customers so as to "grease the wheels" to ease transactional pain and reduce costs.

A good example of a brand doing this at the moment in the UK is Norwich Union (soon to be Aviva). They have introduced a service within their motor insurance website which provides details of the prices of over 140 competitors – showing details of their quote even where this is cheaper.



Despite appearing to have its origins in the film Miracle on 34^th Street where the store Santa advises customers to go to a competitor store for a better price, Norwich Union could be on to a winning formula here.

The reason for this is that firstly it builds confidence – people will feel the brand has integrity as they show themselves to be in touch with the market and willing to say "hey, we're more expensive, we know that - but there's a reason" – this then gives them permission to explain and demonstrate why.

Second it allows them to "own" the buying process – for many people insurance is commoditised and they simply use a price comparison site to choose the cheapest vendor that meets their needs. The hope here will be that these "price hunters" will give them a go knowing they get the comparison anyway, but now Norwich Union are in control and can begin to build a relationship.

What Norwich Union seems to have realised is that trust is a critical component of customer retention – something which has been severely lacking in the insurance industry for many years. Every time a renewal quote is sent to an existing customer which is obviously higher than that offered to new customers – trust is destroyed.

Focusing on genuinely building trust however can reap real and tangible benefits.

If a customer trusts that you have their best interests at heart then they will be less likely to look at competitor products and services.

If a customer trusts that you're always working for mutual benefit then they will be more likely to trial additional products and services from you.

If a customer trusts that you'll look after their personal data then they are more likely to provide it to you.

If a customer sees you demonstrating trust when problems arise – handling complaints or queries fairly – then they are more likely to speak about it with others – generating positive word of mouth.

On the other hand all of those benefits disappear quickly if trust doesn't exist or is destroyed through the course of doing business.

Trust is at an all time low within many industries at the moment so those businesses which cultivate it, demonstrate it and generate it will surely prosper with lower costs to serve, increased retention and a willingness to trial.