Research Results: Complaint-Handling Processes Drive Up Customer Retention

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A colleague and I recently published our results on drivers of customer retention, in the European Journal of Marketing. EJM is a double-blind, peer-reviewed, academic journal. We set out to identify which of a number of management disciplines contributed to improved customer retention.

We generated data from a random sample of manufacturing and service organisations in both business-to-business and business-to-consumer settings. We examined the impact of retention planning, executive responsibility, retention budgeting and complaints-handling on customer retention outcomes.

Our analysis shows that only one variable is significantly associated with customer retention excellence, and that is the presence of a documented complaints-handling process. None of the other variables we tested were significant. Does that surprise you?

Francis Buttle
Dr. Francis Buttle founded the consultancy that bears his name back in 1979. He has over 40 years of international experience in consulting, training, researching, educating, and writing about a broad range of marketing and customer management matters. He is author of 15 books, has been a full professor of Marketing, Customer Relationship Management, Relationship Marketing, and Management.

8 COMMENTS

  1. I have no doubt that people who complain about a problem and receive satisfaction from a company will rate the company higher and stay with the it longer. I guess that means if 100% of customers complained and had their issues addressed everyone would have loyal customers.

    But 100% of people don’t complain, nor to 50% or even 10%–unless the company is particular adept at messing things up. Most people who might have a complaint usually write it off to a bad experience and quietly drop that company. Indeed, only 23% of the people surveyed in the research that lead to this conclusion responded to the questionnaire on this subject. Any researcher would have to question if this limited response rated was weighted to complainers. What about the vast majority who didn’t respond and might have been happy with their experiences?

    If solving problems made it that easy to retain customers, companies should strategize ways to cause customers problems so they can go about solving them. Gladly, that is not a particularly popular approach for increasing customer retention.

    Bob Kaden
    Author of Guerrilla Marketing Research

  2. Bob

    You’ve misread our paper that Graham Hill kindly provided a link to in the thread above. Our survey was of organisations, of not complainers. We tested our sample for non-reponse bias. There was none, so you can be assured that the results are statistically representative.

    Francis Buttle

  3. I did misread your paper and I apologize. Discovering that a good customer complaint process is a strong factor in retaining customers is a valuable piece of information. Companies should indeed be encouraged to invest in such a function.

    Yet, companies would also be wise invest money in understanding the factors that drive customers to complain in the first place. Fulfillment issues, tardy orders and billing problems are some of the obvious ones that cause customers them to actively complain. But uncovering complaints and negatives that customers have toward companies, and that they express by silently switching to a competitor, is perhaps the bigger issue.

    By first understanding and then being more proactive in addressing potential customer complaints and problems before they occur is more the key to increasing customer retention–at least in my mind.

    Bob Kaden

  4. Francis, Bob

    Bob’s last comment raises a couple of interesting points.

    If a company is losing customers then it should clearly do something about it. It could spend a lot of time doing market research and then develop a customer recovery process based upon the findings. But that takes time. And there is no guarantee that what customers say to a researcher is what customers will actually do. On the other hand, the company could just carry out a meta-analysis of what we already know about customer recovery and design a best-practice customer recovery process. This wouldn’t take much time at all. And if designed appropriately, most of the useful answers that the market research would provide could quickly be gathered through operating the process. And adopting a Kaizen approach would ensure that the process was adaptive and always kept up with changing customer behaviour.

    My questions are this. What should a company do? What is the minimum market research required to make a reasonable decision? How quickly can a customer recovery process be put into place? And how can the process be made to learn, adapt and improve from Day 1?

    Graham Hill
    Independent CRM Consultant
    Interim CRM Manager

  5. People are relunctant to change because they resist change.

    Every customer, even the irrational and unreasonable one, understands clearly that nobody is a saint. As long as the service recovery process is effective and efficient, everyone deserves a second chance.

    After all, to err is human.

    Daryl Choy, the founder of Touchpoint eXperience Management, helps firms make a difference at every touchpoint. Choy can be reached at wisdomboom.blogspot.com.

  6. Bob’s post suggesting that the better strategy is to be proactive, addressing issues which (can / might / do) lead to customer complaints before they occur, is patently true. Of course, it makes sense to get –it-right first time, by having good people use good processes and good technology to deliver satisfying customer experiences. But even the best get it wrong, sometimes. People have bad days at work, processes fail and technology crashes. As it says on the bumper sticker, “S*** Happens.”

    Graham asks 4 questions:

    1. What should we do? Continue to try to get it right-first-time but have recovery processes in place to capture at-risk customers before they churn. The best recovery mechanism is a complaints-capture and handling process that is modeled on the best practice described in the international standard for complaints handling ISO 10002.
    2. What is the minimum market research required to make a reasonable decision? Don’t spend a cent. Instead, assess your current complaints-handling process against the ISO 10002 standard to see where you need to improve.
    3. How quickly can a customer recovery process be put into place? It takes time, money, focus and senior-level commitment to put a best-practice complaints-handling process in place, but it’s the best customer recovery investment you can make.
    4. How can the process be made to learn, adapt and improve from Day 1? If it conforms to ISO 10002, it will naturally do that, because the ISO standard demands that you audit, update and improve your complaints-handling process over time.

    Here’s a plan of action:

    * Understand that the research evidence supports a clear linkage between complaints-handling and customer retention, a point I made at the top of this discussion.
    * Commit in principle to implementing an ISO 10002-compliant complaints process.
    * Perform an analysis of your existing complaints-handling processes (presuming there are some) to find out where there is room for improvement.
    * Perform a cost/benefit analysis of the complaints-handling value proposition.
    * If convinced, design and implement your new process and watch the churn drop and satisfaction and positive WOM rise.

    You might like to browse to listeningpost.com.au and take a look at some of the tools those guys have. I know the people behind the company and they operate pretty much right in the target zone of this discussion. Tell them Francis sent you!

    Francis Buttle

  7. Francis, I’m a bit late on commenting on your article and some of rhe responses it generated. Your two posts on complaints I found very interesting. Different from how I see complaints however.

    For sure, no one like complaints. Certainly the one being complained to as well as the person doing the complaining.

    Several years ago, speaking to a group of business executives, in response to a question about complaints, I started off by saying, “Complainers are the best customers your business has!” (I have since used that opening on the topic ever since.) Silence and looks of “are you kidding?” from my audience. I then went on to complain that there were reasons why people complain. The first one is that by complaining, the customer was telling them that the customer wanted to keep doing business with them. The second reason someone complains is that they had someone down their back and living with the complaint in their environment was far worse than calling or writing the resource about the complaint. Had it not been such, the customer would start looking for another resource.

    One member of the audience piped up with, “are you telling me that my nagging wife is the best friend I could have?” thinking that he had caught me. My response was that if his wife was not complaing/nagging, then very likely she really didn’t give a damn and . . . . . laughter and some lewd remarks came from his friends.

    But, there is another aspect to this look at complaints that is not often put acorss to staff which relates to perforance reviews or critisis.. That is, when they receive complaints fromt heir superiors or associates about their performance, it says to them that the firm would like to keep them and in order to do so, the person voicing the complaint is really a agent for whomever was affected negatively by the employees less than expected output.

    Alan
    Alan J. Zell, Ambassador of Selling, Attitudes for Selling
    [email protected] http://www.sellingselling.com
    Winner of the Murray Award for Marketing Excellence
    Member, PNW Sales & Marketing Group
    Member, Institute of Management Consultants
    Member, Lindedin.com

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