Are you getting enough customer complaints?
That’s right. Are you getting enough customer complaints? Well no business wants complaints and all businesses should strive to deliver levels of performance and service that satisfy or delight their customers. But sometimes, even the best companies fall short.
It’s the silent ones who really hurt your business
Are the customers who complain part of a “vocal minority” who are dissatisfied? Or, are they just the visible “tip of an iceberg” and there are many more who you never hear from. It’s the silent ones who don’t complain that really hurt your business.
How much is a happy customer worth?
But first let’s consider a delighted customer – in this example a supermarket shopper. Their average weekly shop might be £100. They might also buy £25 of petrol a week to get loyalty points and perhaps even buy insurance from the store as well. Over 5 years their supermarket spend could easily exceed £30,000. Alternatively, someone buying a pack of cigarettes and a newspaper from a corner shop every day could spend over £10,000 over 5 years.
Brand advocate to brand terrorist
The loss of a customers spend could be significant but this is only part of the story. Companies like William Morrison & First Direct have high levels of advocacy. So losing a customer means no future referrals. It could be much worse. A customer might move from being a brand advocate to a brand terrorist and tell others about their “unhappy experience”.
So taking the supermarket example above, the loss of the complainant, 2 referrals & 2 other existing shoppers (who stop buying after hearing about the problem), could easily have a total impact of £150,000 over 5 years.
How First Direct stopped me from becoming a potential brand terrorist
I have had an account with First Direct for over 12 years. About 8 years ago, I asked for an account balance by telephone and their call handler tried to dissuade me from doing this suggesting I could get an account balance by using the ATM. After the call I was very irritated and decided to close my account.
But before I did this, I called the next day to complain and they apologised and said I could call anytime for a balance. A week later I got a call from a First Direct supervisor who apologised again and wanted to know if the issue had been resolved and if I was satisfied. A week later, I received a complimentary bottle of Scotch.
If I hadn’t complained, or if they hadn’t dealt with my complaint satisfactorily they would have lost the value of:-
- 8 + years of my business
- countless referrals through my advocacy
- the impact of potential brand terrorism
Rule Number 1: “The customer is always right”
In the early 90’s when I worked at Asda, I had the pleasure of listening to a presentation by the CEO of Stu Leonard (a US dairy supermarket, located in Connecticut with a reputation for legendary customer service).
He told a story about a customer complaining about the cream not being fresh. Stu told the customer it wasn’t possible, as the cream is made fresh in the dairy next door every morning, kept refrigerated and sold the same day. He went on to say he had never had a complaint before about the cream. The customer insisted the cream was off and reluctantly Stu gave the customer a $1 bill. The customer grabbed the bill and stormed off (without giving Stu the 5 cents change) saying “And I will never come back to this store again!”
Stu went “Wow. I gave the customer his money back but he’s still angry and I have now lost a customer.” This incident led to Stu developing 2 rules that were carved on a huge boulder and placed at the store entrance:
"Our Policy
- Rule 1: The customer is always right!
- Rule 2: If the customer is ever wrong, re-read rule 1"
Eager to learn the lesson, Asda placed similar boulders outside its stores.
Develop a passion for customer complaints
The presentation was full of examples of legendary customer service. One of the things that struck me most was almost a passion for encouraging customers to complain or to tell them when they were not happy. They strongly believed that it was only possible to solve a problem (& keep a customer) if you knew about it. All complaints were dealt with the same day and if necessary a new process developed to avoid reoccurrence.
This passion was picked up at Asda and CEO Archie Norman would personally read all customer complaint responses before they went out. Apart from finding out what the hot issues were for customers, if he wasn’t’ happy with your response you could expect a phone call!
What can you do to get more complaints (feedback)?
If you want to get more sales make it easier for customers to complain or to tell you how to do better?
- Have highly visible signs or employee badges that encourage customers to “Shout if they are not happy” or to “Tell us if we could do something better”
- Have suggestion / complaint pads in prominent positions (even web sites)
- Incentivise / reward customers for great ideas / complaints
- Encourage the customer facing staff to ask “Can we do anything better? Are you coming back?”
- Have a simple complaints policy and offer a strong guarantee
- Disagree with the customer at your peril
- Apologise and be eager to find out “How can we do better?”
- Compensate customers for their inconvenience - try and find something that may be low cost for you but have great value to the customer
- Is it worth losing £150,000 over 5 years for a 50p pot of cream?
- Make sure all staff are treated well, motivated and fully trained to handle customer complaints in a positive way
- Deal with all complaints the same day
- Have an effective monitoring system that highlights trends to try and avoid future problems before they occur
- Follow Stu & Archie’s example and make sure that complaints are “seen and owned” by the MD / CEO
What about return on investment?
Some might say that this strategy will just increase costs. It might, but this doesn’t have to be at the expense of greater profits. Overall, I believe that this strategy will significantly improve the business return on investment by:-
- highlighting problem areas and reducing associated costs and causes of dissatisfaction
- identifying areas of improvement in product, services and satisfaction that lead to:-
- more customers
- coming more frequently
- for longer (less attrition) s
- pending more
- and more referrals
It may be unrealistic to expect you to arrive at work tomorrow and shout at the top of your voice “Bring on the complaints!” But hopefully even if it starts as a blind date, in time, getting more customer complaints may develop into a long term passion!
Peter Hawtin
This article was taken from the Brand New Way SME marketing newsletter which is published every 2 weeks.
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How do you know if your customers are still your customers?
This is one of the questions I always ask when I first sit down to review a business. On the face of it this is a simple question, but why do so many businesses struggle to answer it? How would you answer it?
Firstly, it requires the business to have a definition of a customer. Secondly, it requires an understanding of the point when a customer ceases to be a customer.
The answer will have a major impact on business profitability and Marketing Return on Investment MROI, which is the topic I outlined in the last newsletter. If you know the point when your customer makes a decision not to buy from you any more and becomes a lapsed customer, you have an opportunity to do something about it. As a marketer you could choose to:-
- ignore it (which would be silly)
- persuade (or incentivise) the customer to buy again
- or develop a customer contact strategy that maximises Marketing Return on Investment
A definition of a customer
The definition I use is - a customer is someone:-
- who has bought a product or service from you
- and is expected to buy again from you in the future
The first part of the definition is straightforward. Most companies have a list or database of customer purchases. The hard part is knowing whether or not they intend to buy again from you in the future. You might be aware that a small proportion of your customer base does not intend to buy again in the future. Some unhappy customers may have told you that they never intend to buy from you ever again. Sadly, some others may have died. But what about the rest? Are they all customers? At what point does a customer become a lapsed customer?
Why is this important?
Firstly, using the definition above is a good indicator of the health of your business. If you assume every customer is still a customer, then you are getting a false picture of the business by just adding on new customers each week or month. You need to take off lapsed customers to determine the net effect to identify whether your overall customer count is growing or reducing.
Secondly, it is generally the case that the cost of acquiring a new customer is significantly more than he cost of keeping one. Developing marketing activities to prevent customers on the point of lapsing (or leaving or defecting) from lapsing usually results in a significant improvement in MROI.
The challenge is to identify who to market to and when, which brings us back to the central question, when is a customer about to lapse?
How to identify the potential lapse date?
Some businesses sell their products or services with a "known" product life cycle. Insurance is a good example where the customer buys cover for 12 months, so the annual renewal date becomes a key trigger for renewal activity to avoid the customer lapsing. Companies like the AA & RAC have very sophisticated renewal programmes & achieve very high renewal rates. The challenge for them is to identify which customers would naturally renew without any activity or marketing spend versus others that might need more of a nudge.
But what do you do if you run a restaurant. How do you know when a customer is at the point of lapsing?
Latency - a lifecycle metric to determine who to market to and when
The concept of latency identifies normal customer behaviour to set trigger points which are used to determine when to take action to increase customer value. First of all you need to calculate the average time between activities. The activities measured will depend on the business but could be between:-
- 1st purchase and 2nd purchase; 2nd purchase & 3rd purchase etc
- 1st web site visit and 2nd; 2nd & 3rd etc
- 1st stage of sales process & 2nd; 2nd & 3rd etc
So if the average interval (i.e. normal behaviour) between 1st and 2nd purchase is 60 days, then anyone who hasn't made a 2nd purchase by 61 days of the 1st purchase is outside the norm and potentially about to lapse. In this example the trigger point would be 60 days and should prompt some marketing activity to prevent lapsing.
Marketing activity in less than 60 days is unnecessary (and a waste of money) as they are still following normal behaviour. Every day beyond 60 days means they are more likely to become a lapsed customer and it will get harder (and usually more expensive) to get them to come back. So don't delay.
What about businesses that don't have "sophisticated customer databases"?
Latency can be simply applied to all businesses. Take a restaurant for example. They may use a diary to record bookings showing the customer name, date of booking, number of people. By transferring the data to a PC spreadsheet, it would be relatively easy to look over a 6 or 12 month period to identify the average interval between bookings.
They might find that the average interval between bookings is 35 days. They might also find out that 40% of customers have not booked for over 180 days which suggests they are lapsed customers and indicates a big problem. They use an interval of 35 days as a trigger to prompt marketing activity and send a postcard offering a free bottle of wine worth £7 to customers (not having booked for 35 days).The offer is valid for bookings made in the next 7 days to encourage an immediate response.
A disappointingly small number respond and book a meal. During the meal, at some point the staff mention "in a friendly way" that they have noticed the customer hasn't been in for a while and ask why. A frequent response was that the customer was planning to book in a few weeks anyway and the wine voucher prompted them to come in sooner. And then the penny dropped. These customers tended to have young families. Could it be that customers with young families have a different cycle to customers that don't have young families? On reviewing the data, it was possible to separate out young families by time of meal and booking of high chairs and sure enough customers with young families had an average interval of 60 days whilst customers without young children had an average interval of 18 days.
This analysis led to 2 different marketing campaigns: one to customers with young families who haven't booked after 60 days and the other to customers without young families who haven't booked after 18 days. They also experimented with different offers for the 2 groups to improve response. e.g. "The children eat free" would only be appropriate for one of the two customer segments.
What about businesses that have thousands of customers making "zillions" of transactions"?
The principles remain the same but often, they have a different problem. They might have so much data, that they can't see the wood for the trees. That's why I have developed the Brand New Way Marketing ROI Toolkit to enable Marketers to simply do complex tasks at the press of a button. It includes a Latency Tool to automatically calculate intervals for activities like purchases or site visits. It can also be used to automatically trigger specified marketing activities to the right people at the right time, such as an email campaign with automatic tracking of recipients' behaviour to get immediate feedback. This enables continuous improvement in Marketing ROI.
Peter Hawtin
This article was taken from the Brand New Way SME marketing newsletter which is published every 2 weeks.
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