Michigan State University, University of South Florida, St. John’s University, and American Customer Satisfaction Index (ACSI) paper: The costs and benefits of addressing customer complaints

8 Aug

Guy Winch Ph.D. wrote in the Psychology Today article, Complaint Handling: Where Companies and Customers Both Fail: Why companies fail at complaint handling:

Consumers whose complaints are handled well by a company become loyal customers and spread positive word-of-mouth. Yet too many companies fail at complaint handling and then fail again in responding to these failures. Here’s why:

How Our Complaining Psychology Leads Customers Astray

When we are dissatisfied with a purchase or a service, the vast majority of us fail to complain to the company or business in question. We are convinced it will require too much time and effort to do so, that the process will be unpleasant and that if we did pursue our complaint, the company or business would be unlikely to resolve the problem to our satisfaction.

Instead, we are far more likely to switch to another company or business and to tell our tale of consumer disappointment to 10-20 of our nearest and dearest, hundreds of our Facebook friends or thousands of our Twitter followers, spreading terrible word-of-mouth about the company or business in question but failing to get a satisfactory resolution to our problem.

However, our fears are usually greatly exaggerated. In other words, voicing complaints to companies and businesses is usually far less laborious and annoying than we anticipate. This is especially so if we voice our complaint to someone with the authority to resolve the matter, such as the manager of a restaurant or a store, or an executive in a company. Call-center representatives are also likely to be more responsive if we approached them with civility and respect instead of holding them personally responsible for our problem.

And yet, each time we interact with a company that has terrible complaint handling procedures, our fears are not only reinforced but they generalize and we become less likely to voice a complaint when next we encounter a problem regardless of the company or business in question.

Why Companies Should Handle Complaints Well

  1. Great complaint handling increases customer loyalty.
  2. Great complaint handling reduces customer attrition.
  3. Great complaint handling spreads positive word of mouth.
  4. Poor complaint handling spreads negative word of mouth.
  5. It is far more expensive for a company to recruit a new customer through traditional marketing and advertisingthan to retain an existing customer by improving complaint handling procedures.
  6. Customer complaints give companies free and crucial information about problems with products or procedures that are costing them customers.
  7. Handling complaints give companies opportunities to have a dialogue with their customers, to educate them about new or existing products and to upsell.

The above factors contribute to significant increases in a company’s bottom line, while handling complaints poorly hurts their bottom line. This makes the fact that companies still fail at complaint handling both unfortunate and at first glance, bewildering….                                                                                                                       https://www.psychologytoday.com/us/blog/the-squeaky-wheel/201105/complaint-handling-where-companies-and-customers-both-fail

See, The Benefits of Handling Customer Complaints                                                                      https://businessofstory.com/customer-complaints/

Matt Weingarden  wrote in the American Marketing Association Journal,                      The costs and benefits of addressing customer complaints:

Researchers from Michigan State University, University of South Florida, St. John’s University, and American Customer Satisfaction Index (ACSI) published a new paper that analyzes relationships between customer complaints, complaint handling by companies, and customer loyalty to understand how customer complaint management affects companies’ performance and to inform companies how to manage customer complaints much better and more consistently.

The study, forthcoming in the Journal of Marketing, is titled “Turning Complaining Customers into Loyal Customers: Moderators of the Complaint Handling—Customer Loyalty Relationship” and is authored by Forrest Morgeson, Tomas Hult, Sunil Mithas, Tim Keiningham, and Claes Fornell.

The angry restaurant patron. The irritated airline passenger. The retail customer screaming about a return or refund. Every company worries about complaining customers. They can be loud, disruptive, and damage a company’s brand reputation, sales, employee morale, and market value. But are customer complaints as damaging as they seem?

As it turns out, customers who lodge complaints are not a lost cause. They can still be satisfied and remain loyal if their complaints are handled well. Regrettably, companies rarely handle complaints consistently, partly because they don’t know how.

The research team carried out the largest study ever on customer complaints to inform companies how to manage customer complaints much better and more consistently. We studied data from the world-renowned American Customer Satisfaction Index (ACSI) regarding behaviors of 35,597 complaining customers over a 10-year period across 41 industries…..                                                                                                     https://phys.org/news/2020-08-benefits-customer-complaints.html

Citation:

Forrest V. Morgeson et al, Turning Complaining Customers into Loyal Customers: Moderators of the Complaint Handling–Customer Loyalty Relationship, Journal of Marketing (2020). DOI: 10.1177/0022242920929029

Journal information: Journal of Marketing

Here is the press release from the Journal of Marketing

Press Release from the Journal of Marketing: The Costs and Benefits of Addressing Customer Complaints

6.26.2020

Matt Weingarden

Researchers from Michigan State University, University of South Florida, St. John’s University, and American Customer Satisfaction Index (ACSI) published a new paper that analyzes relationships between customer complaints, complaint handling by companies, and customer loyalty to understand how customer complaint management affects companies’ performance and to inform companies how to manage customer complaints much better and more consistently.

The study, forthcoming in the Journal of Marketing, is titled “Turning Complaining Customers into Loyal Customers: Moderators of the Complaint Handling – Customer Loyalty Relationship” and is authored by Forrest Morgeson, Tomas Hult, Sunil Mithas, Tim Keiningham, and Claes Fornell.

The angry restaurant patron. The irritated airline passenger. The retail customer screaming about a return or refund. Every company worries about complaining customers. They can be loud, disruptive, and damage a company’s brand reputation, sales, employee morale, and market value. But are customer complaints as damaging as they seem?

As it turns out, customers who lodge complaints are not a lost cause. They can still be satisfied and remain loyal if their complaints are handled well. Regrettably, companies rarely handle complaints consistently, partly because they don’t know how.

The research team carried out the largest study ever on customer complaints to inform companies how to manage customer complaints much better and more consistently. We studied data from the world-renowned American Customer Satisfaction Index (ACSI) regarding behaviors of 35,597 complaining customers over a 10-year period across 41 industries.

The study finds that the relationship between a company’s complaint recovery and customer loyalty is stronger during periods of faster economic growth, in more competitive industries, for customers of luxury products, and for customers with higher overall satisfaction and higher expectations of customization. On the other hand, the recovery–loyalty relationship is weaker when customers’ expectations of product/service reliability are higher, for manufactured goods, and for males compared to females.

Hult explains that “We draw two key conclusions from the results. First, companies need to recognize not only that industries vary widely in the percentage of customers who complain (on average, about 11.1 percent), but also that economic, industry, customer-firm, product/service, and customer segment factors dictate the importance of complaint recovery to customers and their future loyalty. Companies should develop complaint management strategies accordingly.”

He continues, “Secondly, the financial benefits of complaint management efforts differ significantly across companies. Since complaint management’s effect on customer loyalty varies across industries and companies offering different kinds of goods, the economic benefit from seeking to reaffirm customer loyalty via complaint recovery varies as well. Through this study, these performance factors can be identified and considered when designing a company’s complaint management system.”

Without context, these conclusions suggest that a profit-maximizing strategy simply requires that managers understand the impact of complaint recovery on customer loyalty in their industry. Added to this complexity, however, is the reality that profitability is not evenly distributed throughout the customer base. Fornell says that “Companies need to implement complaint management systems that make it easier for front-line employees to respond to complaining customers in ways that optimize customer satisfaction, customer loyalty, and the economic contribution of customers.”

Without a deeper understanding of the boundaries of the complaint handling–customer loyalty relationship and the effects of economic, industry, customer-firm, product/service, and customer segment factors, companies will likely allocate cost estimates to complaint management that are too low for the required recovery actions or customer loyalty estimates that are too high, or both, instead of achieving an optimal point of recovery-loyalty yield.

Fornell advises that “Achieving an optimal recovery-loyalty yield is more advantageous than adopting the mantra that the customer is always right. It is a folly to believe that the customer is always right. Economically speaking, the customer is only “right” if there is an economic gain for the company to keep that customer. In reality, some complaining customers are very costly and not worth keeping.”

Full article and author contact information available at: https://doi.org/10.1177/0022242920929029

About the Journal of Marketing
The Journal of Marketing develops and disseminates knowledge about real-world marketing questions useful to scholars, educators, managers, policy makers, consumers, and other societal stakeholders around the world. Published by the American Marketing Association since its founding in 1936, JM has played a significant role in shaping the content and boundaries of the marketing discipline. Christine Moorman (T. Austin Finch, Sr. Professor of Business Administration at the Fuqua School of Business, Duke University) serves as the current Editor in Chief.
https://www.ama.org/jm

About the American Marketing Association (AMA)
As the largest chapter-based marketing association in the world, the AMA is trusted by marketing and sales professionals to help them discover what’s coming next in the industry. The AMA has a community of local chapters in more than 70 cities and 350 college campuses throughout North America. The AMA is home to award-winning content, PCM® professional certification, premiere academic journals, and industry-leading training events and conferences.
https://www.ama.org/

ACADEMIC

Matt Weingarden

Matt Weingarden is Director, Integrated Academic Content, a role which includes serving as publisher and managing editor of the AMA’s four scholarly journals, as well as managing the AMA’s numerous academic conferences and academic community initiatives.

Mathew Swyers wrote in the INC article, 5 Steps to Handling a Customer Complaint: Your employees may be turning customers away. Teach them these simple steps to navigate through a customer service issue:

So don’t make a mistake that costs your business its business. Teach all your employees how to handle complaints like a pro:

  1. Listen and Understand

First, always listen to the customer. They are concerned about an aspect of your services. Let go of the temptation to respond in any quick fashion. Take the time to listen and truly understand what is driving their concern.

  1. Empathize

Once you have listened to their concern immediately empathize with their position to create a bond between you and the customer so that they know you have heard their concern and are going to work with them to resolve the issue.

  1. Offer a Solution

Offer a solution to their problem. In this regard, always focus on what you can do as opposed to what you cannot. There is always a solution. It may not be exactly what they are asking for, but if you focus on what you can do versus denying them their requested remedy you have still offered a solution and often merely having another option is sufficient to remedy the situation.

  1. Execute the Solution

Solve their problem be it with their originally requested resolution or an alternative you have proposed.

  1. Follow-Up

Once you have gone through the first four steps, make sure to follow-up with them to make sure that they are satisfied with the solution and that you have taken care of their concern.                                                                                                   https://www.inc.com/matthew-swyers/5-steps-to-handling-a-customer-complaint.html

Resources:

7 Steps for Resolving Customer Complaints                                                                                   https://www.lifehack.org/articles/communication/7-steps-for-resolving-customer-complaints.html

The Right Words and Phrases to Say to an Angry Customer                                                     https://www.callcentrehelper.com/the-right-words-and-phrases-to-use-with-an-angry-customer-30110.htm

8 Steps to Squash a Customer’s Complaint

Before you rush to defend yourself or fight back remember to put yourself in your customer’s shoes.                                                                                                                         https://www.inc.com/matthew-swyers/8-steps-to-handle-customer-complaints.html

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