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How to deal with customer complaints print Print

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Being able to deal effectively with unhappy customers is a distinguishing mark of the successful business. This guide spells out the benefits of effective complaint handling and shows how this process can be built into a competitive advantage for your business.

Opportunities in disguise

We all enjoy praise, but few of us relish criticism. Many businesses dread getting complaints, but in reality they offer you some valuable market research into the state of your business. In the perfect business where everything and everyone works at optimum levels, there would be no complaints. This is an unlikely situation in real life, so customer complaints offer you the opportunity to fine-tune your business by removing the impediments or changing the processes that prevent you from delighting your customers. The sooner you can fix what's wrong, the sooner you can improve your business.

It is better that people complain openly than nurse a grudge and simply abandon your business. What you want to avoid are disgruntled customers relaying their grievances to friends and contacts, but never telling you. Research has shown that a satisfied customer is likely on average to tell two or three people about your business, but a dissatisfied customer is likely to tell 10. If each of the 10 then spread the word to even a few extra, the damage can be substantial.


Actively ask for feedback

In order to deal effectively with a problem, you must first know of its existence, whether it is poor service, late delivery or substandard goods. It's therefore important to get feedback from people who are unhappy with the goods or services they have received from you. Fortunately people are now less likely for two reasons to bottle up their feelings than in the past. This is firstly because people have become more assertive and aware of their rights, and secondly because businesses have had to become far more customer focused to survive.

Encouraging a feedback process

You can actively encourage feedback from customers in a variety of ways. For example by sending out follow-up questionnaires to customers, or contacting them by telephone to survey their level of satisfaction with your products and services. A simple and effective way to get customer feedback is to ask customers immediately after a sale if they are happy with the level of service they have received. Whatever methods you choose, it is important to make them a regular and compulsory part of your business process for all staff, rather than a sporadic exercise. For more on customer feedback and market research, read our article The importance of market research.


Logging all complaints

Require all staff to log customer complaints in a central Complaints Book. Explain to them that compiling a record of all complaints will help you to identify the points at which the business is not working at maximum efficiency, such as:

  • Late delivery, under-delivery, delivery of wrong products or quantities, or faulty products.
  • Poor service, broken promises, lack of communications or services that did not fulfil expectations.

Staff are more likely to comply if you explain how the process will improve the business. Emphasise that the purpose is not punitive, but an opportunity to improve the business. For example, logging all complaints will quickly enable you to spot recurring problems, such as late delivery. The sooner the causes of complaints are addressed, the fewer future problems and the more efficient (and profitable) the business becomes.

The most likely complaints to escape this central compilation process are:

  • Complaints as a result of an employee's blunder or oversight that the employee is too embarrassed to pass on.
  • Complaints of rude or poor service from an employee that the employee is likely to conceal.

The first is more likely to be reported if you have in place a business culture that stresses self-improvement and learning from mistakes rather than being punished for them. The second is best solved by mystery shopping, in other words, getting someone unknown to employees to come into the business and report on the quality of service encountered.


Preventing complaint recurrence

Use the Complaints Book to identify the main areas of failure, and try to fix those areas as early as possible in the business process. The customer comes at the end of the process, so the nearer to the source or start of a business process that you can fix the problem, the more cost-effective it is likely to be. For instance, repeated invoicing errors may need to be fixed by a basic change in the way the accounting system is set up, by better communication between departments or by staff re-training.


Resolving complaints

It is important to establish a clear process for resolving complaints. Your objective is to turn the disgruntled customer into an advocate for your business. It is always worth making the effort to convert unhappiness into satisfaction. In certain cases it is worth taking some extraordinary measures to do this, for example:

  • Discounting the cost of products or services if they are delivered late or fail to meet expectations.
  • Giving the customer extra goods or services in compensation for poor service. For example, if you sell laser printers, you could offer a free toner cartridge refill, if you sell a consultation service, you could offer some free hours of your time.
  • Offering a discount coupon for the customer's next purchase.
  • Giving flowers or a coupon for a restaurant meal. This may be appropriate in certain cases and carry extra value since the gift has no direct connection with your own business.

You might be thinking at this point that these strategies all cost either time, effort and money, but:

  • Bear in mind that it costs between five and seven times as much to find a new customer than to do more business with an existing customer.
  • Weigh up the lifetime value of the customer - this could considerably offset a little trouble or expense now.
  • Remember that an unhappy customer is likely to spread the damage by telling many others about the failings of your business.
  • Most important, realise that a customer converted from unhappy to happy often becomes the most powerful advocate of all for your business.

Remember too that if you offer free product or services, the actual cost to you is usually far less than the perceived value to the customer. For instance, a free toner cartridge refill might have a perceived (retail) value of $100, but cost you only $65. A voucher for a restaurant meal for two might have a perceived value of $80, but might cost you $50 if you have a joint marketing arrangement with the restaurant and use the vouchers for other promotions as well.

Is the customer always right?

Probably not, and there will always be customers who are 'trying you on'. Strong people skills are certainly needed to handle some difficult customers. But the important points for staff are that most people are honest and the customer pays everyone's wages. The few that may abuse a situation are far outweighed by the many who are converted by staff being prepared to 'walk the extra mile.'


Empowering staff to take responsibility

In certain difficult cases it will be necessary for staff to refer complaints to you or a senior staff member. But it's not practicable to put one person (even yourself) in charge of all complaints, because that person cannot be on duty all the time.

A more practical way of dealing with complaints is to empower staff to take responsibility for complaints and give them a range of options (outlined in an operations manual if necessary) for resolving issues that may arise. Empower your staff to offer an on-the-spot settlement if possible. For example: "I sincerely regret that we have fallen short of your expectations in this case and I understand the frustration you must feel. The goods should be here by tomorrow, and I will arrange free delivery and installation at your home to compensate you for your extra wait." The quicker grievances are satisfactorily resolved, the less chance there is of the grievance festering in the mind of the customer.

Train staff to take responsibility for a complaint from start to finish. If employees are allowed to refer a complaint they received on to someone else, the chances of the complaint being resolved satisfactorily diminish. The more people involved, the greater the chance of the complaint getting buried or forgotten since it is all too easy to duck responsibility. "I thought Peter was handling it" is the classic excuse. Instead, make each employee responsible for following up any complaint they receive until that complaint is resolved to the customer's satisfaction.

For example, if the complaint requires a follow-up telephone call, an email or a letter, it is the employee's responsibility to complete these actions or to ensure that an appropriate person (for instance, the accountant or bookkeeper if it is an accounting issue) sorts out the problem.


Good communications

Good communications is the first step towards resolving complaints, and is often all that is required. For instance, a customer's sense of grievance or dissatisfaction can often rapidly dissipate if you listen attentively to their complaint and then acknowledge their feelings: "Yes I can understand how angry that made you feel." This is often the main satisfaction that people want - because they so rarely get it.

Other forms of good communication involve simple courtesies. For instance, telephoning customers in advance to tell them that the goods will be late is far preferable to them finding out after the delivery date has passed.

Letters and emails too are great customer 'comforters', particularly if they include a name and contact number of the person responsible for the transaction. For example, if someone has ordered goods or services from you over the phone or online, it is good business practice to confirm the order by email or letter and let them know how the order is progressing and who is in charge of the order. This is particularly true for mail order or online shopping where people often have misgivings about revealing their credit card details to an unknown business. A simple acknowledgement thanking them for their order and advising them when the product will be sent can do a great deal to reduce anxiety. And by building credibility, you are helping to ensure in the customer's mind that you are a reputable business worth doing business with.

Teach staff to under-promise and over-deliver. The aim of everyone should be to delight each customer or client who deals with you. If your staff lack people skills, then some training will pay dividends, since each employee is an ambassador for the business. Regular staff meetings on dealing with customers also help, since you can brainstorm 'best practice' techniques with everyone, and then outline operational procedures.


Build a competitive advantage

Finally, build a competitive advantage by remembering the two principal positives about a good complaints process. Firstly, complaints provide the insights that allow you to improve your business. Secondly, you gain the opportunity to convert an unhappy customer into a satisfied customer who could become a powerful advocate for your business. So few businesses handle the complaints process well that with a little thought you can turn a potentially unpleasant process into a business building opportunity for your business.


Useful resources

For more information on this topic, see our article 15 ways to retain and delight your customers.

If you are a small business, you may qualify for free Enterprise Training biz workshops for small businesses. Review details of possible relevant workshops in your area or call a Biz Adviser on 0800 269 249.

The KiwiHost organisation also provides a variety of workshops on sales techniques and improving customer service. For more details visit

If you need help with improving your business processes, contact your local industry body, Chamber of Commerce or the Employers and Manufacturers Association, your Accountant or Business Advisors for information about consultants who work in this area.


Further information:

To talk to an ANZ Business Specialist:
Call 0800 269 249
Visit your nearest ANZ branch


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