Poor management of customer dissatisfaction: causes and consequences
An untapped profit center
Complaints management is often perceived as a cost center, when in reality it is an untapped profit center. This management approach even has a significant and measurable ROI!
So why do companies so often remain at the cost level?
Intellectually shifting from a cost center to a profit center, in other words, turning losses into gains, requires accepting one thing: putting everything on the table. It also requires being willing to face uncomfortable truths. Complaints are not pleasant to accept because they indicate a poor level of performance that needs to be corrected. Therefore, it requires effort.
Learning to manage customer dissatisfaction
Truly opening the hood on complaints is, however, a source of performance. It is even possible to measure an ROI on the subject. William Sabadie has worked and written on this topic of ROI to explain what effective complaints management actually delivers.
The 2 key pillars according to William Sabadie:
- Retention: complaints management leads to loyalty through several different vectors: repurchase, cross-selling, reduced relationship costs, and price premium (low price elasticity).
- Acquisition: handling complaints effectively boosts recommendation through word of mouth, and therefore market share.
Knox and West (2014) emphasize that good complaints management outperforms the impact of improving satisfaction. This means that reducing complaints and handling them well are very powerful levers for market performance.
Measuring the profitability of effective complaints management
The idea is to start from complaints, which are not all expressed for a variety of reasons. In B2C, this is because the product price is low; in B2B, it is because previous purchases went well.
The first question is therefore: what is my complaints rate? Even if it means asking customers directly through a specific study. This allows for a thorough understanding of the diversity of issues and how to measure them.
The second question is: what is their behavior following this problem? Does their NPS collapse or not? For those who experienced a problem and did not complain, we almost always observe a collapse in NPS. This is alarming: we are losing customers without knowing it, and simultaneously losing their recommendation power.
The statistical cross-referencing of data related to these two questions allows each company to calculate the ROI of genuine complaints management. It then becomes possible to know how to correct course.
Our studies paradoxically reveal an often very passive attitude toward complaints in companies: “Well, we handle them as best we can”, “No need for a dedicated service”, “It would cost too much”, “Acquisition is the priority.” But if companies move to the next level by actively seeking out complaints, they can then address the root causes of this dissatisfaction. As a result, they restart the virtuous cycle of retention and acquisition described above.
But why do companies not always seize this opportunity that is right there for the taking?
Our diagnostics, conducted over more than 10 years across more than 80 companies, show that this is directly linked to company structure (organization and processes) and to stated priorities. For example, the priority might be short-term cash flow. The customer orientation of both the company and its employees is too weak to recognize the power of complaint management and to make it a priority.
From an organizational standpoint, leadership does not sufficiently embody this customer mindset. Furthermore, customer data is not used or shared enough within the organization. Moreover, front-line management does not give employees enough autonomy to satisfy customers.
From an individual standpoint, we consistently observe in these companies a lack of customer reflexes (i.e. customer mindset) among both front and back office employees. This is not a matter of skills but of mindset. With little awareness of the importance of this customer culture, each person manages their own scope in isolation. There is no perspective on the customer value chain within the organization.
Customer culture projects are therefore virtuous on multiple levels. Not only do they place the customer at the heart of the organization, but they then open the door to embracing complaint management, having understood and measured its impact in terms of ROI.