The business community has long accepted that for every complaint a manager gets or that’s escalated to headquarters, there are plenty of other customers who want to complaint but don’t. Most customers opt to not gripe because they don’t believe it will get them better service. That’s what I call trained hopelessness.
The real downside of this is that most business owners don’t quite understand how much money they’re leaving on the table because of this trained hopelessness.
In other words: No news from customers is not good news.
Businesses tend to self-rationalize that most good customers actually do complain when they’re unhappy. That’s just not true. If you think otherwise, you could be losing out of millions of dollars — regardless of what kind of business you’re running.
For serious problems, no more than 25 percent of customers will usually complain to a front-line person, whether the retail staff, phone customer service representative (CSR) or relationship manager. However, if that person does not immediately resolve the problem or responds by saying “that is our policy,” then a customer will likely give up. So it’s fair to say that for each serious problem heard at a management level, there are between four and 50 similar complaints that aren’t being articulated. For irritating problems, the complaint rate is almost always below five percent — a 20:1 ratio, even in B2B environments. If you question these ratios, review the last five problems you recently encountered as a customer, and consider how often you pick your battles and not complained at all.
These ratios are important because they allow an executive to estimate the frequency of problems in the marketplace by extrapolating from the number of complaints received among management in B2B environments — high-tech companies are especially at risk. For instance, less than 5 percent of B2B customers will complain about a service tech or relationship manager because they know they will have to depend upon that person for future support.
The most common reason for not complaining: It wouldn’t do any good. The customer has been trained from their previous experience to accept problems as a general business practice, without prospect of change. If that’s the case, why bother complaining? Also, customers fear retribution by the person complained about — do you complain about the waitress early in the meal? You fear you’ll get worse service.
So why should you be concerned? Customers who encounter a problem, but do not complain, are at least 20 percent less loyal to a company and tend to spread negative reviews by word of mouth.
We have found that if a small or medium business receives two complaints about a policy or operational issue at its headquarters, then it’s fair to say that at least 10 — or even 100 — customers are fairly unhappy about the same issue. The ratio can be even higher for companies with long-term contracts, or monopolisitic, nonprofit, and governmental agencies. Even for serious problems, only about 25 percent of non-profit donors ever complain to anyone, and if not handled on the spot, the donor goes silent.
Allowing for a ratio of even 10:1 (2 complaints) could mean 20 customers had a bad experience and a business is at risk of losing as many as 40 customers. If your average customer is worth $1,000 in revenue, two complaints in a month means that you’re losing at least $4,000 per month or $50,000 per year. If each of these 20 unhappy customers relates the experience to just four others (a reasonably conservative number), it would imply 80 negative referrals per month. All your marketing is “swimming upstream” against the current of negative word of mouth. Finally, you’ll see a higher turnover among frustrated employees when they receive complaints but are not empowered to fix problems. Half of all voluntary turnover among good employees is due to “I’m not getting paid enough to take all this crap.”
Fortunately, you can counter trained hopelessness to set your company apart from the competition:
Put a sign in your store as well as a message on your website and invoices, “We can only solve problems we know about!” Encourage your employees to make eye contact — it can raise complaint rates by 30 percent.
Empower your front-line employees to fix problems:
Employees will not invite complaints they cannot handle. Ask them what three problems they do not feel capable of handling and give them the tools. Remember that most customers will not complain a second time when the first issue complained about wasn’t handled well.
Prevent problems by proactively providing educating customers:
A Virginia building contractor educates home remodeling customers, making them understand that the first four weeks of work will be disheartening, a lot of mess, and little feeling of progress. He gets stellar ratings on Angies List. A Maryland car dealer has a sign in the waiting area (everyone reads signs while waiting) explaining why his $110/hour labor was fair and actually a bargain compared to local plumbers’ rates of $165/hour. Loyalty is more than 93 percent.
Remember, it’s what you do not hear that can cause the most revenue damage. See my webinar, “Fewer Complaints are not necessarily better!” on the Salesforce.com website.
John Goodman is Vice Chairman of CCMC. His latest book is Customer Experience 3.0, which, along with Strategic Customer Service, is published by AMACOM and available on Amazon. firstname.lastname@example.org, @ jgoodman888.