Goodman on complaints

Notes from Basic Facts on Customer Complaint Behavior
John Goodman

• 50% of consumers will complain about a problem to a front line person. If this person is an employee of a distributor or retailer, the chances are high that the problem will never be reported to the manufacturer or corporate office.
• Only 1-5% of customers will escalate their complaint to a local manager or corporate HQ. For packaged goods and other small ticket items, TARP has found that 96% of consumers either do not complain or complain only to the retailer from whom the product was bought.
• For large ticket items, the complaint rate is higher. 50% will complain to the front line, and 5-10% of complainers will escalate to local management or to corporate.
• The existence of an 800 number at corporate HQ will, on average, double the number of complaints getting to corporate. However, only one out of 100-500 will actually be addressed to a senior executive.
• Complaint rates vary by type of problem. Problems which result in out of pocket monetary loss have high complaint rates (e.g., 50-75%) while mistreatment, quality, and incompetence problems evoke only 5-30% complaint rates to the front line.
• On average, twice as many people are told about a bad experience than are told about a good experience. The magnitude of word of mouth varies by product, price, and industry. For example, the ratio was 10:5 for a soft drinks maker, and 16:8 for a car manufacturer.
• Depending on whether the problem is minor or major, 54-70% of customers will buy from you again if you resolve the problem. This rises to 82-95% if you resolve the problem quickly.
• Customers who complain and are satisfied are up to 8% more loyal than if they had no problem at all.
• It is five times more expensive to win a new customer as it is to keep a current customer. The range varies from 2:1 to 20:1.