Customer Service Reader

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.

Best places to buy electronics

The December 2005 issue of Consumer Reports includes the results of a survey of more than 18,700 Consumer Reports readers who bought a TV, digital camera, DVD/DVR player, camcorder, PDA, or audio equipment. Among the findings:

• The five Internet retailers at the top of the online store Ratings did a better job satisfying customers than most of the brick-and-mortar electronics sellers. Crutchfield, a catalog and Web site that had the best online information and navigability and great selection, received an exceptionally high score. Two online retailers, Amazon.com and JR.com, were perceived to have both low prices and wide selection.
• Among stores, expect trade-offs. None in the survey had low prices, a big selection, and great service. For example, warehouse clubs such as BJ's Wholesale offered low prices but had subpar selection and service. Ritz Camera scored tops in selection and service, but worst in price.
• Most big electronics chains, warehouse clubs, and mass merchandisers were beaten by local independent stores on overall satisfaction. The independents' prices and selection were only average, but they received top marks for service.
• The electronics world is changing. Specialty superstores, which became the place to buy electronics for their sweeping selection in the 1980s and 1990s, are now facing increasing competition from mass merchandisers such as Target, Wal-Mart, and Costco, where low price trumps service.
• Brand is becoming less critical, since technological improvements enable manufacturers to churn out low-priced copies of commodity products.
• The Internet has given consumers instant access to lower prices, plus all the model-specific details, specs, and other info they desire. Consumers use the Web primarily as a research tool, making most purchases at walk-in stores.

Why is customer service so bad?

The state of customer service is a reflection of the state of society. American society has seen a general decline in civility. In part this is due to natural selection. Aggressive, chest-thumping gorillas produce more offspring than the laid back, poetry-reading bonobos. The growth in the population of ill-mannered primates has far outpaced that of the well-mannered breed, and so the more apish of apes have come to dominate the gene pool.

People who work in stores tend to be rude, mainly because they tend to be people. People who shop in stores tend to be rude for the same reason.

Consider these stats:

46% of Americans say bad service drove them out of a store in the past year
77% say it's common for sales people to act like "the customer is not even there"
74% say they often see customers treating sales people rudely
81% think too many stores cut corners on hiring, forcing bad service upon them
62% say that witnessing rude and disrespectful behavior bothers them a lot
52% say the residue from such episodes lingers with them for some time afterward 
41% confess to having acted rude or disrespectful themselves
79% say lack of respect and courtesy is a serious national problem
69% believe the problem is getting worse

- from Aggravating Circumstances: A Status Report on Rudeness in America, prepared by Public Agenda for The Pew Charitable Trusts

Hope

48% say they "often" see people being kind and considerate
64% rate their neighbors as friendly and helpful

Predictions

In the American Customer Satisfaction Index Q4Y4 report, Claes Fornell wrote:

"Through heavy discounting, the holiday season did bring in more buyers for both traditional and online retailers. But because some companies also cut costs, resources to serve the increasing demand were sometimes lacking, resulting in crowding, longer lines, and slower service."

This holiday season will be a repeat of the last. Companies have invested heavily in advertising, and resorted to deep discounting, to drive customers like cattle into the kettle. Very few have invested in improving service. For most companies, the effect will therefore be an exponential increase in the number of dissatisfied customers.

More customers + Bad service = More angry customers

It's a safe bet that the ACSI report for Q4Y5 will show yet another drop in customer satisfaction.

Update: Once in a while I get it right .