Customer Retention:
Turning Complaints Into Profits

Customer retention, it might be argued, can be measured by how well a business operator handles complaints.

But many business owners fall short here - especially in very small (or "micro") businesses, where the owner is much "closer" to the customer.

Unless you can identify where and how you contributed to your customer's reason for complaining, don't take it personally. Even more important, don't let it ruin your relationship.

In fact, a complaint might be your best opportunity to strengthen that relationship when you acknowledge, address, and correct the problem. Don't let ego ruin it for you - take advantage of this often-overlooked opportunity to enhance your customer retention stats.

Customer retention through conflict resolution

When a customer complains, do you see it as an annoyance ... or as valuable input?

Some people just need to gripe, and some hope to get something for nothing. But they're in the minority. Most of the time when people complain it's for a good reason. It can be good for you as well, providing an opportunity to enhance your business - and actually increase customer loyalty - if you know how to turn them around.

The vast majority of people who are unhappy with a company will never say a word to the company itself. Studies show that only about one in 20 will. The rest will either "vote with their feet" (switch to a competitor) and/or complain to 8-10 other people whom they know.

The ones who take their beef to a company usually do so directly, either in person or by phone. Often, this catches an employee or boss off-guard. If the customer's complaint isn't handled properly, it can mushroom into an even bigger problem.

You can't anticipate every complaint. Nor can you create a company so efficient that you'll never receive complaints - everyone gets them. But you can prepare yourself and your employees so that when someone complains, you can not only solve the problem, but avoid the high cost of replacing a needlessly dissatisfied customer.

Root causes of complaints

Complaints come whether the issue is real or perceived (please see Seven Complaints to Take Seriously). Customer complaints often center on dissatisfaction with companies that don't follow through after an initial complaint or inquiry, which only compounds the problem and makes it much harder to keep the customer.

Another frequent cause of complaints - and the leading cause of customer retention decline - is dissatisfaction with quality of service. This can happen even to companies that do outstanding work, when the customer has different expectations.

For example, this can happen when the customer chooses a less expensive option from a menu of services, but remembers the benefits of the more expensive options, later confusing the two.

Or, as Tom Lucas, CEO of Performance Nursery in Redondo Beach, CA notes, when customers have unrealistic expectations about a company's ability to fulfill a wish as lightening-fast as, say, the customers' personal computers.

"Things are fast-paced today: car phones, email, etc.," Lucas says. "It's created a general expectation that things should happen much faster than they really can, and it often seems to a customer that it should be easy to just switch a schedule. So you do all you can to retain your customers, but you have to understand and accept that you may not be able to make everyone happy on their own terms."

Customer complaints - whatever the reasons - can easily seem legitimate to your customer, yet their causes can be just as legitimate to running your business.

Unfortunately, too many companies stop at the point where they themselves are satisfied and don't take steps to work through customer complaints. As a result, they wind up spending big sums of money to replace customers that could have easily been retained.

"The key is to take ownership of the problem, but not take it personally," Lucas says. "Sometimes I feel impatient, but I've learned not to take it personally when something goes wrong."

Of course, the root cause of any complaint is important to understand if you want to resolve it and keep the customer. But too many companies believe that's the whole story. It's not - there are always two issues involved in any complaint: the matter itself, and the way the customer feels about how he or she was treated.

It's the latter that carries the most weight with the customer ... and provides your biggest opportunity for customer retention.

Can you hear me now?

"Some people just need to complain," says Lucas, "but most of the time the complaints are legitimate. You have to really listen to them, and let them know that you heard them."

People want to be heard. Chances are, it wasn't easy for your customer to complain, but it was important enough for them to overcome their hesitation to bring things to your attention. Keep in mind that your relationship with your customer is mutually beneficial. You both bring something to the table so that you both can gain. You're on the same side!

The most important thing in handling customer complaints is to assure your customers that their input matters. In fact, it does. When your customers are satisfied with your responses, it reinforces their confidence in your business.

The key is to let them know that you heard them, not just "what" they're complaining about. Here are some simple steps to achieve that:

1. When customers complain, set aside your point of view and listen to their concerns.
2. Repeat back to them what you understood them to say. Allow them to correct you.
3. Apologize for their experience even if you don't feel the company did anything wrong. An apology dissipates emotions and goes a long way toward restoring customer satisfaction.
4. Thank them for bringing the problem to your attention.
5. If possible, resolve the problem immediately (the faster you do, the less it costs). If immediate resolution isn't possible, tell the customer that you will work on it, and give a time frame for your first follow-up. One business day should be the maximum before calling the customer, even if only to say that you're still working on it.

At this point, the issue that caused the customer to complain may still be unresolved. But the above steps will usually be enough to assure the customer that they matter, which takes care of the larger issue (how they feel about how they're treated).

"Communication is the most important thing in customer retention," says Bryan Garrison, principal of Dreamscape in Santa Cruz, CA. "Be honest and tell them you'll get to it right away and get it resolved. Coordinate time frames, leave messages if you have to, but don't be afraid to tell them what's going on."

After you resolve the problem, call or visit your customer in person to follow up and make sure they're satisfied. Thank them again for their input. By letting them know that their continued business is important, chances are they'll tell others - bringing you more business with happy customers for years to come.

Please see the sidebar to this article:

Seven Customer Complaints to Take Seriously
The main causes of customer complaints and how to deal with them effectively.

Customer Retention:Turning Complaints Into Profits

Customer retention through conflict resolution

Root causes of complaints

Can you hear me now?

Customer Retention:
Turning Complaints Into Profits