Complaint Handling And Service Recovery

"Thank Heavens for Complainers" was the provocative title of an article about customer complaining behavior. "The ones I worry about," declared one successful manager, "are the ones I never hear from. Customers who do complain give a firm the chance to correct problems (including some the firm may not even know it has), restore relationships with the complainer, and improve future satisfaction for all.

Although the first law of service productivity and quality might be "Do it right the first time," we can't ignore the fact that failures continue to occur, sometimes for reasons outside the organization's control.

You’ve probably noticed from your own experience that the various "moments of truth" in service encounters are especially vulnerable to breakdowns. Such distinctive service characteristics as real-time performance, customer involvement, people as part of the product, and difficulty of evaluation greatly increase the chance of perceived service failures.

This chapter addresses the question:  What should we do when customers' expectations are not met? How well a firm handles complaints and resolves problems may determine whether it builds customer loyalty or watches former customers take their business elsewhere. The chances are that you're not entirely satisfied with the quality of at least some of the services that you use.

Specific complaints can be related to any of the 8Ps. A common source of frustration results from inappropriate trade-offs between productivity and quality, when a firm tries to boost productivity without thinking about its impact on customers. Perhaps some of the product elements are poorly executed. Or maybe the service processes in which you are involved are badly organized.

Shortcomings in delivery place, cyberspace, and time are common. For example, a service may be unavailable where and when you want it; or a Web site may not be functioning satisfactorily. Failings in physical evidence include ugly or poorly maintained facilities and dirty or poorly fitting staff uniforms.

Price and other user outlays are a major source of complaints. You can probably recall occasions when you felt you were overcharged, were kept waiting too long, or endured unnecessary hassles. Your disappointment with a service may also have resulted from promotion and education strategies that promised too much (thus raising your expectations too high), or failed to instruct you properly in how to use the service. And perhaps you were inconvenienced or annoyed at some point by the behavior of the people in a service environment either customer-contact personnel or other customers.

How do you respond when you have been disappointed? Do you complain informally to an employee, ask to speak to the manager, file a complaint with the head office of the firm that let you down, write to some regulatory authority, or telephone a consumer advocacy group? Or do you just grumble to your friends and family, mutter darkly lf, and take your business elsewhere next time you need that type of service? If you don't normally tell a company (or outside agency) of your displeasure with unsatisfactory service or faulty goods, then you're not alone.

Research around the world has exposed the sad fact that most people do not complain, especially if they don't think it will do any good. And even when they do communicate their dissatisfaction, managers may not hear about complaints made to customer-contact personnel

Customer Response to Service Failures

What options are open to customers when they experience a service failure?  

This model suggests at least four major courses of action:

• Do nothing
• Complain to the service firm
• Take action through a third party (consumer advocacy group, consumer affairs or regulatory agencies, civil or criminal courts)
• Switch suppliers and discourage other people from using the original service firm (through negative word-of-mouth)

It's possible to imagine a variety of outcomes to the actions listed might cause customers to feel a range of emotions from fury to delight. The risk of defection is high if customers are dissatisfied, especially when there is a variety of competing alternatives available.

One study of customer switching behavior in service industries found that close to 60 percent of all respondents who reported changing suppliers did so because of a perceived failure: 25 percent cited failures in the core service, 19 percent reported an unsatisfactory encounter with an employee, 10 percent reported an unsatisfactory response to a prior service failure, and 4 percent described unethical behavior on the part of the provider.

Managers need to be aware that the impact of a defection can go far beyond the loss of that customer's future business. Angry customers often tell many other people about their problems. The Web has made life more difficult for companies that provide poor service, because unhappy customers can now reach thousands of people by posting complaints on bulletin boards or setting up Web sites to publicize their bad experiences with specific organizations.

There are even Internet-based services like Ellen's Poison Pen (www.ellenspoisonpen.com) that, for a fee, will deluge CEOs of offending companies with letters, e-mails, and faxes until the disgruntled customer is compensated or at least acknowledged. Companies who have been on the receiving end of correspondence from these new online consumer complaint services have charged that cyberspace is fast becoming "Whine Country.

The TARP Study of Consumer Complaint Handling

TARP, a leading customer satisfaction and loyalty measurement firm (now known as e- Satisfy), has studied consumer complaint handling in many countries. It published a landmark research study based on its own research and a detailed review of other studies from around the world.

The findings, which were widely publicized, prompted many managers to consider the impact of dissatisfied customers especially those who never complained but simply defected to a competitor. Let's take a closer look at some specific findings, recognizing that some of the percentages reported may change for better or worse over time.

What Percentage of Problems Are Reported?

From its own research and detailed literature studies, TARP found that when U.S. customers experienced problems concerning manufactured consumer products, only 25 percent to 30 percent of them actually complained.

For grocery products or their packaging, the market research firm of A.C. Nielsen found a complaint rate of 30 percent. Even for problems with large ticket durables, TARP determined that the complaint rate among dissatisfied customers was only 40 percent.

Similar findings come from other countries. A Norwegian study found that the percentage of dissatisfied consumers who complained ranged from 9 percent for coffee to 68 percent for cars. A German study showed that only a small fraction of customers expressed dissatisfaction, but among this group the complaint rates ranged from 29 percent to 81 percent.

And finally, a Japanese study found complaint rates of 17 percent among those experiencing a problem with services and 36 percent for those experiencing a problem with goods.

Where Do People Complain? Studies show that the majority of complaints are made at the place where the product was bought or the service received. Very few dissatisfied consumers complain directly to the manufacturers or to the head office. In fact, industry-specific studies conducted by TARP suggest that fewer than 5 percent of complaints about large-ticket durable goods or services ever reach corporate headquarters, presumably because retail intermediaries fail to pass them on.

Who Is Most Likely to Complain? In general, research findings suggest that consumers from high-income households are more likely to complain than those from lower income ones, and younger people are more likely to complain than older ones. People who complain also tend to be more knowledgeable about the products in question and the procedures for complaining. Other factors that increase the likelihood of a complaint include problem severity, importance of the product to the customer, and whether financial loss is involved. Customers are also more likely to complain if the problem involves a technology failure during a self-service interaction instead of an encounter with a service employee.

Why Don't Unhappy Customers Complain? TARP found three primary reasons why dissatisfied customers don't complain. In order of frequency, customers stated that:

• They didn't think it was worth the time or effort,
• They decided no one would be concerned about their problem or resolving it, and
• They did not know where to go or what to do.

Unfortunately, this pessimism seems justified since a large percentage of people (40 percent to 60 percent in two studies) reported dissatisfaction with the outcome of their complaints. Another reason why people don't complain reflects culture or context. A study in Japan found that 21 percent of dissatisfied customers felt awkward or embarrassed about complaining.

In some European countries, there is a strong guest-host real township between service providers and customers (especially in the restaurant industry) and it's considered bad manners to tell customer-contact personnel that you are dissatisfied in any way with the service or the meal. Think about an occasion when you were dissatisfied but did not complain. What were the reasons?

Impact on Repurchase Intentions When complaints are satisfactorily resolved, there's a much better chance that the customers involved will remain brand loyal and continue to repurchase the items in question.

TARP found that intentions to repurchase different types of products ranged from 69 percent to 80 percent among those complainers who were completely satisfied with the outcome of the complaint. This figure dropped to 17 percent to 32 percent (depending on the type of product) for complainers who felt that their complaint had not been settled to their satisfaction.

Variations in Dissatisfaction by Industry

Although significant improvements in complaint handling practices occurred during the 1980s and early 1990s in some industries, many customers remain dissatisfied with the way in which their problems are resolved. There are discouraging signs that the situation is deteriorating again. Data from Better Business Bureaus showed that consumer complaints more than doubled between 1995 and 1999.

One reason may be that customer expectations are rising at the same time that companies are focusing their attention on their most loyal and profitable customers and paying less attention to the rest. Firms have also been trying to save money by automating their complaint handling procedures, making it increasingly difficult for customers to speak with a real person.

A valuable measure of how well different industries in the United States are performing relative to the needs and expectations of the marketplace is provided by the American Customer Satisfaction Index (ACSI), which measures customers' evaluations of the total purchase and consumption experience, both actual and anticipated, on an annual basis. ACSI results show that most manufactured products score higher than most services.

The trend in annual satisfaction scores for several major service industries between 1995 and 2000. Most show a decline, with the airline industry showing the sharpest deterioration in customer satisfaction. As these data suggest, many service industries are still a long way from meeting their customers' expectations on service. But some companies do better than others. Within each industry, there are often considerable variations in performance between different firms.

Findings from a large-scale study of consumer complaining behavior in Australia showed that, among the industries studied, a majority of customers who had a serious problem did make the effort to complain. The results showed considerable disparity from one service industry to another in both the incidence of unsatisfactory service as well as in customers' likeliness to complain.

For instance, more Australians were willing to complain about telephone service and other utilities than about restaurants and health services. Other key findings from this study were the following:

• 57 percent of respondents had experienced at least one problem with products or services within the past 12 months.
• On average, 73 percent of those respondents who had a serious problem took some action to have it corrected.
• Only 34 percent who took action were satisfied with the way the problem was resolved.
• Among those who were not happy with their complaint outcome, 89 percent reported they would not deal with the same firm again.
• Complaining households made an average of 3.4 contacts each in an effort to have their most serious problems resolved.
• The further up the management hierarchy customers had to go to get the problem resolved, the more their satisfaction declined.
• On average, a dissatisfied customer told nine other people while a satisfied customer told only half as many.

What do people actually complain about? Inevitably, there are variations from one industry to another when it comes to problems with the core product, but certain aspects of customer service are common to numerous service industries.

Highlights the extent of different types of complaints about telephone service in the United States, as reported to the Federal Communications Commission. It's striking to note that 41 percent of all complaints concern inaccurate information. A substantial proportion of the remaining complaints revolve around failings on the part of service personnel, including unresponsiveness, rudeness, poor training, and a bias against minorities.

Factors Influencing Complaining Behavior

When consumers have an unsatisfactory service encounter, their initial (often unconscious) reaction is to assess what is at stake. In general, studies of consumer complaining behavior have identified two main purposes for complaining. First, consumers will complain to recover some economic loss, seeking either to get a refund or to have the service performed again (e.g., car repairs, dry-cleaning services).

They may take legal action if the problem remains unresolved. A second reason for complaining is to rebuild self-esteem. When service employees are rude, aggressive, deliberately intimidating, or apparently uncaring (such as when a sales assistant is discussing his weekend social activities with colleagues and pointedly ignores waiting customers), the customers' self-esteem, self-worth, or sense of fairness may be negatively affected. They may feel that they should be treated with more respect and become angry or emotional.

There are costs associated with complaining. These may include the monetary cost of a stamp or phone call, time and effort in writing a detailed letter or making a verbal complaint, and the psychological burden of risking an unpleasant personal confrontation with a service provider especially if this involves someone whom the customer knows and may have to deal with again). Such costs may well deter a dissatisfied customer from complaining.

Often, it is simply less stressful to defect to a different service supplier especially when the switching costs are low or nonexistent. If you are unhappy with the service you receive from your travel agent, for example, you may easily switch to a different agent next time. However, if you decide to switch doctors or dentists, you may have to ask to have all of your medical records transferred. This requires more effort and might make you feel uncomfortable.

Complaining represents a form of social interaction and therefore is likely to be influenced by role perceptions and social norms. One study found that for services where customers have "low power" (defined as the perceived ability to influence or control the transaction), they are less likely to voice complaints. Professional service providers such as doctors, dentists, lawyers, professors, and architects are a good example.

Social norms tend to discourage criticism by clients of such individuals, who are seen as "experts" about the service being offered. A clear implication is that professionals need to develop comfortable ways for their clients to express legitimate complaints.

What do customers expect after investing time and effort in making a complaint? In a very real sense, they are looking for justice and fairness. Based on a study of consumers' experiences with complaint resolution, Tax and Brown identified three types of fairness. The first, outcome fairness, relates to customer expectations of outcomes or compensation that matches the level of dissatisfaction.

Second, customers expect procedural fairness, in terms of clear, timely, and hassle-free procedures for handling complaints and resolving problems. Third, customers look for interaction fairness, which involves being treated politely, with care and honesty.

Complaints as Market Research Data

Responsive service organizations look at complaints as a stream of information that can be used to help monitor productivity and quality and highlight changes needed to improve service design and execution. Complaints about slow service or bureaucratic procedures, for instance, may provide useful documentation of inefficient and unproductive processes. Personal or telephone interviews offer much better opportunities than mail or in-store surveys to dig deeper and probe for what lies behind certain responses.

A skilled interviewer can solicit valuable information by asking customers questions such as: "Can you tell me why you feel this way? Who (or what) caused this situation? How did customer-contact employees respond? What action would you like to see the firm take to prevent a recurrence of such a situation?"

For complaints to be useful as research input, they should be funneled into a central collection point, recorded, categorized, and analyzed. Compiling this documentation requires a system for capturing complaints wherever they are made without hindering timely resolution of each specific problem and transmitting them to a central location where they can be recorded in a company-wide complaint log.

The most useful roles for centralized complaint logs are:

1. to provide a basis for following up on and tracking all complaints to see that they have in fact been resolved;
2. to serve as an early warning indicator of perceived deterioration in one or more aspects of service; and
3. to indicate topics and issues that may require more detailed research. However, creating and maintaining a company-wide log is not a simple matter because there are many different entry points for complaints, including the following:

• The firm's own employees at the front line, who may be in contact with customers face-to-face or by telecommunications;
• Intermediary organizations acting on behalf of the original supplier;
• Managers who normally work backstage but who are contacted by a customer seeking higher authority;
• Suggestion or complaint cards mailed or placed in a special box; and
• Complaints to third parties consumer advocate groups, legislative agencies, trade organizations, and other customers.

Making It Easier for Customers to Complain

How can managers make it easier for unhappy customers to complain about service failures? Many companies have improved their complaint collection procedures by adding special toll-free phone lines, prominently displayed customer comment cards, Web sites and e-mail addresses, and video or computer terminals for recording complaints. Some go even further, encouraging their staff to ask customers if everything is satisfactory and to intervene if a customer is obviously unhappy. The hostess at Hampton Inn was clearly very observant. She noticed that the two Australian guests

Service Recovery Following Customer Complaints

Service recovery plays a crucial role in restoring customer satisfaction following a service failure and retaining a customer's goodwill. The true test of a firm's commitment to satisfaction and service quality isn't in the advertising promises or the decor and ambience of its offices, but in the way it responds when things go wrong for the customer.

Recent research suggests that customers' satisfaction with the way in which complaints are handled has a direct impact on the trust they place in that supplier and on their future commitment to the firm. Unfortunately, firms don't always react in ways that match their advertised promises. Effective service recovery requires thoughtful procedures for resolving problems and handling disgruntled customers, because even a single service problem can destroy a customer's confidence in a firm if the following conditions exist:

• The failure is totally outrageous (e.g., blatant dishonesty on the part of the supplier).
• The problem fits a pattern of failure rather than being an isolated incident.
• The recovery efforts are weak, serving to compound the original problem rather than correct it.

Principles of Effective Problem Resolution

Recovering from service failures takes more than just pious expressions of determination to resolve any problems that may occur. It requires commitment, planning, and clear guidelines.

Both managers and front-line employees must be prepared to deal with angry customers who are confrontational and sometimes behave in insulting ways toward service personnel who aren't at fault in any way. Service recovery efforts should be flexible, with employees being trained to handle complaints and empowered to develop solutions that will satisfy complaining customers.