Reduce effort > Giving refunds

customer-compliantsWhat do you do with an unhappy customer? Refunds are the easy way out. They don’t fix the problem. They just put a band-aid on the situation, without addressing the underlying problem that led your busy customer to take time to call you.

But don’t take my word for it. A report from Beyond Philosophy entitled The Customer Complaints X-Ray uses a survey of 1015 respondents in Europe and the USA to study which made more of a difference in loyalty – the outcome of the complaint, or the way it was handled. (The full report isn’t available without joining, but you can get a summary on their website.) What did they find?

The first question is: what drives a customer’s likelihood to continue doing business with you? Is it the outcome (getting a refund, resolving the problem, etc.) or the way the complaint is handled?

When the authors looked at the result of those who were satisfied with the outcome, only 42% plan to continue to do business with the company, versus 25% who plan to defect. However, when customers are satisfied with the process, 59% plan to continue to do business, and only 10% plan to defect.

Clearly, listening to your customers will do far more to keep them loyal than simply reaching for the gift card. It’s not that refunds are never in order – just that your focus needs to be more on listening first, then thinking about the gift card later.

Even more interesting was the analysis on customer effort*. They modeled the interaction between effort, complaint handling, complaint outcome, and a customer’s outcomes, and found that effort was at the center of everything. Make it hard for customers to resolve their issues, and you’re much more likely to drive them away.

It’s similar to the CEB’s work on effort, but more interesting as it’s targeted specifically to customer complaints. In fact, they found at a 1-point improvement on effort (on a 5-point scale) resulted in:

  • An increase in likelihood to recommend of 20%
  • An increase in the level of stated relationship of 20%
  • A decrease in the likelihood to complain again of 20%

Even if you don’t believe in the power of delighting customers to build loyalty, this last bullet provides a clear call to action. Making it easier to manage complaints today leads customers to be less likely to complain again.

Start by listening to how your agents respond to complaints today. Are they taking the time to listen? Or are they jumping right to the gift card? A heavy focus on managing call length or numbers may lead your agent to take a shortcut. Then you must coach and train the complaint-handling process that you want. Agent empowerment (or lack thereof) must also be considered.

Also, consider measuring the Customer Effort Score. Developed by the CEB, the Customer Effort Score is a transactional measurement to discover the amount of effort involved in resolving your customer’s issue – and can help you pinpoint agents and/or processes that are creating more effort for your customers.

Combining customer effort measurements with agent training and empowerment is your best way to reduce your customer’s effort and improve their opinion of your response handling. And that will come back not only to save future calls, but to create more loyal customers as well.

* Note: Beyond Philosophy used a different method to measure than the popular Customer Effort Score. They used a 5-point scale where 1 is “the business followed it proactively” and 5 is “I had to do everything to chase it.”

** Second note: This post was originally published by Intradiem.

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