Complaining Customers – Burden or Benefit?

Existing or prospective customers who complain can be bothersome, time consuming and often require ‘Mother Teresa’ patience by customer service staff as emotions become strained.

Exacerbating this, many complaints are false, vexative and motivated by customer self interest – the notion of using ‘the more we complain, the more we get for free’ as a negotiating tactic.

Customer relationship management theory places great emphasis on the benefits of repeat purchase and the value of life long customers.

However the boom of interest in customer satisfaction – and all the anecdotes fed to MBA students and executives in conferences about how understanding customers results in a more profitable business – seem very tired.

Profitability in many businesses in these sectors continues to increase regardless of customer satisfaction trending up or down.

Many people cannot recite the last time they truly experienced an enhanced customer experience with, say, an airline, an internet service provider or a financial institution?

So is this a case of a good theory lapsing in practice? Maybe not as we believe the answer is complex and dynamic.

Customer relationship management was borne as a simple way of providing one company with a competitive advantage over competitors.

Depending on the frequency of transactions typical of each industry, many businesses established loyalty programs as a way of maintaining or growing market share and revenue.

Similarly, CRM programs were justified as leverage to understand and predict customer behaviour, and to be premeditative with enticing offers.

But what happened when competitors matched or bettered an offer – that is, assuming enough customers (from profitable segments) were swayed by CRM programs to change their purchasing patterns in the first place?

The cost of business went up, in some cases adding 3 or 4 per cent to costs.

As an example, one casino business has reduced its’ return to player ratio (or long term chance of winning money) by approximately 4 per cent to pay for the cost of enticing patrons in the first place.

An interesting competitive position for any neighbouring casinos would be to widely promote the absence of CRM schemes and the money they cost – this need not be a budget offering, rather one to smart consumers.

CRM programs were also supposed to have the collateral benefit of slowing the leaking bucket whether it be a result of unsatisfied consumer experiences or due to natural churn.

Many businesses have now realised that consumption patterns are often stochastic or follow some pattern of behaviour.

Modelling the success of CRM programs against established patterns of consumer behaviour often finds no significant benefit justifying full CRM programs.

So what about service recovery as part of a company’s CRM program?

Too hard – as where are the rewards for managers recommending product changes based on consumer voice?

Each year is likely to see products changed slightly.

Packages of chocolates get smaller, there is more automation in traditional service industries, airline passengers get more and more rescheduled flights that erode their personal time so flight companies can more profitably manage their inventory.

Spin doctoring and the principles of crisis management now guide service recovery, CRM and product changes.

The way forward for many businesses is to go counter cyclical.

For many businesses, it is time to change from merely a competitive focus (who’s got the biggest market share) to who can use marketing science to anticipate and understand new market segments and then adapt products for those segments.