July 3, 2020 Last updated July 3rd, 2020 870 Reads share

Are Customer Complaints Profitable?

Image Credit: DepositPhotos

Why is customer service so bad? Because it’s profitable. That was the headline of a Harvard Business Review article last year, suggesting that some companies are purposely unhelpful to tire out unhappy customers and avoid fixing their problems. From experience, this seems correct.

It isn’t by chance that brands make it difficult for us to make a complaint. Even if you walk right into a store, the big boss is often nowhere to be seen, and you’re given a number for customer service. Upon ringing, you’re required to provide every single detail for them to investigate further. It’s an uphill battle.

Do we help brands grow just by giving up?

Please Hold, Your Call is Important to Us

If you’ve ever called a customer service number, you will have heard this line a million times. It’s repeated every few seconds, along with your place “in line,” so you feel like someone’s coming, and your patience stretches a little bit further.

It’s safe to say these are deliberate factors designed to make us give up before raising our concerns. If no one answers for 15 minutes and we can live without an explanation, putting the phone down seems to make the most sense. But if 90% of customers can’t be bothered with the hassle at this same point, businesses will continually grow their profits.

That isn’t just because of the time they’ll save – but because they won’t have to worry about giving a refund, offering a discount, or sending out a replacement. It saves them a significant amount of money, which they can then invest in acquiring new customers if you leave.

How Satisfied Are You With Your Service?

A lot of brands go out of their way to ask for feedback or customer service ratings. This seems odd as we could give a response they don’t want to hear, but it doesn’t stop them from reaching out.

This is because it helps them to improve their business. The positive comments tell them to push certain features even further, while anything negative can be ignored. It’s the same cycle as when we try to make a complaint ourselves, except this makes it look like they care about our opinions.

However, there is a tactic behind this. If brands actively follow up on these comments and ratings, they’re opening up their time and effort to solve each customer’s problem and sometimes offer an incentive. Get this wrong, and the customer will probably never return.

A good example is brands that send replacements or more complimentary items than necessary, only for them to be problematic themselves. It almost feels like they’re saying they won’t cause you any hassle again, but that they aren’t quite sorry for doing it in the first place. This drains their resources, time, and budget more than if they had said nothing at all.

Spending £2,000 in Time to Refund £2,000 in Costs

A lot of complaints based on refunds or faulty goods end up being more about how the brand dealt with the situation, rather than the cost involved, forcing the customer to accept it and move on. But for purchases that cost thousands of pounds, complaints are usually dealt with in some way.

Counter-intuitively, the time it takes for each staff member to deal with these situations, whether it be answering calls, searching through data, or contributing to meetings, often ends up costing more than the refund itself. It takes up so much resource to decide which approach to take, that the initial complaint causes twice the damage.

In theory, this suggests that customer complaints are only profitable when they’re relatively small to begin with, and turning a blind eye would save you money. This would still have to be weighed up, though, as the potential for negative reviews and a damaged reputation could affect you more in the long run.

Looking at Complaints Holistically Isn’t Enough

It doesn’t make sense to create more hurdles for your customers if it’ll only require a small discount, or it’ll take a short amount of time to correct their order. The uphill battle isn’t always worth the effort for them anyway – if there are a lot of similar businesses to you, they’ll just shop elsewhere.

However, breaking down what is and isn’t worth poor customer service isn’t enough to justify its success. You might save money on refunds by making customers hang around for longer, but how they remember the situation will have the most significant impact. This can be put down to two elements: distorted memories and the peak-end rule theory.

Every time we think of a memory, such as a bad experience with a brand, the memory changes. In this instance, recalling the hassle and time wasted dealing with a complaint is likely to make the memory worse, forcing us to experience stronger negative feelings than when it initially happened.

Where this distorts our final or current memories, the peak-end rule theory focuses on the highest point of emotion we experience in a situation. It’s a psychological heuristic that argues that we judge and remember an experience based on intensity, which, regarding customer complaints, might be when a brand has passed us onto another advisor for the fifth time or refused to give us a refund.

Whatever it is, the way a customer remembers their experience with you can transform the situation you thought you were making a profit from. It may have freed up your time to focus on other areas of your business, and saved your costs, but the memories involved could completely wipe out the customer’s entire lifetime value.

Weighing the Costs

The impact of making things difficult for your customers does depend on the extent of their complaints. If someone has been refused to return an item in-store and has to wait for over an hour on the phone, the time spent traveling and hanging around probably outweighs the initial £30 spent. On a good day, you might keep the customer and avoid the refund.

But if you invest too many resources into managing a complaint or even ignore it entirely, you could run a higher risk of prolonged hassle, online abuse or tarnishing, or even legal threats. For cases like these, nipping it in the bud to start with is probably the best way.

Some customer complaints can be profitable, but it doesn’t always make sense to make things worse for your customers. Start looking at the numbers, figure out how many complaints you get and the current costs associated with them, and see where you could improve efficiencies.

The key to success is to strive for excellent customer service but to prioritize the customers who will have the most significant overall impact on your business.

DepositPhotos – customer complaint

Jessica Kirkbride

Jessica Kirkbride

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