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Calculated Costs of Just One Customer Complaint

Posted on November 23, 1999

by Patricia Weber,
of Professional Strategies

Is it worth while to refund a product when the return period is over? Why bother to keep in mind the adage, "The customer is always right, even when they are wrong?" How much trouble is it to take a 60 second break to act and think upbeat even when you are not? How you and your company respond to these questions can determine the strength and resilience to get, and what is more important, keep customers. Let's put reality to a formula that does not require a calculator. Some calculations yes, but no tough math. Research and statistics from the TARP Report, a standard reference for customer service experts, provide the structure for the formula.

You start with one customer, just one, who for some reason you did not service satisfactorily. Maybe it was an attitude or disinterested tone you communicated. Maybe it was a billing problem. One poor encounter, one customer lost.

One disappointed customer represents 6 others who also are not happy. Those other 6 are just keeping their dissatisfaction a secret from you. One plus six is - 7.

We can count on the average disappointed customer to tell at least 9 others. Considering we have 7 dissatisfied customers from the one brave soul who told us we were not up to par, now 7 will tell 9 people each. From easy multiplication, that's 63 people who will hear about this negative experience. To keep the calculators away, round this to 64.

We know there is an assumed level of influence of 25%. Only one quarter of those 64 will act on what they hear. This means 16 people are likely not to do business with a company who can't deliver satisfactorily, or who somehow communicate an attitude of rudeness or indifference. Pandora's box is wide open.

Multiply this 16 by the average revenue for your product or service. Say you sell a service that costs $1,000. One negative encounter just cost you and your company $16,000. What would the potential loss be if you multiply that out over the number of purchases a customer is likely to make in a life time? What if two people in your organization did something to lose one customer today? Immense, immeasurable loss.

With all this costly talk, why don't customers tell you before they chatter incessantly? Think for a moment. Why don't you complain? You don't think it will make a difference. You want to avoid the stress. It's just as easy to find someplace else to buy from. These are the same easons your customers may not come back.

What's the good news? One complaining customer is your opportunity to improve. You can rescue the potential, immense loss when you improve on what that one customer complains about. Provide a solution that they agree is more than satisfactory. Statistics show that 7 out of 10 customers will do business with an organization again if a complaint is resolved in their favor relatively quickly. Listen. Respond. Resolve.


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