Good customer complaint management has proven its effectiveness in increasing customer loyalty for decades. Recent market research, published in September 2020 provides insight into how this efficiency varies according to your business sector. This is the first research to understand the economic, sectorial and relational effects on customer loyalty after a complaint has been processed. The authors study the differences between products and services, as well as the impact of constraints linked to the customer himself (age, gender, and so on). This is also the research on customer complaints with the largest volume of data (35597 dissatisfied customers) of all the research on customer complaints.
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The study of 35597 customer complaints made it possible to measure the influence of specific effects on customer loyalty after the complaint had been processed.
- +34.2% for customers who were satisfied before the claim was made
- +16.7% for customers of personalised products
- +16.2% in the services sector
- +14% in the luxury sector
- +9.4% when the economy is doing well
- +8.3% if the complaint comes from a woman
- -6.7% for customers expecting reliability
- -12.3% for markets where supply is concentrated
Summary
- The importance of the successful handling of a customer complaint
- Methodology
- Factors that play a role in customer loyalty after the customer complaint has been processed
- Results of the research
Why handling customer complaints is important
40 years of marketing research has highlighted the importance of handling customer complaints well. A paradox has even been uncovered, that of customers being more satisfied after their complaint has been dealt with than they were before the problem occurred. One might think that the mechanisms that generate customer satisfaction are well known to companies and that they are committed to handling complaints well. Unfortunately, the reality of the situation shows us that this is far from being the case. We asked one of the leading specialists in the field, Prof. Davidow, about this subject (interview in English below). Statistics show that customers are dissatisfied with the way their complaints are handled.
The methodology of the customer complaints research
The American Customer Satisfaction Index (ACSI) provides historical data. This index is the reference in terms of customer satisfaction in the United States but also measures a whole series of behaviours related to customer satisfaction: complaints, responses to complaints, re-purchasing after complaints.
A total of 35597 customer complaints were processed, covering a 10-year history (2005-2014). All economic sectors were represented as well as Fortune 1000 companies. This research is, therefore, an essential milestone in the understanding of the customer complaints mechanism. Never before has such a set of data been exploited.
Without going into technical details, a hierarchical linear model was used to model the influence of the different moderating parameters of the response to customer complaints.
Factors influencing the response to customer complaint handling
What is crucial to understand is that this research focuses on understanding the role of external factors on the response to customer complaints. These are referred to as moderating factors. In other words, these are factors that you do not control, that are exogenous. Some of the most prominent examples are economic growth, the intensity of competition in your sector, the nature of the commodity,
Based on preliminary research of the literature, the authors propose a series of hypotheses on the effect of moderating factors. You will see from the table below that the views are formed on a thought pattern that sometimes closely resembles Porter’s 5 forces model (for more information on Porter’s 5 forces, see step 4 of our market research method).
The factors are classified into 5 categories: economic, sectorial, relational, product/service, customer typology. Based on previous research, different variables are identified, and their respective effects predicted (see table below).
| Variables | Effect on the consumer’s willingness to find an alternative following a complaint | Explanation |
| Economic factors | ||
| Growth of GDP | Positive | In times of economic growth, the bargaining power of consumers increases. Businesses, recognising the decline in their bargaining power and the risk of defection, tend to make more effort to retain dissatisfied customers. |
| Sectoral factors | ||
| The Hirschman-Herfindahl Index | Negative | The Hirschman-Herfindahl Index (HHI) measures market concentration. The higher the index, the more the market is in the hands of fewer companies. A high index, therefore, means that there are few alternatives for the consumer. An index of 1 corresponds to a monopolistic situation. Logically, the fewer alternatives there are, the harder it is for the consumer to find another supplier after a complaint. When the index equals 1, there is no alternative available, and the consumer has no choice but to remain a customer despite his complaint. |
| Customer-business relationship factors | ||
|
Customer satisfaction |
Positive | The customer satisfaction accumulated before the authors describe an incident as a “reservoir of goodwill”. The more satisfied the customer is with his previous relationship with a supplier, the more likely he will be inclined to forgive him and keep his trust in him. |
| Expectations in terms of personalisation | Positive | Customers who have higher expectations in terms of personalising the relationship will be more inclined to appreciate the company’s efforts after a complaint. The moderating effect will, therefore be positive in the sense that the company’s efforts will be rewarded in the form of increased loyalty. |
| Expectations in terms of reliability | Negative | Customers with high expectations of reliability will find it harder to come to terms with the problem that led to the complaint and will be more inclined to terminate the relationship with the company. The effect on customer loyalty will, therefore be negative. |
| Product / service factors | ||
|
Commodities (convenience) vs luxury goods |
Positive | Lovers of luxury goods, because of their purchasing power and the number of alternatives available, will be more likely to defect. Customers who are satisfied with necessary products will be less affected by a complaint, and their loyalty will not be affected. Handling a claim well should, therefore have a positive effect on companies in the luxury segment, which is more prone to customer defection. |
| Products vs services | Negative | Customers of products are less likely to be attentive to the resolution of their complaint than customers of services. This factor will, therefore have a negative effect on products compared to what is expected for services. |
| Factors related to the type of client | ||
| Income | Negative | Higher revenues will be associated with a negative effect on customer loyalty after a complaint. Indeed, higher incomes mean more choice for the customer and therefore a greater propensity to look for another supplier. |
| Sex (women vs men) | Positive | Previous research has shown that women are more likely to remain, customers after a successful complaint has been processed. |
| Age | Positive | Previous research has shown that with age, retention increases after a complaint has been dealt with successfully. |
| Region | Unknown | The regional specificity of marketing strategies has led the authors to anticipate a moderating effect. However, the direction of this effect has yet to be determined. |
Results
The research shows 5 crucial results that will enable companies to anticipate the benefits to be expected from the handling of customer complaints:
- the effects on customer loyalty of handling customer complaints are 9.4% stronger when the economy is doing well.
- when supply in a market is highly concentrated, the benefits to be expected from handling complaints are 12.3% lower. This is a logical conclusion, but it still needed to be demonstrated. The higher the concentration, the fewer alternatives there are, de facto reducing the customer’s possibilities for change.
- the effects of customer complaint handling are 16.7% stronger for customers who want customised products.
- for customers attentive to the level of reliability of suppliers, the effect of customer complaints is -6.7% on customer loyalty
- customer satisfaction from past relationships leads to a 34.2% increase in customer loyalty after a complaint has been made
- companies in the luxury segment will see their efforts rewarded since the effect on customer loyalty is increased by 14%.
- service companies have a greater interest in dealing with complaints than companies selling goods. The effect is +16.2%.
- women show a greater tendency (+8.3%) to retain their loyalty than men
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