- Aug 29 2010
Why the Customer Care Revolution Failed SO FAR: A Roadmap to Ultimate Victory Part 1
The White House Study
In the mid-1970’s, I was principal author of a report, commissioned by the White House, that examined how the private sector responded to customer complaints. The most important take-away from this White House study was the finding from the National Consumer Survey that well-handled complaints could lead to increased brand loyalty and a very favorable positive ROI. This good news, however, was counter balanced by the fact that only 23% of complaining customers’ most serious problems were satisfactorily resolved (received more than I asked for or completely satisfied).
The majority of complaining customers, then, were dissatisfied with the response to their complaints, and this led to decreased brand loyalty and negative ROI’s. Such a result was not surprising because more than 30 years ago very limited, if any, corporate resources were being devoted to responding to customer complaints. Those were the days when many companies feared being “ripped off” by a few “unreasonable” customers more than they cared about satisfying the far larger number of their customers who had experienced legitimate problems.
The Advent of the Customer Care Revolution
The marketing benefit of effective corporate complaint-handling practices highlighted by the White House study was the reason that many companies vastly expanded their customer care programs. So it was not Ralph Nader, government regulation, or the consumer movement, but old-fashioned capitalism and the profit motive that caused companies to become more customer-centric. As a result, yearly corporate expenditures for customer care programs (inbound call centers for complaint-handling, satisfaction surveying, policy adjustments in excess of warranty guidelines, web-based complaint-handling, etc.) today have skyrocketed to the point where they exceed many billions of dollars.
Apple’s program to give iPhone users free bumpers to solve the antenna problem is just one of many examples of how companies are spending “big bucks” to proactively address customer problems before litigation or a regulatory response is necessary. Since the 1970’s, whole new industries have evolved around inbound customer response call centers and conducting satisfaction surveys. The customer care revolution has truly come of age.
Replication of the Original National Consumer Survey
When CCMC was established, in the early 2000’s, we decided to field a series of annual national probability household surveys that would provide an in-depth replication of the National Consumer Survey from the original White House Study. These surveys were designed to provide an updated, tactical level profile of what problems customers are experiencing today and to gage the success of the multitude of new corporate complaint-handling initiatives.
A series of four surveys were fielded from 2003 to 2007. More than 1,000 households were interviewed for each survey.
A surrogate measure for determining the true “seriousness” of customers’ problems is the concept of rage. (The CCMC surveys, both past and present, have always focused on the “most serious” problems experienced by customers during the previous year.) The first question to be addressed, then, is just how serious these “most serious” problems actually were?
The answer is quite serious. The level of customer rage (those reporting that they were extremely or very upset) with the problems reported by the four surveys fielded in the 2000’s was 71%. Less than 10% of survey respondents did not (those reporting that they were only a bit upset or not upset at all) experience rage. The level of customer rage was so high that these studies have become known as CCMC’s National Customer Rage surveys when reported by the media.
The most surprising, as well as depressing, finding from these surveys was that after more than 30 years, and the expenditure of tens of billions of dollars on upgraded corporate customer care programs, things have gotten WORSE; not better. The average level of complainant satisfaction for customers’ most serious problems was only 17%, a drop of 6% from the mid-1970’s. Most troubling is that the trend is moving in the wrong direction. The 2007 survey found that only 12% of complaining customers were satisfied; 11% less than found in the White House survey. This means that more than 80% of complaining customers were not satisfied with the corporate response to their complaints.
The economic implications of this finding are devastating. CCMC estimates that the revenue at risk to business, just for households’ most serious problems each year, exceeds $95,000,000,000. If the market damage of less serious customer problems are added to the calculation, the size of this number would increase significantly.
What people have taken away from the White House work of the 1970’s and our subsequent studies (e.g. satisfied complainants are often times more brand loyal than customers who have not experienced problems) is that effective corporate complaint handling can result in a very attractive ROI. However, what has been conveniently forgotten, is that, if the problems of most complaining customers are not satisfactorily resolved, a negative ROI results.
Given these findings, today corporate America is spending a fortune NOT resolving customer problems and, as a result, is losing billions of dollars of sales and profits. Unless the level performance in this area is significantly improved, most companies would increase profitability by shutting down their complaint-handling programs (call centers, satisfaction surveys, etc.). Being customer-centric, then, only makes good business sense if companies adopt policies and programs that WORK.
In sum, just handling customer complaints isn’t enough. The policy implications of this CCMC research for corporate complaint-handling programs is simply: DO IT RIGHT, OR DON’T DO IT.
To Be Continued…
My next posting, Part 2, gets into the weeds and presents a detailed examination of the customer’s complaining experience. These findings provide a tactical profile of why complainant satisfaction has decreased so markedly over the past three decades. This covers the “SO FAR” part of the title. Part 3 deals with REDEMPTION. It provides a simple roadmap for how companies can satisfy more of their complaining customers, while at the same time spending significantly less money on customer care programs. If followed, this roadmap should produce a very positive ROI.
CCMC has prepared a white paper, “Customer Care – the Multibillion Dollar Sinkhole: A Case of Customer Rage Unassuaged,” that summarizes the results of the first replication of the National Consumer Survey. Findings from all of these Customer Rage studies are reported in a PowerPoint presentation presented at Arizona State University Business School’s 18th annual Compete Through Service Symposium. This material is available by contacting Scott M. Broetzmann at firstname.lastname@example.org.
President & CEO, CoFounder
Scott Broetzmann has over thirty years’ experience in advising companies on how to invest limited customer experience dollars wisely to ensure happy customers and investment return.