Monday, January 24, 2011

Fixing Complaints: The 95% ROI and Quick Way to Get New Clients

Fact: Clients who complain are more interested in working with you than clients who say nothing.

Think about it: If you get awful service from a vendor you have no intention of ever using again, you likely won't complain. Instead, you will silently take your business elsewhere.

So do whatever it takes to "save" complaining clients. Because these people secretly want to keep working with you. And because the payoffs can be huge ...

I remember Sharon, a client of my resume service back in 1998. Upon seeing the first draft of my work for her, she said, "Oh, this has problems. I don't like this."

My reply: "Thanks for letting me know that now. The sooner we fix this the better. Please tell me everything that's bothering you and why."

We then went through her resume, line by line. In the end, she was delighted with the result. And she later referred more than 8 new clients and several thousand dollars in revenue to my business.

That's just one example.

According to

Fixing problems turns angry customers into loyal advocates. Jake Poore, who looked after “service recovery” for Disney says “everyone makes mistakes, that’s human.

But how do you solicit those mistakes and rectify them so that the story is now possibly better than if there were no mistake at all?”

He makes the point that customers who go home mad tell their story, whereas those who go home happy tell your story. Often a bad experience that was turned around makes for a happier customer and a better story than a customer who had a good experience in the first place.

According to "Manage Complaints to Enhance Loyalty," an article by John Goodman published in the Feb. 2006 issue of "Quality Progress," solving customer complaints pays you back with a 95% profit for the time and effort invested:

The following are cost-benefit calculations for getting customers to complain and satisfying them. The assumptions are:

• A customer is worth at least $30 in profit over a year’s time.
• The cost of handling a complaint is about $5.
• At least 75% of callers are satisfied.
• To quantify the payoff of soliciting and handling complaints, it’s critical to know the rate of the prevalence of noncomplainants and their loyalty as well as the loyalty of those who complain and are not satisfied.

The calculation for moving a customer with a problem from noncomplainant to satisfied complainant follows:

• Payoff due to improved loyalty. Typically, moving a customer with a problem from noncomplainant to complainant to a satisfied caller raises loyalty by about 30%, meaning, conservatively, handling a customer at a cost of $5 will give you a payoff of (.30 increase in loyalty) x (.75 satisfied) x $30 value = $6.75.

After covering the $5 cost of handling the complaint, your are left with $1.75 profit and or an ROI of 35% ($1.75/$5 cost to handle)

The article goes on to detail the total return-on-investment of 95% from the increased word-of-mouth referrals that result from fixing customer complaints:

If, conservatively, one out of 10 satisfied customers produces a word-of-mouth referral and one new customer worth $30 is won for every 40 who hear good things, then satisfying 10 customers adds $30 in word-of-mouth benefits, or $3 for each customer satisfied (10 customers satisfied times four positive referrals per satisfied customer times one new customer for each 40 hearing positive referrals).

That adds an additional $3 payoff for each customer satisfied, raising the ROI to 95% ($1.75 + $3.00)/$5.00. The preceding calculation is a simple estimate of the impact of positive word of mouth produced by good service on loyalty and profits.

Finally, Southwest Airlines went so far as to hire a Chief Apology Officer, a guy who "spends his 12-hour work days finding out how Southwest disappointed its customers and then firing off homespun letters of apology." Which may explain why Southwest Airlines is the only airline in America with actual fans.

Bottom Line: Do whatever it takes to satisfy complaining clients. See every service problem as a chance for you to triumph. When you do, your happy clients will tell their friends.

A customer service "recovery" can be as valuable as delivering good service the first time. Not that you should cause complaints in order to recover from them -- that's like hitting yourself in the head with a hammer because it feels so good when you stop.

But you never run from complaints. Instead, rush to solve them, then encourage your clients to share their new-found happiness with others.

(More ideas like these in the Free Report, Guaranteed Marketing for Service Business Owners.) 

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