Sales and Marketing

Dealing with Customer Complaints

CommunityTeam — Wed, 03 Jun 2009 16:49:00 GMT

Here are some tips on how to deal with unhappy customers and where to draw the line in resolving their problems

By Christopher Freeburn

Small business owners understand the necessity of attracting customers to their business. But keeping those customers happy and coming back means more than just offering good products and services at reasonable prices. It means properly dealing with the inevitable complaints from customers who have a problem with your company's products or services, or with the way in which they were delivered.

Knowing how to properly resolve customer complaints is crucial. According to a recent study by the Technical Assistance Research Programs Institute, 91 percent of customers who have an unsatisfactory experience at a business while making an expensive purchase will not do business with that company again. And even when the item purchased was inexpensive, the study found that more than half of the customers surveyed indicated that they would shop elsewhere after an unresolved complaint.

In most cases, losing a customer over a complaint is unnecessary, says John Tschohl, president of the Service Quality Institute. "Nine times out of ten, just a little bit of effort by the business to address the customer's complaint would have soothed the situation and probably kept the customer coming back." Indeed, if your business handles the situation properly, not only can a customer's dissatisfaction be remedied, but you can also build additional loyalty to your business. "If a customer sees that your business is responsive to his or her problems, they are actually more likely to come back to your for additional purchases, since they know that they can count on your to help them through any future issues," Tschohl adds. Not only does this make for repeat individual customers, but it can help spread a positive image of your company through word of mouth, since satisfied customers ar

Steps to address complaints

Listen carefully. "The most important thing in handling a customer complaint is making sure that the customer feels that he or she is being heard," says Tschohl. Nothing increases customer anger more than the impression that the company doesn't care. "Whether it's the business owner himself or a salesman or representative talking with the customer, it's important to make sure the customer knows that someone is listening." Tschohl advises empathizing with the customer and reassuring him or her about the importance of their complaint and your desire for continued business.

"When customers feel that their complaints have fallen on deaf ears, they will probably take their business elsewhere in the future," says Tschohl. "Worse for your business, they are very likely to tell their friends and family about the experience," he adds. A disgruntled customer can spread his or her dissatisfaction by word of mouth in a way that can turn a potentially large number of prospective customers away from your business. If your business happens to be in a small town, this effect can be magnified, since small communities have limited customer bases.

Admit any errors on your part. Even the best companies sometimes make mistakes and even small errors can irritate customers who were counting on you to deliver the right goods or services on time. If your company did indeed make a mistake, the best thing you can do, Tschohl says, is to admit the error and work toward correcting it. If the wrong product was sent to the customer, for instance, ship them the correct product without charge. If you can't correct the error itself, offer some form of compensation for the customer's lost time or inconvenience.

Apologize. "Say your sorry that they've had a bad experience and that you want to make things right. Just saying you're sorry-even if you admit no blame-goes a long way toward cooling off someone who's upset," Tschohl notes. Customers want some acknowledgement of their distress, and in some cases Tschohl says that just providing that acknowledgement may be enough, even if there is nothing else you can do for the customer.

Offer solutions. In most cases, customer complaints can be resolved by offering something small like a discount on future purchases, or by granting a refund. "It's better to lose some money settling a customer complaint than to lose additional business," Tschohl says, "because 87 percent of angry customers will tell their friends about what happened, and that could cost you a lot more in potential business."

Follow up. Once you have reached a solution with the customer, be sure to follow up after a little time has passed. Not only does this allow you to see if the complaint has been fully addressed, but it reinforces the customer's impression that your company really does care about keeping their business. That will go a long way toward moving your company's relationship with that customer beyond the problem and toward future purchases.

How to Attract New Customers

CommunityTeam — Mon, 04 May 2009 14:40:00 GMT

By Max Berry

A faltering economy may not seem like the ideal environment for attracting new customers. But, even when consumer confidence is low, there is plenty a small business owner can do to instill faith in his existing customers and court the attention of those looking for a business to believe in. The secret, as always, comes down to the golden rule: Be good to them and they'll be good to you.

Back To Basics
"If it's not essential to your business, don't do it," says Ed Hess, Professor of Business Administration & Batten Executive-in-Residence at the University of Virginia's Darden Graduate School of Business. "You have more leeway in the good times, more cushion for mistakes, more room to experiment."

According to Hess, when the economy takes a serious turn south, experimentation is one of the first things to which a small business owner should bid adieu. Dreaming up innovative services and marketing strategies may earn an entrepreneur big business in a time when consumers are looking for the next big thing. But when they, like you, are just struggling to get by, they'll appreciate a straightforward approach. "The closer you are to basic, fundamental needs, the better chance you've got [of attracting new business]," says Hess.

This strict reliance on the fundamentals-which Hess identifies as quality of product, caring customer service, and strong cash flow-is also a cautious way to proceed in unpredictable times. "Even if your business is doing well," Hess advises, "you need to operate as if [the economic downturn] will last a long time or might get worse before it gets better."

But beyond keeping you safe rather than sorry, returning to the fundamentals may actually reacquaint you with the most basic-and valuable-tenets of entrepreneurship. As Hess points out, "Hard times focus the mentality of a small business owner back to the fundamentals of customer service and customer acquisitions."

Target the Right Customers
The first step to attracting new customers in any economic climate is pleasing your regulars. "Get close to your regular customers," advises Hess. "Those are relationships that will pay off in the good times." Moreover, the word-of-mouth buzz you gain from them will be a huge boon in attracting new business.

Getting close to your regular customers in an economy that is tough for both of you may involve offering longer warranties and easier return policies on products, or special deals and discounts for your most valued patrons. Your customers have to bear with bad economic times just as much as you do. Let them know you're in it together by reaching out to them and making your relationship as hassle-free as possible. Show some empathy and you'll receive it in return.

Even so, when times are tough, you can't give too much away. "Certain customers you bend with," says Hess. "Others, you can't. It has to be a strategic decision, not global and across the board." Not every customer who patronizes your business should benefit from special offers or discounts. Get in touch with your most loyal customers and offer them an exclusive deal. The fact that you're remembering them in particular, rather than throwing up a sign in the window that says "Sale!" will go a long way toward building that empathy.

Target new customers just as carefully. Look at the demographics of your usual patrons and don't waste resources trying to attract an entirely different set of customers. "Small business owners need to be more tactical and focused in hard economic times," says Hess. "[A manager] should not use broad-based marketing. You have to think, ‘Who are my customers and who will keep spending?' It's like a rifle shot, not spraying a field."

A Silver Lining
Believe it or not, an economic downturn offers its own kind of opportunities to America's small business owners, if they know how to take advantage of them. "Now is an opportunistic time," says Hess.

While the professor stops short of positing that, disaffected by major corporations, consumers will run to the open arms of America's small business owners ("That's soap opera stuff," he says), he does see an upside to down times: "Other businesses are getting in trouble and their customers have to go somewhere."

Hess makes a compelling point. The most sustainable businesses, the ones providing the best value and customer service, will endure while others fail. And those that survive, naturally, will pick up business from those that don't. The trick is to strive toward running the kind of business that can last. "The economy is out of your control," says Hess. "Focus on what you can control and be very, very proactive."

Firing a customer

CommunityTeam — Fri, 05 Oct 2007 20:06:00 GMT

The customer is always right, right? Wrong.
By Reed Richardson

Ordinarily, a statement like this might seem like heresy in the business world, considering all the time and effort spent pursuing and landing customers in the first place. But to Larry Selden, business professor emeritus at Columbia University, this is exactly the kind of radical approach more businesses should be adopting.

"This doesn't fit the way most managers run and measure-and thus think about-their businesses," he acknowledges in his 2003 book Angel Customers and Demon Customers. But Selden, who co-authored the book with Fortune senior editor-at-large Geoffrey Colvin, writes that based on their research almost every company "consists of both profitable and unprofitable customers-angels and potential demons. Some customers are making your company more valuable while some are draining value from it."

The costs from these "demon customers" can be staggering. In his book, Selden estimates the bottom 20 percent of customers can often generate losses totaling more than 100 percent of a company's profits. At the same time, many business experts note the existence of an "80/20" rule with regard to "angel" customers, whereby roughly 80 percent of a company's profits come from the top 20 percent of its customers. But the first step toward improved profitability involves differentiating between the "angels" and the "demons."

Perhaps the most effective way to do this is through activity-based costing. Rather than using traditional accounting methods that tend to distort cost information by heavily weighting labor and materials over support operations, the ABC method traces all costs back to individual product lines or services. Most small businesses make the mistake of only looking at how much an account or customer brings in, instead of assessing the their true net value.

Once you begin to determine your customers' true worth, then you can start to tier your services to match profitability, focusing greater support to your top level of customers. What to do with the bottom 10 or 20 percent of your customers, however, remains controversial. Some business experts advocate ruthlessly cutting those customers loose, while others, like Selden, believe you should at least attempt to "exorcise" those "demon" customers first, using tactics such as discouraging returns or upselling.

Still, the best opportunity to identify "angels" and "demons" occurs before they become customers. By properly sizing up prospects, your business can expend less energy and make more money without having to "fire" anyone.

THE RIGHT WAY TO LET THEM GO

Below, we've identified four categories of bad customers that can suck the life and profits out of your small business. For each one, we've also suggested a corresponding strategy for ridding yourself of these "demons" that's more nuanced than just telling them "You're Fired!"

1. Exceptions to the Rule. These are customers whose needs don't line up with your small business's areas of expertise. Often, they're either pushing you to provide new services before you're ready or they're still clinging to an old product line and haven't recognized that your business's focus has changed.

How to "Fire" them: Schedule a face-to-face meeting and patiently, but firmly, explain the gaps between their needs and your company's capabilities. If they are uninterested or incapable of switching over to your current products or services, refer them to a reputable business that can satisfy their needs and extend your current business arrangement for a few more weeks to allow them a smooth transition.

2. More for Less-ers. This customer focuses solely on price and is constantly pressing you for more while at the same time expecting to pay less. The only value they see in your company is measured in how good a deal you're giving them.

How to "Fire" them: Rather than just hit these customers with an up-charge that they're sure to bitterly reject, give them a choice between accepting a price increase or adding on other premium services offered by your business. If they accept the latter, you might still be able to convert them into a loyal, profitable customer. Even if neither offer appeals to them, chances are they will leave on good terms, feeling like it was their decision to go, rather than yours.

3. Whiners and Beefers: Some customers live to complain and feel like the "customer is always right" mantra is an excuse to act rudely and make ridiculous demands. Even if they seem like profitable clients, there are often hidden costs-like increased customer service calls and lowered morale-that make them worthy of getting the boot.

How to "Fire" them: Explain to the customer that, based on the frequency of their complaints, it's apparent that your small business will never be able to satisfy them. So, as part of your commitment to providing them the level of service they desire, politely let them know that you're referring them to another company. (Let your competitor deal with the headaches.)

4. Indecisive Wafflers: These customers promise big payoffs or lots of sales, but rarely follow through. And when they do commit to a purchase or a project, they often ignore your advice and end up disappointed or ask for endless changes and abandon the project before it's finished. If you're not careful, their dithering can ruin a hard-earned reputation for having satisfied customers.

How to "Fire" them: In the retail world, notifying your customers upfront about your returns policy and then strictly enforcing it can often weed out perennial browsers and serial complainers. In a professional practice or b-to-b environment, requiring both potential and current clients to commit to written, contractual deadlines as well as ongoing payments can help prevent them from becoming afflicted with constant "what if" syndrome.

Reed Richardson is a writer/associate editor for Business 24/7 magazine.