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In a world where everyone has a Twitter, Facebook, Yelp, and a voice for sharing their consumer happiness (or not) with the world, there is no greater threat to your company’s reputation than poor customer service.

Why There is Nothing More Important Than Good Customer Service

It’s clear that there’s a direct correlation between poor customer service and bad company reputation. Many of the companies that have the worst reputations in the Harris Poll Reputation Quotient also have poor customer satisfaction scores in the American Customer Satisfaction Index (ACSI).

Why does customer service matter so much? According to Customer Care Measurement & Consulting’s (CCMC), companies put 76 billion dollars at risk as a result of serious problems with products and services. That’s a staggering number, but even worse is the fact that with reportedly high levels of dissatisfaction with customer service, most of these billions were lost. Echo’s 2012 Global Customer Service Barometer tells us that 55% of U.S. consumers who planned on making a business transaction, but didn’t, decided not to because they experienced poor customer service.

Lost revenue should have your attention, but if you’re not worried yet, consider this: customer problems are continuing to grow. That means in coming years, it’s not just 76 billion at stake anymore. That number will grow larger as more customers continue to have service issues. Just in the gap between 2011 and 2013, the customer problem rate increased by 5% from 45% to 50%. (Note: that’s 50% of customers who have a problem!)

Poor customer service continues to grow more damaging because consumers are becoming more vocal. According to CCMC’s survey, posting information on the web about customer problems has almost doubled since 2011. In 2011, 19% of customers posted about their problems on social networking sites, but now, 35% do. They’re also more apt to post directly to company websites to complain, with website complaints increasing from 11% in 2011 to 19% in 2013. This growing vocal outreach among customers should have the attention of companies.

The bottom line is if customers are unhappy, there’s a good chance they’ll say something, especially if they’re not satisfied by customer service measures. 27.7% of dissatisfied complainants shared their experience via word of mouth. Compare that with just 10.2% of satisfied complainants that share word of mouth, and it’s clear that dissatisfied customers have a louder voice.

And while consumers are becoming more vocal, they’re also growing more angry when they’re dissatisfied. CCMC’s survey shows that customer rage increased by 8% from 2011 to 2013, growing from 60% to 68%.

Why Are Customers So Mad?

Customers are becoming more dissatisfied, they’re not going to be quiet about it, and your reputation depends on what they’re saying. Clearly, it’s important for companies to get to the bottom of customer dissatisfaction. What exactly has customers so upset?

According to CCMC’s survey, a majority of customers don’t feel that they’re not getting what they want. In the survey, 56% of complainants felt that they received nothing in return for their complaint, and those who reported that they got something felt that what they got was not significant. For example, 76% of complainants wanted an apology — but only 32% got one.

Losing Customers to Poor Customer Service

The consequences of poor customer service — and a bad reputation to go along with it — are clear: lost customers, lost potential customers, higher customer service costs, and revenue loss.

CCMC’s study indicates that companies are most certainly losing customers to unresolved complaints. In the survey, dissatisfied complainants are 12% less brand loyal than non-complainants. And it makes sense: customers who complain, but feel they haven’t been heard or satisfactorily addressed, are obviously more likely to walk away from a brand altogether—and that’s if you’re lucky. A dissatisfied customer could easily create a crisis management problem if they speak out on social media about your brand. But there’s a positive flip side to companies that can handle customer service positively: CCMC reports that complainant satisfaction is strongly correlated with increased brand loyalty in 2013.

The study points out that when companies develop customer care programs that don’t satisfy most of their customers, they’re spending billions of dollars on programs that are actually causing them to lose customers. The message from Customer Care Measurement & Consulting: do customer care right, or don’t do it at all.

Are You Doing It Wrong?

Companies have increased their spending on customer complaints, with billions of dollars invested annually on call centers, expanded Internet access, and enhanced remedies, but complainant satisfaction today is still on the same level as it was in the 70’s, says CCMC. In fact, the majority of customers who complain are dissatisfied with how their problems are dealt with. Are companies wasting billions on customer service measures that don’t work? CCMC’s research certainly suggests so.

While companies are upgrading their customer service systems to handle complaints, they’re not really effective. CCMC’s study explains, “the problem is, instead, that companies ARE DOING ALL THE RIGHT THINGS, THE WRONG WAY.” What’s gone wrong?

  • 800 numbers
  • complicated automated response menus
  • not allowing customer care agents the power they need to resolve complaints
  • under staffing so customers have difficulty reaching an agent in a timely manner

Of these, wasted time seems to be the most damaging thing companies aren’t handling well. CCMC’s study highlights time lost as the most often reported damage in 2013, with 62% of respondents losing time, with only 40% losing money. It’s also getting worse: in 2003, only 50% of complaining customers felt they lost time.

Customers feel that the time they spend complaining is growing less worthwhile. With 61% saying they felt the time they spent complaining was worthwhile in 2011, compared to just 50% in 2013. They may feel this way because companies are taking longer to resolve their problems. Only 21% of complainants had their problems resolved on the first contact, while most (60%) of complainants had to make three or more contacts to find a satisfying resolution. Further, 56% of customers who complain feel that they got nothing as a result of their customer service interaction. Note: these dissatisfied customers are the ones that are less likely to come back for future business, and more likely to share their dissatisfaction through word of mouth and on social media, damaging your company’s reputation.

What Companies Can Do to Increase Customer Satisfaction

The obvious solution to poor customer service is what companies already know (but often, don’t practice): better customer service. CCMC’s survey shows that when customer complaints are handled positively, they see higher levels of brand loyalty. Industry leaders have also seen high ROIs from properly executed complaint handling initiatives. How exactly can companies effectively increase customer satisfaction?

  • Supplement monetary relief with non-monetary remedies: Customers are disappointed to lose money, but what they really want to know is that companies care. That’s why fixing problems with money just isn’t enough. CCMC’s survey shows that when non-monetary remedies are added to monetary relief, complainant satisfaction doubles from 37% to 74%. Namely, this non-monetary relief includes a genuine apology. Remember, 76% of complainants in CCMC’s survey wanted an apology, but only 32% got one.
  • Make it easier to get satisfaction: It’s infuriating to spend hours wrestling with customer service, so it’s no wonder that customer rage is increasing. Customers feel that they’re losing time to resolve problems, and it’s taking longer to do so, with just 21% of customers having their problems resolved on the first contact. Ditch confusing automated service trees, make it easy for customers to talk to a real person, adopt communication lines on social media, and give customer service agents the authority they need to deliver real solutions to problems — the first time.
  • Regularly ask for feedback: The easiest way to avoid customer problems is to identify issues and stop them before they can continue. Don’t wait for customers to complain to you: ask them with surveys, social media, and open communication what they’d like for you to do better. Fixing problems that customers identify for you allows you to avoid customer service nightmares in the future.
  • Establish a culture of customer service: Everyone involved in your company should understand that that’s nothing more important than customers. Dealing with customers isn’t a distraction from the mission: they are the mission. They’re the reason you have work to do, after all. Avoid letting employees sacrifice customer service in favor of other tasks.
  • Always offer a solution: Customers complain because they want something, but it’s not always money. Often, they’re looking for an apology, recognition of their problem, or even a simple promise that the problem they’ve had won’t happen to anyone else. No matter the situation, customers should always have some sort of solution to their problem. If all else fails, just ask them what they want. Without a solution, there’s no reason for them to spend their time pointing out what’s wrong.