RTM: I guess there is a small minority of channel players who are forever moaning about their suppliers’ performance.

SHL: Yes, and it is easy for companies to become fixated by this group and to ignore the hidden opinions of the silent majority. Often that will come through complaints. The problem is that most suppliers are not very good at handling them.

RTM: So what is the best way of managing complaints?

SHL: Often staff don’t like to hear complaints about their product or service, so they don’t always respond very well. Also most companies spend 95% of their resources on reacting to individual complaints and less than 5% on analysing and using the information from complainants.

RTM: I suppose that part of the problem is that not all dissatisfied customers complain.

SHL: No. In fact most customers do not complain at all. 

RTM: So how do they respond?

SHL: Essentially, customers respond in other ways, such as exiting the relationship or engaging in negative word of mouth, which can be very damaging.

RTM: Why don’t dissatisfied customers complain?

SHL: A variety of reasons. They may believe the organisation will not respond to their complaint. They might not want to confront the person responsible for the failure. They might be uncertain of their own rights and responsibilities. They might be concerned about the high cost (in terms of time and effort) of complaining.

"Some companies tell customers explicitly how to lodge a complaint and what to expect from the process."

Fear can also play a role within an unequal power relationship, for example a GP–patient relationship or one where the supplier is deemed to be very powerful, such as Microsoft, for instance.

RTM: So you should actively want your customers to complain so that you can deal with the problem?

SHL: Absolutely right. But firstly you need to encourage dissatisfied customers to complain. The annual customer-satisfaction survey may be too little, too late.

RTM: How do you do that?

SHL: Best practice suggests that firstly you need to set clear performance standards and communicate these to customers AND staff. You then need to emphasise the importance of service recovery to the staff and to embed it in the culture. You also need to train your customers in how to complain.

Some companies tell customers explicitly how to lodge a complaint and what to expect from the process. This demonstrates a clear message to customers that you care and will listen to them, that you are customer-driven.

RTM: What should you do when customers complain?

SHL: Most intermediaries only complain when they believe there to be a serious problem. Therefore, if they do complain, then they expect or hope for some action that they perceive to be fair.

RTM: What do you mean by "fair"?
 
SHL: Good question. Customers generally form perceptions of fairness by assessing three aspects of service recovery: outcome fairness, procedural fairness and interactional fairness.

RTM: Perhaps we had better go through these one at a time!

SHL: Sure. Outcome fairness concerns the results that customers receive from a complaint. Interestingly, most intermediaries judge the outcomes they receive to be unfair. Offering an apology contributes to customer compensation, without liability!

"Customer loyalty drives profitability."

Companies often fail to compensate adequately for the harm done or to recognise the costs involved by the customer in getting the complaint resolved. Companies need to better understand customers’ expectations for a fair recovery from a service failure – even though they might not always respond to them.
Customers also prefer to have recovery strategy options to choose from.

RTM: What about procedural fairness?

SHL: First of all the company needs to assume responsibility for the failure, if appropriate. It is helpful if the complaint can be handled quickly. Also, the individual customer’s circumstances do need to be taken into account. Finally, the customer should again be consulted on what the final output should include.

RTM: And finally, interactive fairness?

SHL: It is really helpful if the company demonstrates politeness, concern, honesty and a genuine effort to resolve the problem and, where possible, provides an explanation to the customer as to why the failure occurred.

It is important to note that performing poorly on even one dimension of fairness severely limits the potential for customer satisfaction.

RTM: What does a company need to do to improve its service-recovery effectiveness?

"Good service recovery is directly linked to increased retention and profitability."

SHL: First of all, don’t forget that the better the service, the less dissatisfaction will be felt by customers. Also, the company is now being proactive in trying to identify where failure is taking place, which is positive.

So, what strategies need to be considered to improve service recovery? Basically, four practices have been identified that together dramatically improve service recovery effectiveness.

These are: hiring, training and empowerment of staff; establishing guidelines and standards for staff; providing easy access for customers and effective responses from staff and, very importantly, maintaining customer and product service databases.

RTM: Quite a list. Care to elaborate?

SHL: Successful service recovery is highly influenced by the effectiveness of the employees who receive and deal with the complaints. Service-recovery performance must therefore be incorporated into HRM practices.

The relevant staff need to acquire appropriate skills, attitudes and behaviours. Combined with the necessary authority, staff can respond to the "fairness" attributes identified earlier.
 
The Samaritan Health Services "AAAA" Action plan for service recovery is but one example of establishing guidelines and standards:

Anticipate and correct problems as they occur.
Acknowledge mistakes when they occur, without placing blame or making excuses.

Apologise sincerely for the mistake, even if it is not your fault, and make

Amends for the mistake by taking corrective action and following it up to ensure the problem has been resolved.

With the evolving technology of the computer, the Internet and telephone centres, access can be relatively easy, yet staff capabilities remain a challenge for most organisations.

Finally, databases are important because they enable trends to be identified, knowledge of customers and complaints to be logged and service-recovery personnel to be kept informed.

RTM: How important is the database?

SHL: Very. But the majority of companies fail to document and categorise complaints adequately, which makes learning more difficult. Thus there is a lack of dissemination out to relevant managers and therefore the quality issues that caused the complaints are not dealt with, but merely repeated. Complaints are viewed as failures and hidden, rather than being learnt from.

RTM: You seem to be suggesting that identifying and responding to customer complaints is very important.

SHL: I believe it is. The logic and evidence are absolutely clear.

"The majority of companies fail to document and categorize complaints adequately."

First, customer loyalty drives profitability, and this has led companies to shift their emphasis away from customer acquisition to customer retention (which has led to the growth in the concept of relationship-marketing). Secondly, customer satisfaction has been shown to be a strong influence on positive word of mouth and future loyal behaviour.

Finally, complainants who perceive that their complaints have been responded to fairly, in all its meanings, can actually increase their level of satisfaction with the company at fault. Therefore, good service recovery is directly linked to increased retention and profitability.

It is also worth noting that a company that compounds an error with an insufficient recovery incurs a large penalty in terms of both negative word of mouth and potential exit from the relationship.

Thus, firms really do need to develop a comprehensive service-recovery strategy that encourages dissatisfied customers to voice their complaints and that provides a fair process and outcome, through which organisational learning can take place.