What Negative Feedback Can Really Cost You
September 1, 2003 • COMPLAINTS AND DISSATISFACTION are a very common and well known source of customer feedback. Although the value of such feedback is not always well appreciated or well received by most people and organizations, it remains a relative constant in the business world today. One of the main reasons why most people and organizations don't appreciate negative feedback, is that no one truly likes to hear criticism of their work and they do not associate the "true costs" that such information can have on their business.
Studies such as those published by LUV Lines-Southwest's monthly employee newsletter
have revealed that for every customer who was "wronged," there are 25 others
who remain "silent." These "silent" complainers may not be heard by the company
that has disappointed them, but studies also reveal that each person in the
silent majority will on average, tell 12 other people about their complaint.
When you add it all up, the result of just one negative situation can influence
up to 300 people!
To put this into context for your organization, take the total number of instances
of complaints and dissatisfaction received from your customers and multiply
that number by 25. You then take that number times 12 (the average number of
people they tell) and you can quickly see the snowball effect that negative
feedback can have on an organization. If you also associate the average dollar
value representative of each of your customers, that number times the possible
number of potential customers impacted provides you with the total potential
revenue impact of your complaints as illustrated below.
Example of 100 complaints received and the average customer value
of $100:
| |
100 |
(Total number of complaints received |
| x |
25 |
(Those who have complaints but don't report them) |
| = |
2500 |
(Possible dissatisfied customers) |
| x |
12 |
(The average number of people who complain to others) |
| = |
30,000 |
(Possible number of potential customers) |
| x |
$100 |
(Total $ value of each potential customer)* |
| = |
$3,000,000 |
(Total potential revenue impact of complaints) |
| |
|
*The average customer is typically worth 10 times the price of a single purchase. |
Once you substitute your company's own figures to this equation, the results can be staggering and potentially
eye-opening for your organization. These "costs" can quickly add up and provide a solid rational for a new or
renewed focus on customer information and feedback management. Here are a few steps you can take to
help reduce these costs:
- Learn to accept, learn from, and process negative information within
your organization. Negative feedback is commonly referred to as just that,
negative. So to most, the goal is to reduce and even eliminate such feedback
instead of really accepting that it exists and learning from it.
- Create policies and procedures to successfully process negative feedback
in a way that does not threaten the employees or people who have to respond
to it. People who process feedback should be independent and objective
and not feel encumbered by the feedback from others.
- Respond to negative information in a quick, personal, professional and
effective manner. Research indicates that if sincere efforts are made to
remedy complaints and create goodwill with the customer, roughly 88 percent
of them will stick with you.
For further information about customer feedback management, contact the CFS Corporate Research Department at: corpresearch@custfeedback.com or at (800) 465-8430.
