CFPB requirement or competitive advantage—why not both? Last week, with Michael Benoit of Hudson Cook, we explored the regulatory side of consumer complaints. Michael walked us through how the Consumer Financial Protection Bureau evaluates institutions’ consumer complaint programs for evidence of overall compliance. We also learned the five key elements of the consumer complaint resolution process and, just as important, how “resolution” doesn’t always mean what you may assume it means.
If you missed part 1, click here. In this installment, we’ll hear from Wendy Miller, Compli’s Vice President of Customer Success, about everything your business has to gain from effectively and proactively managing complaints.
The Business Case for Addressing Consumer Complaints
During Consumer Complaints: Your Company’s Broken Windows, Wendy trotted out one of our favorite statistics, and started multiplying:
“For every customer that bothers to complain, 26 remain silent. Think about that number a little bit. That means for every 5 complaints, there are 130 people who would have complained but they just didn’t. Or, for every 10, there’s 260. For every 50, there’s 1,300. It adds up quickly. And those complaints give you valuable insight into how your processes and people are doing.”
To illustrate her point, Wendy brought up Uber’s surge pricing model. As you may know, the ridesharing service charges riders more during times of peak demand (e.g. holidays, weekends, late nights). What you may not now is that the way Uber presents this information has changed over the years—due to consumer complaints:
“Resolution doesn’t mean [customers] necessarily get what they want. It means that you address a problem. You address a concern. What [Uber] did is, when you go in now.., instead of getting this big, scary alert that tells you ‘We’re going to charge you more because we can,’ it tells you what your price is. So, ‘It’s going cost me $80 to the airport. I know that it normally costs me $25, but I also know it’s 5:30 in the morning and I have to get to the airport.
Now, they made a conscious decision that they could potentially have a short-term loss of revenue because people would decide not to go with them. But they made the decision to go forward with it regardless, because they saw that it was worth the long-term gain in loyalty and retention from improving the customer experience.”
Essentially, Uber faced a choice between giving its customers what they wanted and remaining in business. The company split the difference by changing its messaging.
Although it may sound unintuitive, this is a great example of how to effectively address consumer complaints. Uber saw that its customers didn’t like surge pricing, but—in looking at the data holistically—determined that most people weren’t simply complaining about the model, but complaining about how the model worked. By updating the app the way it did, Uber may have lost a few customers who refused to pay for surge pricing, but it removed frustrations and inefficiencies for the many people who stayed with the service.
Wendy told us that customer experience is “the next competitive battleground,” and that there are “serious consequences” for companies that ignore feedback:
“It is never a good idea to do business in a vacuum. And by not addressing complaints, that’s exactly what you’re doing. You’re not taking that feedback from the customer at the end of the sales cycle, really, and improving upon the customer experience.”
Plus, she said, by addressing complaints as soon as you receive them, you can reduce your chances of regulatory action:
“[M]ost customers are going to file complaints with the CFPB only after trying the institution first. Of course—I mean, that just makes sense. You do not call the FCC when your cable goes out. That’s just not the first thing that people think to do. … By putting a system and processes in place to manage complaints yourself, you’re minimizing your public exposure, protecting your and your bank’s reputation, and you’re resolving those complaints internally.”
Determining Channels and Looking for Patterns
Once you understand the business case for complaints, the next step is defining your intake process: What channel do consumers use to send their complaints? Each organization, Wendy said, should define channels for itself, keeping an eye on the big picture—data:
“Whether it’s coming in from a teller, it’s coming in from a phone, you have one centralized location where you’re managing all of that. You have defined processes where you’re handling escalation. And you’re able to report against it, datamine, and address the big picture—not just those individuals. Of course the individuals are important. But at the end of the day, making business decisions based on the data that you’ve got there is very valuable.”
That value isn’t limited to complaints against your company. Wendy used the recent controversies surrounding United Airlines to make her point, pointing out how competitors such as Delta and American Airlines changed their policies to win over consumers who had been burned by United. Companies in any industry, she told our audience, can use the CFPB’s complaint database to do the same thing:
“Look at what the data looks like on CFPB for your competitors. Compare that to yourself. … [I]s their trending consistent with yours? Are you better or worse in some instances? How can you address that? How can you leverage that? You have that data available to you, and you should be taking advantage of it.”
Using Complaints to Foster Return Customers and Referrals
Ready for another statistic? It’s 6 times more expensive to acquire a new customer than to keep a current one. Wendy told us that companies can reduce acquisition costs by turning complainers into brand advocates:
“These folks who have complained have already self-identified as the 1 in 27 who will speak up. They are the talkers. By automating your complaint tracking system, you are more likely to turn those talkers into happy, satisfied customers who are talkers. And a talkative one is going to do just that—talk, right? That complaint just became a referral.”
Let’s pause right here for a moment. Companies that follow CFPB requirements can actually transform complaints into referrals. Here are a few more data points to emphasize the power of this process:
92% of consumers say they trust a referral from someone that they know more than a call, ad, or any other kind of sales touch.
Customers are 4 times more likely to buy when referred by someone they know.
In other words, the same things regulators ask for also make good business sense. By addressing consumer complaints, you will retain more customers, improve sales, and reduce risk all at the same time.
In the final installment of this series, adapted from Consumer Complaints: Your Company’s Broken Windows, Compli Director of Sales Brian Larson will show you where complaint resolution fits into your compliance management system, and how consumer finance companies can perform at the next level through automation.