- The cost of obtaining a new customer is much higher than retaining an existing one.
- Negative word of mouth results in the loss of potential customers.
- Dissatisfied customers often do not complain; they simply switch to another brand or service.
The significance of consumer ratings and reviews are often underestimated by suppliers.
Main reasons why dissatisfied consumers do not complain:
- They do not want to cause a fuss.
- They think that it is not worth the effort.
- They think that it would not serve any purpose.
Many also resort to "negative word of mouth" (WOM), telling family, friends and colleagues about their bad experience. Customers who are dissatisfied with the supplier's response to their gripe or grievance are even more likely to engage in WOM.
In South Africa, another factor is that
many dissatisfied customers do not know how to complain or who to address the complaint to. What is clear is that most consumers do not complain. According to one study, 90% of dissatisfied customers initiate no action and simply leave the product, brand or supplier.
A study demonstrated that customers who have a bad experience will tell approximately 11 others about it while those with good experiences will tell just 6. Another study revealed that on average dissatisfied customers told 9 others about their negative experience. A recent Nielsen survey indicates that reports of bad experiences outnumber good customer service reports by as much as 5:1.
Once a consumer does seek redress, negative WOM intentions and repatronage intentions are dependant primarily upon the complainant’s perception of justice: consumers who feel that their complaints are handled poorly report higher negative WOM intentions and lower repatronage intentions.
Formal feedback to
getclosure indicates that 44% of South African consumers are less than satisfied with the way in which their complaints are handled while 35% are less than satisfied with the outcome of their complaint. Other studies have shown that more than half of all efforts to respond to consumer complaints actually reinforce negative reactions to a service.
Customers dissatisfied with the retailer’s response typically engage in twice as much negative word of mouth than customers satisfied with the response and the level of satisfaction with the response has a significant impact on their repatronage intentions.
The cost of getting a new customer is much higher than the cost of retaining an existing customer. In some sectors,
it costs five times as much to attract a new customer as it does to retain an existing one. Research indicates that some businesses may lose 10 to 15% of their annual volume each year because of poor service.
Click here to read a summary of the benefits that flow from handling complaints properly.
Sources of information:
- getclosure statistics
- Nielsen Global Survey: Word-of-Mouth the Most Powerful Selling Tool: www.nielsen.com
- Hart, Heskett & Sasser, Harvard Business Review, 1990 p148
- Crie in Database Marketing & Consumer Strategy Management, 2003, Vol 11, No 1, citing a 1986 study by the Technical Assistance Research Program Institute for the US Office of Consumer Affairs.
- Bloggett, Grandbois & Walters, Journal of Retailing, 1993, vol 69 No4, p 399
- Desatnick Managing to keep the Customer, 1988, cited by Blodgett, Grandbois & Walters.
