3.06 Counting the cost

Customer complaints are unavoidable. They happen to every business and almost every employee. The only question is how to handle them. Not handling them is simply not an option. Why? Because customer complaints can be very costly! Let’s examine some of the costs of customer dissatisfaction and complaints.

Costs to the employee or salesperson. If you’re a salesperson and a customer’s complaint results in a returned product, you could lose the commission you made on the sale. Even if you’re not paid commission, customers’ complaints can affect your chances for promotions or raises. In addition, dealing with customer dissatisfaction—if you don’t know how to deal with it appropriately—can drain your energy and confidence.

Loss of sales. When customer complaints go unresolved, the business stands to lose those customers’ current and future purchases. In addition, unhappy customers often express their dissatisfaction to friends, relatives, and coworkers. The number of sales lost to this negative word of mouth can be alarmingly high!

Loss of reputation. When customers spread the word that a business doesn’t care about their satisfaction or has not resolved their complaints appropriately, the business’s public image is damaged. And, once a company gains a bad reputation, it can be very difficult to reverse it. Today’s businesses face the unique challenge of existing in a world where information travels at lightning-fast speeds—one angry customer can get online and reach thousands of others with just a few clicks of the keyboard.

Loss of time. Handling customer complaints can cost businesses and employees a lot of time. In addition to the time spent dealing with the customer, it may take time to restock returned items, update sales records, etc. As you’ve probably heard, in business, time is money. The more time a company spends on customer complaints, the less efficient and profitable it is.

Loss of profit. Customer complaints can eat into a company’s profits not only by wasting time, but also by reducing the amount of money it can make on the goods it sells. Many returned goods are resold—but often at reduced prices. Therefore, the greater the number of returns, the greater the loss of income to the business.

In addition, when a wholesaler or retailer buys goods from a manufacturer, it must pay interest on any money it borrows to make the purchase. If too much time elapses before the goods are resold, the amount of interest can become substantial. This can also result in reduced profit for the business.