Once a sale has been made, the customer is then part of your client base and needs to be communicated to and nurtured so that you do not lose the customer in the future.

Apart from natural changes to the customer’s lifestyle, the customer moving away, or other events that affect the relationship, the organisation should be able to retain the customer for a long period of time, provided they service the customer and provide them with the stock or services that they need.

Customer retention is an important event in the cycle of the sale and in the development of customer preferencing for your brand, product and services as well as in the attainment of loyalty and advocacy which sees them referencing you widely to their networks and friends.

Most organisations do not have in place customer retention systems. Once the sale is made then the sales force is the major thrust for maintaining, retaining and gaining new customers. This means that the customers usually have to ‘find their way’ through the organisation in terms of seeking out products and services, and in maintaining the relationship with the company through transactions.

Customer retention will become most important in the future, and this has already been shown through the development of online sales and marketing, whereby customers are even more remote through the online internet system. In addition, the consolidation of markets and the increasing competition thrown up by online services and organisations, means that the maintenance and protection of market share, which includes the customer base, is an ongoing battlefield.

In retaining the customers the last bastion of customer advocacy and retention is usually the complaint handling division or centre within the organisation. Within small or medium enterprises (SMEs) this is usually done by the office staff or the manager, and in medium companies, again, there may be no complaint handling centre or no complaints system.

Large companies have complaint centres, but these are often dysfunctional and are often very product and service centric. They are used to handle complaints due to system break-downs, due to non-delivery of product and services, because of stuff-ups in accounting procedures, product and contractual arrangements, etc. As a result, retention is secondary in the mind of the customer service representative, and often the idea of their job encompassing customer retention is secondary to them ‘getting it right’ for both the organisation and the system.

In this process the customer suffers, and the organisation often loses customers that are unnecessarily ‘pushed out’ of the organisation because of poor attitudes towards customers, poor response to their enquiry or problems, and lack of respect and recognition of their rights as customers.

Our study, ‘Consumer Sentiments, Emotions and Advocacy NOW’, done in 2009, explicitly shows that the major reasons that customers become dissatisfied and leave organisations are as the chart below demonstrates:

The customer complaint handling section of an organisation is the last chance for the organisation to get it right for the customer. Once the customer ceases to deal with the complaint centre and gets angry, upset or just switches brand – which happens in 86% of the cases where there is no satisfaction through complaint resolution, according to our 2009 study – then the customer is ‘lost’ to the organisation and moves to another brand or alternative products and services gained through other means (Do it yourself activities, etc.).

Failure to retain the customer and failure to recognise what is often the ‘last chance scenario’ with customer complains creates huge cost to the organisation. When this customer is lost they not only go to another competitor, who is then empowered through their sales and revenue stream to be even more competitive and to have an even greater client base than your organisation, but they also take with them valuable revenue stream that is lost to your organisation.

In the past, the attitude seemed to be that if they left, we could easily replace them with another customer, and that was the job of the sales force. Today, unfortunately, the sales force is becoming an expensive resource, and many of the sales force are not even directly in touch with the consumers with the growth of middle-man services, agencies, franchises and channel captains in major markets; furnishings, finance/insurance, electronics, computers, food retailing, etc.

The result is that getting to the customer is an additional problem for the sales force, as well as getting time as people are time-poor, and there is also the cost of travel and the resources to underpin the salesperson which is very expensive.

According to a Dartnell survey conducted in the USA as far back as 1992, the support costs for a salesperson were around $14,000, training and development was between $4,000 – $5,000, the average sales revenue salary around $58,000 and in total, the cost of a sales call was calculated at $98, very close to the $100 mark.

Given the passage of time, the cost of the salesperson today is probably in the order of $150-200, when you consider the salesperson to be somebody who could be selling berry fruit-juices from a merchandise truck, or an industrial salesperson visiting clients on a regular basis, or a service based consultant for finance, insurance, etc.

This raises two issues on the cost of the resource expended to replace the customer, verses retention of the customer:

1.   The gap between most of the cost of a complaint centre one hour block, which is estimated between $56-60 according to a recent poll by ourselves, and the cost of a salesperson at between $150-200, is approximately $90-140. This means that when the customer ‘leaves’ you are having to outlay between $90-140 to get another customer to replace them. In addition there is the cost of reach.

2.   A salesperson can take on 660 calls on an average year where they visit retail or wholesales customers, or even when they deliver insurance, finance banking, or handle goods and services at a store level. Even if these figures increase to 800 calls, then after 800 customers you have to add another salesperson to handle the retention level (note: this also includes repeat calls to customers). This is assumes that the customer is not always selling new customers as well, which in that case will reduce the ability to replace customers who have left.

The result is that losing customers through failure to retain them through proper complaint handling procedures is a major problem for organisations, and a major cost to their bottom-line profits.

In our recent study, already referenced in 2009, we found that only 14% of consumers around Australia felt that the customer complaints handling procedures were not properly and adequately addressed within the organisations, and that the ‘customer service’ person often did not have the authority and ability to handle their complaint properly. This means that 86% of the organisations are not properly organised for customer retention. The likelihood of this cost escalating in the future. Especially with the growth of social media, Twitter and other means where people ‘spread the word’ about the organisation to their friends, networks, etc., and through the internet can increase the loss of sales and the turnover of customer affecting or minimising the best ‘bottom line’ performance of organisations.

The first step is to acknowledge that the complaint handling procedures is the last place where customers will do business with your organisation before they leave, often in a disgruntled mood, affecting or discouraging other customers. As such, it is the last chance to get it right and to retain customers who could stay with you for years and years as loyal customers. Again, our studies show that once customers have their complaints handled to their satisfaction, 72% of them return as loyal, and often more loyal, customers to the organisations.

Therefore, organisations should be seeing the complaints handling procedures area not as a cost of $56 an hour where they try to get so many calls handled per hour, and try to limit customers to 5 to 6 minute turnaround time. Not only does this increase the tension, anxiety and lowers the retention rate, but it affects profits (ROI). They should see it as a profit centre where they can retain, gain and maintain customers for the long term.

A customer that’s already dealt with the organisation is liable, applying common sense principles, to purchase more in the short term because they are familiar and trust the organisation and have some degree of customer preference or loyalty to the brands, products and services than a new customer who may be more tentative.

In addition, the new customer is in the field of potential customers, and therefore is an addition to the organisation and will increase bottom-line exponentially, but the customer who is a replacement customer will just maintain status quo. Finally, the bottom line benefit of the customer is the difference between the costs of the sale for the salesperson to replace the customer as against the cost of the call-centre for the retention transaction. It is also the multiplier effect of the transactions and profits associated with those transactions of the customers over time.

The concept of the leaky bucket has been around for years: if you fill the bucket with lots of water and it has many holes in the bottom, then you be putting more water in the top quite often than is necessary because of the holes in the bucket. Increase the holes in the bucket (lack of customer handling procedures and training and development and intent), and the bucket will empty quicker, therefore affecting your bottom-line and giving you lower returns on investment.

Many companies today explain their reduced profits to economic conditions, to lack of rationalisation, poor performing divisions, etc. but the base of everything that we do is the customer.

The customer is the greatest asset in the organisation. If they are not handled properly and you have churn and turnover, and your sales force is trying to replace customers rather than gain market-share from new, additional customers, or gain potential customers from other areas or ‘near’ competitive products and services, then you are risking the bottom line of your organisation.

You can control this result!

There is no doubt that a change in culture is needed to see customer complaint handling procedures, training and development, and the development of proper processes to handle customer complaints as a profit-centred approach to the business.

This is common sense as every part of the organisation, even the accounting division, is involved in trying to get money back to the organisation, retain customers, and increase the bottom-line. In this sense, everybody in the organisation is a sales-person, and everybody must respect and be involved in retaining the customer. Calling them complaint centres or customer service centres is not enough: you need a more definitive statement about what the intent of that organisation is. Customer relation and retention advocacy would be a much more advantageous cluster of words to use.