Unlocking the value of the worst customer experiences

The case for service recovery and fixing root causes In this paper we will look first at the value of well managed “customer recovery” but then compare that to the value that can be obtained from deeper analysis of the causes of complaints and issues. Managing problems and complaints Unfortunately, poor customer experiences are flavour of the month, receiving more media and shareholder attention than ever before. Therefore, how organisations manage these poor experiences has become more critical today. These can be caused by anything from human error to weather events, poor process and system design or system bugs. Most large organisations have some form of complaint or escalation team to manage problems and issues. For example, one large Australian business had over 600 people working in the complaints team for many years on a very expensive cycle of applying band-aids to broken products and processes. This kind of issue management process can be thought of at three levels:

1. Fixing the immediate issue for the customer e.g. correcting one instance of a bill.

2. Some form of service recovery e.g. a goodwill credit acting as a “make good” process for the customer (even more applicable where the problem has occurred and can’t be fixed) and thereby repairing the relationship

3. Root cause analysis and solution creation to try and prevent the issue recurring (stopping this kind of bill error)

This paper looks at the value of investing more in the recovery and root cause processes. The value of service recovery

Many organisations have in place processes to deliver some form of “service recovery”. If something goes badly wrong, they recognise the importance of doing something to shore up the relationship with that customer. They see their complaints teams or recovery processes as a necessary evil to “patch up” issues, deal with regulated complaints or ombudsmen and handle issues that have landed with the senior executives or the board. They go beyond the necessity of fixing an individual complaint to try and repair the relationship with the customer. Some organisations talk with great pride about the great feedback they get when they fix problems well. We agree that good recovery is essential. If things go wrong for the customer, fixing them and “making good” in some way is a valid investment of time and effort. Studies show that when problems get fixed and the organisation recognises the time and effort of the customer in some way, the well managed recovery produces high levels of customer satisfaction and advocacy. One internet provider had clear data that NPS for customers after “recovered” complaints was higher than for customers who didn’t complain. The complaints teams in most organisations have an important role to play. They are often some of the most experienced staff and need the ability to turn around the customer's issue. Often that means giving them senior “delegation levels”, access to all relevant systems and the ability to prioritise processes where they need other departments to help. The recovery process is over and above fixing an issue. It may be as simple as an apology but in many companies, it has a financial component such as a goodwill gesture. There are financial reasons why recovery is worth the investment. Part of the value of recovery occurs because unresolved complaints often become more costly and impactful. In some industries, the regulators or ombudsman charge to handle the complaint and charge more if the problem doesn’t get resolved quickly. Recovering from a complaint before they escalate externally produces a positive return. It can be worth an investment in “goodwill gestures” or fee reversal just to stop a customer escalating to a complaints body.

In this social media age, recovery also limits the potential damage that unhappy customers can cause to brand and reputation. The share price of a US airline took a pounding when a plane load of disgruntled customers tweeted about their extended wait times on a flight and the famous “United Breaks Guitars” song and video did immense brand and reputational damage. Social media is a powerful tool for customers to “amplify” any issue they have encountered. Recovery can also produce revenue. One airline with well-structured recovery, was able to demonstrate that recovered customers increased their spending on the airline after being given extra frequent flyer points as a recovery gesture. So, there was a payback on the recovery gesture. Beyond recovery to root cause In many organisations just finding enough staff to fix the customer issues raised in complaints is a challenge. These issues can be complex, they can cover the breadth of processes in a business and can have regulated deadlines from industry bodies. Recently organisations have been fined, for example, for not responding to complaints in the regulated time frames. Just staying on top of complaint handling and recovery processes can be a challenge and leave little or no time to question why the complaint occurred and whether there is a root cause solution. We have seen many complaint teams where their theoretical remit is to “identify and tackle root causes”. However, the teams don’t have enough capacity to get to structured analysis of root causes or solution design and implementation. They seem to get stuck in an endless loop of complaint handling and immediate issue

fixing. It's hard to break out of this “reactive” pattern. Responding to issues and complaints consumes a lot of time and is expensive. Taking the time to understand why this complaint occurred and whether it was because of systemic or one-off issues takes more time. Then there is further work to put a solution in place. However, often the prize is bigger than it first appears.

Analysing the causes of complaints may show three "layers" of value:

1. There may be causes leading to multiple complaints of this type all of which can be avoided

2. There may be another layer of repeat of multiple contacts that don’t cause complaints but are also expensive to handle

3. There may be an avoidable root cause that causes many “first time” contacts that could also be avoided

Understanding the full picture at all three levels may make it easier to justify the investment in root cause analysis and solution design. Related to these hidden layers of cost there may also be hidden revenue leakage that customers who experience issues don’t complain - they either leave or spend less. The total financial impact of issues that cause complaints is invariably far bigger than the cost of complaints alone. Analysing root causes - an example: There may be multiple layers of root causes. We use a “five whys” technique to trace back through the causes. In an example where a customer has made a formal complaint because they haven’t received a refund to which they thought they were entitled. The five why’s analysis might look like this:

Problem: Customer logs formal complaint because the refund they requested had not been received.

Why: The refunds team are understaffed and have a three-week backlog

Problem: The customer called a second time to chase the refund and expectations were not set again

Why: Contact centre staff have no visibility on backlogs

Problem: Customers expectations were not set when refund was requested

Why: Call centre staff have not been trained on how to set expectations

Problem: Customer had to call to request the refund

Why: No self-service option has been set up as the product owner doesn’t want a “request a refund free for all”

Problem: Why did the customer seek a refund on the product in the first place?

Why: The product information on the web site is incomplete and sales staff don’t know how to sell this product so that many customers don’t understand what they are buying.

This illustrates the range of potential solutions. They include partial solutions like training staff to set expectations better and band-aids like more staff to handle a backlog. However, they also illustrate potential deep root cause solutions that impact how the product is advertised and sold that may have a far greater impact. That is why it is worth doing the analysis to work back to the true causes.

The techniques for this kind of analysis are changing as more data is available and tools now exist that can automate process analysis to help build the case for change. These tools can report how processes are really working, the costs and true customer experience and therefore provide more evidence to justify solutions. For example, in one complex financial services process, an analysis toolset showed that customers rarely went through the happy path and that huge amounts of time and effort were spent managing the rework and problem variations, only some of which became complaints. So, the prize for an improved and more foolproof solution was far bigger than the organisation perceived by looking at complaints alone. The cost benefit analysis was able to justify investments that weren’t apparent by looking at just the complaints.

This kind of structured approach to complaints and related “hidden” activity and costs can deliver great value and help mobilise a business around customer issues. In one business the monthly complaints forum was used to mobilise all departments on customer problems. The CEO attended this meeting and held senior executives to account to tackle the real root causes. This company went on to win multiple industry awards and to lower its cost to serve to levels far below its peers.

Summary

Customer recovery is an important process and worth the investment. However, the benefits of going beyond recovery by digging deeper and applying solutions to root causes can be far greater than they first appear. In a brief paper like this we can’t explain all the techniques in detail but if you’d like to know more on any of these methods, please feel free to get in touch at info@limebridge.com.au or call 03 9499 3550 or 0438652396.