How To Keep An Angry Customer

An unhappy customer means lost profit. Remember it costs five times as much to create a new customer as it does to retain an old one.
May 27, 2011

What do you do when a customer complains about your business? Most small businesses try and fix it, others ignore, and still others just don't care. A survey that I recently ran across indicates there is one simple thing you can do to dramatically increase your ability to convert the unhappy into the happy.

The study had to do with customer complaints, retention, and the like. The survey came to the same conclusion that many of us have heard before, namely, that it costs five times as much to create a new customer as it does to retain a current one.

Given that, it follows that one of the smartest and most cost effective things you can do to build your business is to take care of current customers. The 5-1 ratio is even more important to keep in mind when a customer complains because that same survey contained this statistical nugget: 95 percent of dissatisfied customers would do business again with a company if their problems were solved quickly and satisfactorily.

That is actually incredibly useful information. Given that most people who complain are typically very fed up by the time they get to the complaint stage and their chances of staying on as a customer are minimal, that you can actually keep them given the right effort is amazing. And more importantly, it will cost five times as much to replace them if you don’t.

So what does that mean? Make them happy. Even if you disagree with the complaint and complainer, too bad. The numbers don’t lie—95 percent of your unhappy customers will stick around if you just make them happy this one time.

Let’s do the math. Say that you have a busy store and on average, you get one complaint a week. That’s about 50 unhappy customers a year, and let’s further guess that 40 are mad enough to stay away. It costs you $50 to keep a customer. That means that keeping those 40 customers would normally cost you $2,000. But replacing them will cost you 5x that—a whopping $10,000. That is, of course, unless you resolve the dispute quickly and fairly.

Now, does this mean that the customer is always right? Of course not. But who cares? If you want to save some dough, you may have to swallow your pride on occasion and bite the bullet.

So, just how do you convert the angry?

1. Ask the customer how he or she would prefer the problem be resolved, and resolve it that way if possible.

2. If a customer wants a refund, give it to them.

3. If you are convinced that your business is not at fault, it is still smart to honor a reasonable request. Explain to the customer how similar situations can be avoided, be humble, and express regret that the customer had a negative experience.

4. Even if you disagree with the complainer, offer the customer a gift certificate to make amends. That will go a long way into making them happy enough to stick with you and it costs a whole lot less than the cost to replace them.