Blind Spots in Customer Service

Most financial institutions rely on complaint volumes as an indicator of the company's performance in customer service. Conventional wisdom among executives suggests that declining complaint rates are desirable because they reflect fewer dissatisfied customers. As a result, many institutions develop strategies to address and resolve complaints in hopes of reducing the number of complaints received. Unfortunately this strategy overlooks an important part of the equation: Many customer irritants never make it to the formal complaint stage. In fact, a large percentage of customers who experience a dissatisfying interaction never voice concerns to their financial providers.

In December 2010, the Corporate Executive Board surveyed 5,000 financial services customers across seven countries to shed light on what happens when a customer experiences a dissatisfier. Our data show that financial institutions failed to meet the expectations of 31 percent of financial services customers in 2010. Furthermore, 35 percent of those dissatisfied customers never formally complained to their institution. To put this in context: For a midsized bank, "hidden dissatisfied" customers represent a $243 million revenue risk that executives are missing—a risk roughly the size of that bank's annual technology and marketing budgets combined.

The root cause of this problem is that company emphasis on resolving formal complaints means that the issues of "hidden dissatisfied" customers often are never addressed. In fact, 65 percent of dissatisfied customers who did not complain did not have their issue resolved, creating customer-experience "blind spots" for the business. Despite withholding feedback, however, noncomplaining customers are as likely to defect to a rival institution as customers who took the time and trouble to formulate and submit a complaint. In other words, it's not resolving the complaint that's important, but resolving the problem, even if it must be done in lieu of a complaint.

Anticipate and Facilitate Complaints

While the actions of the "hidden dissatisfied" may seem largely out of executives' control, our research indicates that companies can significantly mitigate dissatisfaction for customers by doing two simple things once an issue arises:

1) Make it easier for customers to complain. Throughout the research process, we tested the factors that would affect the likelihood that a customer will not voice dissatisfaction to the financial institution. We took into consideration customers' personal characteristics, characteristics of their problems, and characteristics of the institution. Of the three, institutional attributes such as availability of preferred channels and staff ability to provide assistance had the biggest impact on the likelihood that a customer will complain.

2) Identify dissatisfied customers in absence of complaints. While making it easier for customers to complain might increase the likelihood that customers will voice dissatisfaction, many progressive financial institutions have stopped relying exclusively on complaint data to drive their issue-management processes. These companies have identified such red flags as missed SLAs (service level agreements) and customer behavior patterns, which signal a potentially dissatisfied customer.

Keep in mind that while making it easier for customers to complain and identifying problems in the absence of complaints are effective ways to mitigate the negative impact of problems once they have occurred, Corporate Executive Board's analysis suggests that for the average customer and the average problem, even the most outstanding problem resolution process fails to improve loyalty sufficiently to compensate for the loss of loyalty the problem generated in the first place.

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