Customer Complaints: Why They Happen, How they Impact Revenue, & How to Keep Them from Becoming Chargebacks
Even if you sell great products, offer real value, and provide exemplary customer service, both you and your team are only human. That means occasional mistakes will happen.
You’re also dependent on at least a few outside services whose operations are beyond your control. For whatever reason, there will always be occasional situations where the customer isn’t happy.
Knowing how to handle customer complaints can have a huge effect on your relationship to your customers, as well as your reputation. That’s why it’s crucial that you have a process for addressing customer complaints before they happen.
In this post, we’ll look at some of the more common complaint types, and suggest methods of both prevention and response. We’ll also provide valuable insights into how and why simple complaints often escalate to chargebacks, and how to stop that from happening.
Recommended reading
- How Do Banks Investigate Disputes on Credit Cards?
- Payment Reversals: How are Refunds & Chargebacks Different?
- The Bank Dispute Process: A Step-by-Step Guide
- Chargeback vs. Refund: Know the Difference?
- Chargeback Disputes: How to Respond to Invalid Chargebacks
- What are ACH Disputes? A Guide for Consumers & Merchants
What is a Customer Complaint?
On the surface, that seems like a dumb question: obviously a customer complaint happens when a buyer has a problem, and lets you know. When a customer — you know — complains about something.
Some mistakes will still happen, and at least some shoppers will bring their complaints to you. That can be frustrating, but it’s also a great opportunity to grow your relationship with that customer. Listening to them, relating to them, and quickly resolving their problems will go a long way toward building brand loyalty.
That said, prevention is still the real goal, and customer complaints, as a whole, need to be considered as much more than one person’s individual issue. Instead, think of an individual complaint as one piece of crucial customer service data.
Each grievance serves as an indicator of how you’re relating to customers overall. Complaints can help you identify areas of customer friction. This lets you proactively resolve issues, optimizing service and preventing future issues.
Types of Customer Complaints
Every situation is different, of course, but most complaints fall into one of four general models. This is what we can refer to as the “Complaint Continuum.”
Productive-Constructive
Productive complaints that provide useful feedback by pointing out an issue, and in many cases also suggesting a potential solution.
These benefit your business by highlighting real issues in a calm, organized way. Feedback will be productive, even if it may sometimes be unnecessarily detailed.
Passive-Chronic
Chronic complaints can be issues that continue to be raised by multiple customers. In effect, it’s one complaint raised repeatedly by the same customer.
This can be tricky because many customers dislike confrontation, and may not even attempt to contact you directly, which means the issue in question may be more serious than you realized.
Expressive-Venting
Venting complaints tend to be more personal. They’re more about relieving the customer's frustration, although at times they can also highlight real issues.
Expressive complainers can be detailed, but that may be simply because these individuals are motivated to talk, so not all issues raised may be valid. These complaints may be frustrating, but it’s better that they vent on you, rather than on social media.
Aggressive-Malicious
Aggressive complainers are expressive, too, but they’re also controlling and loud. They know you just want them to go away, and they leverage that to their advantage.
Some complaints are outright malicious, and are designed to intentionally hurt your business. An example would be posting a scathing review that misrepresents an issue, to benefit a competitor.
How Customer Complaints Impact Revenue
It's hard to quantify exactly how much customer complaints are costing your business. There are immediate, measurable losses, such as refunded orders, return shipping, etc. But, even a single complaint can hurt you more than you realize.
Only 4% of customers with a complaint will actually report it to the merchant. That doesn’t mean they’re going to keep quiet, though; according to the Office of Consumer Affairs, dissatisfied customers typically tell between 9 and 15 other people about their experience.
That could mean a whole host of disgruntled folks are out there talking down your business, and you don't even know about it. Regaining customer trust isn’t easy, either. It can take up to 12 positive customer experiences to make up for just one negative experience.
Social media compounds this problem exponentially. 98% of consumers read online reviews for local businesses. A single negative review or blog post could end up being read by thousands. Again, that can do serious damage to your reputation, even if most of your customers are happy.
There’s also the matter of chargebacks. Reputational damage from customer complaints will be felt over the longer term, but chargebacks will probably be the biggest immediate financial impact.
Chargebacks are forced returns made by the issuing bank. They do more than just cost you a sale: you’re also likely to lose the merchandise, plus any shipping fees or other associated costs. Then there’s the non-refundable chargeback fee, and perhaps even other fines. The losses can add up quickly.
What’s worse, having too many chargebacks on your record will only add to any reputational damage already caused by customer grievances. Not all chargebacks stem from complaints, but customer service directly affects your chargeback rate. It’s a threat you can’t afford to ignore.
Learn more about chargebacks10 Common Customer Complaints & How to Respond
We’ve discussed how complaints can impact your business. Next, let's look at some of the most common complaints logged by merchants, and provide suggestions for how to prevent these complaints:
The Problem: If an order doesn’t show up when expected, it’s easy for impatient buyers to assume the worst.
The Solution: Provide reasonable delivery expectations. Supply tracking numbers, and remember to keep customers informed of back orders or unexpected delays.
The Problem: Time-sensitive orders can be delayed to the point where the customer gets upset, especially if they paid for expedited shipping.
The Solution: Provide reasonable delivery expectations. Supply tracking numbers for shipments. Again, immediately inform buyers of any delays and offer them the chance to cancel.
The Problem: Shipping items that are the wrong size, the wrong color, or in some other way incorrect means you’re obligated to make things right.
The Solution: Deploy quality control protocols to double-check orders before shipping. If the wrong order does get shipped, offer a refund or exchange at no expense.
The Problem: Merchandise that arrives broken or non-working may also be your responsibility, unless you can prove negligence by the carrier.
The Solution: Make sure all orders are securely packed. Containers should protect the goods, but also be firm to prevent goods from being jostled. Also, consider insuring orders above a certain dollar value.
The Problem: Buyers may complain to you about being charged more than the quoted total of their order, or that a pending charge was more than they’d expected.
The Solution: Implement quality control (QC) procedures in your billing department to prevent double billing. Resolve any technology or recordkeeping issues immediately.
The Problem: A customer was promised a credit, but it doesn’t appear on a buyer’s statement when expected.
The Solution: Immediately issue all credits for refunds, order cancellations, etc. Inform the customer when the credit posts.
The Problem: 71% of online users say they “never” or only “sometimes” read service terms. They may be caught off-guard by return limits or restocking fees as a result.
The Solution: Make all transaction policies clear, concise, and easy to access on your site. Require that customers accept conditions prior to checkout.
The Problem: Automated billing customers may forget to unsubscribe, or forget they even signed up for a service in the first place. Or, they may not understand the process for properly canceling their service.
The Solution: Give ample advance warning before you charge a customer’s card. Make canceling a subscription at least as simple as signing up.
The Problem: Your customer already has a complaint that they’re trying to address. The inability to talk to anyone about it just adds fuel to the fire.
The Solution: Use live, trained agents to answer phones, ideally within 3 rings. Respond as quickly as possible to emails and social media comments.
The Problem: This one could be tied to any of the above. Talking to an agent who doesn't listen or resolve the problem can be more frustrating than not getting any help at all.
The Solution: Employ knowledgeable, patient, and empathetic customer service agents. Provide ongoing training on your products and policies.
First-person (friendly fraud) chargebacks, whether filed innocently or maliciously, can account for between 40% and 80% of all eCommerce fraud losses
Whether they call you first or not, any of the above situations could lead a customer to call their bank and dispute a transaction. However, keep in mind that customer disputes are not always based on complete honesty.
As we said, there are only two legitimate reasons for a consumer to dispute a card transaction. That won’t stop unhappy customers from feeling justified in using misinformation to file an invalid claim. Even if they’re not aware of it, they’re committing friendly fraud, meaning you’ll wind up facing a chargeback fee.
Additional Tips for Customer Complaint Resolution
The above suggestions can help you proactively prevent some common complaints (and the resulting chargebacks). However, taking a more comprehensive approach to addressing complaints can be tricky.
Miscommunication will cause more customer/merchant issues than any other factor. It’s ridiculously easy for two people to hear the same conversation, but be miles apart in their interpretations. That’s why it’s essential to have consistent, company-wide procedures for customer complaint response.
Protocols should be designed to make communication as clear as possible, while ensuring that agents don’t contradict one another. When managing complaints, remember to:
#1 | Listen
Nothing will calm an irate customer more quickly than feeling they are being listened to. Pay careful attention to the details of the complaint. Try not to interrupt the consumer until they’ve made their case.
#2 | Empathize
We’ve all had to deal with service agents ourselves. Try to look at the situation from a customer’s perspective. What would you want if you were calling with an issue?
#3 | Echo
Rephrase the complaint and echo it to the customer. Ask questions to make sure you’re understanding the core of the issue.
#4 | Apologize
Even if the customer is in the wrong, it’s a good idea to express apologies for the inconvenience.
#5 | Resolve
Work to find a resolution as quickly as possible; ideally, while still on the phone with the customer.
#6 | Monitor
Keep track of the case, and keep following up with the customer until you’re positive that they are happy with the outcome.
#7 | Share
Complaints are rarely attached to only one person or department. Make sure the complaint (and its resolution) is shared with your fulfillment team, the Accounting Department, or any other person or group with a direct stake.
#8 | Record
Log everything that happened for future reference. Later, you can reevaluate the situation and see if there’s any lessons you can take, or adjustments to policies and procedures that need to be made.
Making the Most of Consumer Complaints
If there is any good part of receiving customer complaints, it is that it provides you with feedback that can be used to strengthen your business and help avoid chargebacks.
You’ll want to collect and analyze all the complaints you get, looking for trends and patterns. For example, is there a page on which a high number of visitors abandon their carts? If so, why? Are there a number of complaints over orders shipped with a certain carrier? Is that carrier doing anything different?
It’s also a good idea to prepare concise, informative answers to common questions. These can be helpful to both your sales representatives and your customer service agents. Once you have those answers, you can use them to create an FAQ page for customers.
Finally, consider calling yourself. Track what the customer experiences when attempting to contact your customer service line. Are there long wait times? Is your automated directory too confusing? How hard is it to reach a human rep? If filing a chargeback is easier than dealing with your company, customers will go that route.
In the end, you need to understand customer complaints and up your customer service game. This can go a long way toward helping you build customer loyalty, avoid chargebacks, and ensure your business has a bright future ahead.
FAQs
What are the 3 most common customer complaints?
Customer complaints can be broken down into many specific subcategories. That said, the most common things customers complain about are product/service problems, delivery issues, and indifferent/ineffective customer service staff.
What to do when customers complain?
Listen to the customer and try to empathize with their position. Express apologies for the inconvenience, and work to resolve the issue as quickly as possible. Follow up with the customer to ensure they are satisfied, then log the data for later analysis.
What not to do with customer complaints?
The biggest thing not to do is ignore or dismiss the complaint. Don’t make callers feel like they’re making a big deal about nothing. Don’t offer excuses, deflect, or try to shift the blame.
Why should you never ignore customer complaints?
The main reason to never ignore customer complaints is that people hate being ignored. If they have that impression, they’re likely to hit back with bad reviews and cause reputational damage. Plus, ignoring complaints means you’re missing a chance to turn a complaint into a positive customer experience.
