Starting with 8,063 in 1987, the number of consumer complaints registered with the Korea Consumer Agency has surged by 96-fold in the past 25 years. In particular, the figure increased from 309,545 in 2006 to 778,000 in 2011, a 2.5-fold increase that coincided with the introduction and explosive use of smartphones, social networking services, online sales channels, etc.
The arrival of the smart era has fundamentally altered the scale, scope, speed and potential impact of consumer complaints. This requires companies to recalibrate the way they respond.
Naturally, mishandled treatment of consumer complaints can cause huge financial loss and a tarnished reputation, as shown by Japanese automaker Toyota and Kryptonite, a U.S. maker of bicycle locks. The U.S. government fined Toyota a record $32.42 million in 2010 for failing to properly report defects in its vehicles. Toyota’s market value also plunged 18 percent in one month. The automaker was slow to react to the complaints of drivers and denied for months that any serious problems existed. Kryptonite suffered from consumer complaints that its locks could be opened with a cheap pen. The company spent $10 million, or 40 percent of its annual profits, in handling the problem.
Consumer complaints in the smart era
The expansion of smart devices and services, distribution channels and online platforms has changed the nature of consumer complaints in four ways: Smart products and services are under scrutiny themselves; online forums about products have proliferated; discontent customers can amass online rapidly and; a single person can sway opinion against a company if he/she has the charisma and/or star power to captivate an online audience.
● Diversifying targets of complaints
The spread of mobile and Internet services has led to an increase in the number of related devices and time using these services. The smartphone penetration rate in Korea is expected to reach 80 percent by the end of 2012 from just 1.7 percent in 2009. The average monthly time spent using smart devices is 81 hours, only 10 hours less than watching TV.
A decade ago, credit card services were the main target of unhappy consumers and among the top five products with the most complaints.
Only mobile phone service was digital related. In 2011, four of the top five were linked to digital services and devices.
There are more than 500 social commerce providers in Korea, with 28 percent of the population having used them and 77.6 percent using them more than once a month. Online transactions have grown to 30 trillion won, led by Internet malls and social commerce. Clothing, home electronics and telecommunication devices take up most of the sales. The expansion of digitized distribution channels has given rise to complaints about payments, applications and contents.
More consumers are raising complaints about social commerce, micropayment via mobile phones and smartphone apps. The number of complaints on mobile micropayment rose to 1,323 cases in 2011 from 629 in 2009; complaints on social commerce surged 4,931 percent over the two-year period, from 35 cases in 2010 to 1,761 in 2011; 48.2 percent of premium apps buyers have experienced damage and complained. Complaints about digital content are also on the increase, and the content of complaints is also diversifying. Content complaints increased 10-fold in an eight-year period from 1,472 in 2002 to 14,520 in 2010. The issues shifted from games to education, security, music and peer-to-peer file sharing systems.
● Online complaint platforms
Various Internet platforms are acting as arenas for consumers to gather and express complaints in real time. The large pool of subscribers to YouTube, Twitter, Facebook and Kakao Talk and other platforms guarantees a ready audience.
Consumer groups and third-party organizations also provide online platforms for consumer complaints, including Better Business Bureau (www.bbb.org) and Ripoff Report (www.ripoffreport.com).
The digital environment often stirs up viral upsurges via real-time posts on a product or service. Pete Blackshaw, an expert in online marketing, said, “Satisfied customers tell three friends, angry customer tells 3,000.”
● Unhappy customers form groups online
Consumers are grouping in online communities to raise complaints, and their power is also expanding. Nearly 74 percent of those who responded to a survey by Embrain and Trend Monitor, an online market research firm in Korea, said they are members of an online community. They included 92 percent of the teenage girl respondents.
Among the community subscribers, 28 percent are members in three to five communities, and 21 percent in six to 10 communities. Furthermore, the so-called “Crowd Clout,” or a group of customers who share common grounds and exercise their collective influence, is expanding.
● Influence of individuals
The expansion of smart devices and social media has enabled hordes of anonymous people to communicate simultaneously in real time. Teens and 20-year-olds were the biggest users of online communication before, but the spread of smartphones has prompted instant messaging by older people. Those aged 25-34 take up 44 percent of the total Facebook users in Korea, and people aged 35-44 account for 12 percent.
Digital snipers have also emerged who attack specific companies through new media. Various forms of digital snipers exist inside and outside a company. They are either a customer who has complaints, an employee unsatisfied with the company, or a force that goes against company interests.
Tips for handling consumer complaints
Properly handling complaints has become all the more important for businesses. Beyond the obvious need to keep customers happy and to protect brand value, complaints can also be the source of ideas to improve a product or even create new businesses. Thus, in the current period of low growth, carefully listening to complaints can be a low-cost way to spur new growth.
The ways to extract value from complaints involves internal analysis, external assistance, proper listening and changes in perspective.
● Build preemptive response systems
To minimize damage costs from customer complaints, preemptive response systems should be set up. To this end, businesses need to manage complaints in a scientific manner, by treating them not as a feedback that is answered and forgotten but as accumulated data. Big data2 can be used to integrate and analyze both structured and unstructured data3 related to complaints. In addition, virtual training should be promoted against potential digital snipers to strengthen response capability and minimize dangers.
● Communicate authentically
Companies have to provide authentic feedback to customers when they raise complaints. Companies tend to try to handle complaints from a rational perspective, using rehearsed, formula responses to complaints. But this can aggravate the situation because it fails to appreciate the emotions that may be underlying a complaint such as anger, fear and anxiety. Responses should therefore have a large dose of empathy. Reasonable complaints should be accepted. Mistakes admitted. Apologies and compensation extended. A sincere response will bring back customers, but lame excuses will cause bigger complaints. According to John Goodman, the store revisit rate by customers who receive no problem with a product is 10 percent, while customers who received sincere handling of complaints revisited at a rate of 65 percent.
● Seek outside support
The nature of many consumer complaints is oftentimes too difficult to resolve quickly. A support system involving outside stakeholders may be needed to effectively deal with consumer complaints and help reduce them. Microsoft’s Most Valuable Professionals are outside experts with deep knowledge on the company’s products and services, who support customers to efficiently use the products, while sharing their product knowledge to raise customer satisfaction.
● Changed perspective to create opportunity from complaints
Consumer complaints should be regarded as a source of inspiration, rather than an unwelcome part of doing business. This way of thinking, of course, will require a change in perspective. Companies need to devote considerable time to reflect on complaints, not only to keep customers satisfied, but to discover new ideas on how to improve existing products and services or open thinking about a new product or service.
The article was contributed by Samsung Economic Research Institute. ― Ed
