A study of 8,500 consumers encountering 16,000 problems indicates several major shifts in customer experience.
The study of grocery categories for five major CPG companies shows:
- While most product complaints go to the retailer, face-to-face service has the worst outcome among all channels, damaging loyalty.
- Manufacturers only hear about a small percentage of problems, usually 1 out of 10-16 problems for each complaint received. This ratio is termed the multiplier of complaints to problems in the marketplace.
- This poor experience is exacerbated by the recent period of inflation. Problems with value including price increases and package shrinkage have become the top issue in some categories.
- Complaints about these value issues are the least effectively handled.
Store brands have lower rates of complaint when problems occur than name brands, probably due to lower expectations of both the product and the stores’ response. Conversely, leading name brands achieve higher satisfaction and levels of delight when consumers do complain to the manufacturer. - Surprisingly, digital channels consistently achieve higher satisfaction than telephone and face-to-face channels.
The study focus
A projectable panel of 8500 consumers were asked about major categories of products manufactured by Colgate Palmolive, Kellanova, KraftHeinz, Pepsico and Nestle Purina. As consumers responded about an average of two different categories, over 16,000 total problem observations were recorded. This study, fielded in December 2023, is one of the largest customer experience benchmark studies ever published.
The study looked at experience with major grocery Name brands as well as store brands. Food products (chips, snacks, packaged meals and beverages) as well as pet products, cleaning and oral care products were explored. Problem experience, complaining behavior and channels used and outcomes, including satisfaction, repurchase, word of mouth and social posting were quantified.
Problem experience is up and complaint rates are still low
46% of consumers reported a problem, compared to half that level in the 2020 National Rage Study food subsample sponsored by KraftHeinz. Value issues (price, smaller or partially filled package) were paramount in food and pet products when such issues were almost non-existent in previous studies. Quality and taste issues were the next most important issues in all categories after the value issue.
Only about one quarter (26%) of consumers complain about their most serious problem but the rate varies by type of problem with complaint rates about value being the lowest.
40% of the 75% of consumers who did not complain reported that they were less likely to continue purchasing the product at the same rate (30% decline in purchase rate is a conservative estimate of this impact) with about one fourth of them, 10%, indicating they would stop purchasing completely. This means that for every ten consumers who did NOT complain, four of those customers is lost (10 X 0.10 + 10 X .9 X 0.30 = 3.7 ~ 4 customer lost). Therefore, there is a huge revenue opportunity is getting non-complainants to complain- assuming the problems are well handled.
Three times as many consumers who complain end up increasing their purchases of the brand due to the stellar responses to traditional issues when compared to purchase behaviors of non-complainants, 40% of which significantly decrease or completely stop purchases as noted above. The obvious conclusion is that aggressively soliciting complaints is a very profitable strategy – fewer complaint calls is not necessarily best vs. not hearing from the customer.
Also, complaints are spread across a range of channels and recipients so that any one channel only receives one complaint for every 12-20 problems in the marketplace.
Consumers complain more often to retailers but are less satisfied, especially for face-to-face complaining
Overall, one fourth of consumers complain about their most serious problem.
- 57% of consumers who complained communicated to the retailer where they bought the product.
- Only 27% of consumers with problems complained to the manufacturer via a half dozen channels. Therefore, the multiplier for complaints to any one channel is at least 10 problems in the market for each complaint received.
- Surprisingly, 7% reported they complained first to a governmental or non-governmental agency.
- An additional 7% simply posted online, venting their frustration but not directing the complaint to the company.
Complaint channels vary but face-to-face is the second most prevalent channel, as shown in the chart below. Email and live chat are the other top channels. Telephone is now the sixth most prevalent channel consisting of 17% of contacts overall but only 11% for name brands.
Complaints to retailers are usually submitted face-to-face or to the customer service unit via email or phone. Face-to-face complaining leads to the lowest levels of satisfaction with 43% reporting that they were only mollified or dissatisfied, resulting in damage to loyalty to the brand. Manufacturers are taking a huge risk allowing retailers to handle complaints about their brand. Further grocery retailers are facing serious challenges in complaint handling overall.
On the other hand, complaints submitted to manufacturers lead to higher levels of satisfaction and, in some categories, record levels of delight. Satisfaction and delight among digital complainants were 10-15% higher than telephone complainants. It may be that delays or struggles getting to a human detract from responses. Ease of complaining and escalation difficulties were a key cause of consumer rage in the last CCMC Consumer Rage Study.
One manufacturer achieved 45% delighted customers, 35% of which said they had increased their purchases as well as telling six people of their experience.
Digital channels were as successful if not more successful in creating delight. This matches the CCMC National Delight Study which found across all industries that digital is just as effective as telephone communications. I suspect this is because many delight actions are communication of substance, transparency, honesty and education.
Poor complaining experience causes negative word of mouth and major loss of sales
There are two major economic impacts of poor customer experience, revenue and word of mouth. If the customer does not complain, an average of one out of five customers is lost so the revenue loss of an unarticulated complaint is 20% of the value of the customer. If a customer complains and receives a a poor response, damage grows to at least 30% of the revenue value of the customer. One out of three customers is at risk. A failed escalation results in 50% damage, or one out of two customers is lost. Not only did the company have a bad product, but the struggle to get resolution indicated that the company didn’t care.
Two thirds of consumers did not tell friends about their issue but the one third who did reported they told an average of seven people. Negative WOM can kill a marketing program. On the other hand, positive word of mouth (PWOM) is the most powerful marketing dynamic. Companies like USAA, Chick-fil-A and Harley Davidson acquire more than 70% of their new customers via WOM. Easy escalation is a powerful PWOM generator. Escalation struggle, can kill a product.
Encouraging complaints usually provides a 200-300% ROI – its better to hear the complaint than not hear from the customer.
There are three reasons why manufacturers should invest in aggressively soliciting and handling complaints, revenue, word of mouth and shelf space.
Revenue: The ROI modelling of Customer experience impact is very straight-forward. When Finance objects to making complaining easy or to encourage escalation to a human costing $25, place that within the context of a customer worth $500 or even thousands of dollars. Help Finance to do the math – is it worth saving $25 while losing $250 (50% X $500)? At minimum, the ROI of easy escalation is 200%, and in the case of a customer worth $500, $83/$25=330%, assuming a 33% gross margin.
If the complaint- handling experience creates delight, which can happen over 33% of the time, the consumer purchases more of the product ( in many cases 20-50% more). They shift from an average to a heavy user worth much more.
Word of mouth: Avoid negative word of mouth to 2-3 people per problem (33% tell seven people) which will result in at least one of them slowing or stopping purchase of the brand.
Create a positive complaint resolution experience where 40% are delighted resulting in winning at least one new customer.
Actions for Retailers and Brand Manufacturers
Retailers must take four actions to give service comparable to the product companies as well as prevent future problems.
- Better train and empower staff to handle face-to-face complaints. While a refund is expected, consumers now want three other things: an apology for the time required to complain, an explanation (for higher prices for example) and assurance that their complaint will have impact (this will be reported to the supplier).
- Encourage complaints –especially for store brands, use messages like satisfaction guaranteed and signs in the store that say, “We can only solve problems we know about!”
- Intensively measure the effectiveness of complaint handling and quantify damage by type of issue. Proactively explain changes in price and value – the covid era has made consumers angry. Stress highest quality and/or best value we can find.
- Provide manufacturers with data to address issues including quality, packaging and complaints about value. Such data can be persuasive and many manufacturers’ quality departments are hungry for such data.
Manufacturers’ brand strategy must address four areas:
- Set proper consumer expectations and educate consumers on value and quality with better labeling and sales messaging.
- Aggressively solicit complaints to siphon complaints away from retailers so you can place the brand imprimatur on the consumer experience.
- Enhance consumer insights measurement in terms of both unarticulated complaints and problem handling effectiveness via digital channels as well as telephone and social media. The CX business case based on the multiplier and market damage is much more compelling than just consumer satisfaction.
- Like store customer service staff, manufacturers consumer affairs staff must have better training and empowerment, with specific flexibility to handle difficult issues. While a refund is expected, consumers also now want three other things: an apology for the time required to complain, an explanation (for higher prices for example) and assurance that their complaint will have impact (this will be reported to our continuous improvement and operations staff).
