Effective complaint handling brings 1000% ROI
New SOCAP research reveals the return on investment of good complaint handling can be as high as 1000% for organisations.
The SOCAP Australia/ University of Newcastle Return on Investment of Effective Complaints Management Report launched in March 2018 found that every dollar invested in complaints handling has potential returns of up to $10 for the organisation.
This ground-breaking research shows the potential financial returns of handling complaints well, while also demonstrating that ineffective complaints handling can result in significant losses for an organisation.
Other studies have measured customer retention, repurchase value (the value of future sales from a retained customer) and stock returns when attempting to measure ROI, however, the Return on Investment of Effective Complaints Management Report found the greatest returns are generated through ‘extended benefits’, including: customer retention, staff satisfaction and customer lifetime value, as well as product improvements made as a result of feedback.
The study found that through these ‘extended benefits’ the potential returns of effective complaints handling are higher than previously thought.
The report provides managerial implications and recommendations which can assist organisations in measuring and monitoring their ROI, as well as maximising their ROI, through harnessing extended benefit. Specifically, fields of data that should be collected in order to measure ROI are detailed.
“This report makes an important first step in delivering a framework to assist organisations to verify once and for all that complaint departments are not merely ‘cost centres’,” said University of Newcastle’s Professor Tania Sourdin.
About the research
The research team studied the complaints management processes of two participating organisations and analysed de-identified and aggregated complaints data from these organisations. Hypothetical scenarios where then used to compute the ROI of effective customer complaints management with the help of the data provided by the organisations and estimates derived from previous research.
The ROI calculations for the hypothetical scenarios showed that the greatest ROI occurs when there is extended benefit generated from the customer complaint management process. Extended benefit is derived from improvements of the organisation’s people, process and products, and includes benefits such as customer satisfaction, customer retention, increased Customer Lifetime Value (CLV), positive Word-of-Mouth (WOM) and greater staff satisfaction.
This study makes an important first step in delivering a framework to assist organisations to verify once and for all that complaint departments are not merely ‘cost centres’. On the contrary, the positive ROI illustrations in this study clearly indicate the substantial financial returns to the organisation when effective customer complaint management is delivered, particularly when extended benefit is generated.
The research project’s aims were to:
- Identify appropriate economic models and approaches in the academic literature to measure the direct and indirect costs and benefits of complaint systems and processes;
- Establish what data is currently collected by participating organisations in the process of handling complaints;
- Document the different kinds of tools and measurements that these organisations currently use to assess the ROI of their complaint systems;
- Identify the costs and benefits of complaint handling that are not usually captured under the current measures; and
- Create tools that can more accurately measure the ROI of complaint systems and processes.
The ROI of Effective Complaints Management Report was undertaken by the University of Newcastle for SOCAP Australia. An industry based collaborative steering committee included NSW Ombudsman, NZ Ombudsman, IAG, NSW Fair Trading, and Icon Water.