Avoid 'seven deadly sins' to keep your customers: UW expert

WATERLOO, Ont. -- Say your company has built a staff that can only be described as a dream team. You Inc. is rolling in capital, controls genius R&D and produces superb products or services that go to market via the best possible distribution channels on the planet. Revenues are rocketing. Competitors are scrambling to catch up. The market is your oyster.

In short, you're hot, but you can still blow it, says economist and consumer expert Robert Kerton, if you don't pay sufficient attention to the people who can make you or break you -- your customers.

Kerton, a professor and dean of arts at the University of Waterloo, is a popular speaker on consumer issues and is acclaimed for his research on consumer satisfaction and the financial services sector.

You "screw up" by ignoring bad news from clients, Kerton says. On the other hand, it can be "very profitable for firms to restore the faith of a dissatisfied customer."

He offers this prescription, dubbed "The Seven Deadly Sins" as the sure path to ruin for any business or not-for-profit organization:

• Assume you already know what your customers want. You know your products or services are good, so customers don't really have anything to complain about, right? Think again, says Kerton.

"So many of the decisions are made by upper management, and they tend to be people who are articulate, skilled leaders" susceptible to believing "customers are just like themselves and will want what they want and be able to get it."

He cites an American study in which 1,500 people were asked if they think the quality of consumer goods is getting better or worse, overall. Of the general population, just 27 per cent said quality is improving.

However, when 100 business leaders were asked the same question, 66 per cent believe quality is improving. A similar study in 1998 by the National Quality Institute of 10,300 Canadians produced the same result, says Kerton. "The majority of consumers believe quality is getting worse."

• When it comes to dealing with customer feedback, adopt a DPD Strategy –- Delay, Procrastinate and Defer.

Take the complaint, but get incomplete information, then lose it somewhere in the system. Promise anything, but never get back to the customer, and never follow up. Hope that your customer gives up in frustration.

Winning companies do a quick turnaround with customer problems, Kerton says, and they track their reaction times and results.

• Fail to create and institute a Customer Complaints and Redress Policy.

This way, every complaint is ad hoc and no one in your company knows "what we usually do," Kerton says, so they "are forced to operate in a system vacuum." A satisfaction tracking system can be worth its weight in gold. The complaint information is extremely valuable for product redesign. A service change may get a two-year lead on the competition.

His research shows this sin is becoming far less prevalent, especially at larger organizations. Of those he has studied, two-thirds have instituted active policies for customer redress, most in the past decade.

• Have a Customer Complaints and Redress Policy but don't tell your staff.

This, says Kerton, is where companies are likely to wash up on the rocky shore of customer indignation. The Consumers Association of Canada often knows more about a company's redress policy than the company's own employees.

"Bankruptcy courts are littered with the corpses of firms who didn't make sure that their front-line troops knew and understood their own customer redress policy and the importance of customer satisfaction."

• Ignore available information from your employees, particularly those who work directly with customers.

When it comes to customer needs and desires, senior managers don't know best, says Kerton. "It costs very little to gather this information from your team, perhaps by instituting an internal suggestion system" with a way to collect, track and assess the value of information received and reward the staff person who contributes the most valuable information.

• In all your communications to customers, use a strictly legalistic approach.

Use big words and long sentences and you will manage to confuse almost everyone. Biggest transgressor under Sin Number Six that Kerton finds commonly is the product or service warranty, which only a lawyer can understand.

In his 1998 study, Kerton applied readability tests to consumer contracts and found that, on average, credit card agreements in English are written on the grade 16 level.

In French, they are even worse, requiring a grade 18.8 reading and comprehension skill level. Applying the same test to insurance policies, you need to be able to read at the grade 24 level (whatever this is!) to understand many auto insurance policies in Canada. Most life insurance policies, at grade 20 comprehension, are incomprehensible.

However, it is possible, he says, to use shorter words, shorter sentences and clear communication techniques so these documents offer legal protections and are still readable. The Americans are ahead of us in the clear language arena, Kerton says. U.S. credit card agreements test at the grade 11 level, while home insurance policies are at grade 10, partly because "many states now have readability legislation in place."

He says: "If Canadian companies want to be successful in U.S. markets, they'll have to increase the readability and the quality of all their customer communications, particularly documents such as warranties."

• Don't apologize. Don't explain. Don't change. Don't allow staff to solve customer problems, ever. Repeat the first six sins over and over.

Despite the turmoil with customer satisfaction and staff morale that following this prescription causes, Seven Sinners might manage to keep going, in some limited capacity, for some time, Kerton admits. A 1990 study of Canadian companies by UW graduate student Cheryl Smith concludes that in dealing with companies that sin in most or all of the above ways, one in five disappointed customers say they will buy again, despite their ire. The other 80 per cent take their business elsewhere.

But, if the company does anything at all to respond to a customer complaint; "makes any effort to listen and look after that customer, even if there isn't a satisfactory outcome from the customer's point of view," says Kerton, this statistic is reversed -- only one in five will walk.

"Most customer problems aren't deliberate, they're just simple oversights" on the part of company staffers, he concludes. "But you may have to ask your customers for feedback, or you might never learn why they are unhappy. Several studies have shown that it costs far less to please customers than it costs to replace them.

"Pleasing customers isn't all that difficult. As coach Yogi Berra (nearly) said, you can hear a lot just by listening."

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Contact:

Prof. Robert Kerton, dean of arts, UW, (519) 888-4567, ext. 2217

Written by Jackie Johnson for the UW News Bureau

From Jim Fox, UW News Bureau, 888-4444; jfox@uwaterloo.ca

UW Release no. 113 -- July 12, 2000