Monday, 28 March 2011

Banking complaints don't try and shut them down - encourage them

Britain's banks are fielding nearly 7000 complaints per day according to the FSA, a rise of 3% over the previous six months. Complaints about Payment Protection Insurance rose by 62%, however it is still complaints about the core banking product, the current/checking account that received the most at 474,456.

Having come from Santander (second in the table for the number of customer complaints), whose reputation for taking cost savings over customer service, Antonio Horta-Osorio, new CEO at Lloyds Banking Group, has not taken long to signal that complaints are going to be treated very seriously at the new Lloyds Banking Group. This was heralded by the announcement that the executive responsible for addressing customer complaints, Martin Dodd, was to be a direct report of the CEO (see ). This has been followed by Horta-Osorio's internal announcement that he is aiming to reduce complaints by 20% in the first half of the year. The new targets – which aim to reduce banking complaints from 2.1 per 1,000 customers to 1.7 by the end of this year and refer 30 per cent fewer problems to the Ombudsman – were revealed to 5,000 senior staff on Friday.

Of course the cynic would say that one way to reduce complaints is to make it more difficult for customers to complain. Some would argue that many banks have already done this by making it difficult to find out how to complain on websites, allowing complaints only through a branch and generally making it inconvenient to complain. The second way that banks have traditionally reduced complaints is to re-define what a complaint is, so for instance unless the customer actually uses the world 'complaint' in a conversation or in writing then it isn't a classified as a complaint and low and behold complaints have gone down!

However playing these sorts of games to look good only has short term benefits and is missing the point entirely. In an increasingly digital world, where branch visits are dramatically down, opportunities to interact with customers are becoming increasingly rare for banks. Rather than discouraging customers from complaining, banks should be actively making it easier for customers to complain, to provide feedback. As Bill Gates says "Your most unhappy customers are your greatest source of learning".

Most customers don't complain, on average only 1 in 26 will actually lodge a complaint.. They either put up with poor service or a problem, or take away their business, without the bank even being aware of the issue. In the meantime they will typically tell 10 other people about their complaint.

However a complaint handled well and, most importantly in the eyes of the customer, fairly, can turn the complainer into an advocate for the bank.

The challenge has been that traditionally the role of the executive responsible for handling complaints has ususally been assigned to the executive who's career in the bank is over - it hasn't been seen as being important. Given that it costs five times more to acquire a new customer than it does to retain one, that traditional thinking is flawed. Rather than the putting the journeyman on managing complaints, banks should be putting their high-flyers, those who see their careers in the upper echelons of the banks into those roles. This is why the appointment of Martin Dodds at Lloyds Banking Group is to be applauded. Likewise whereas the staff members allocated to managing customer complaints have tended not to be the high performers from branches or call centres, the opposite should be true - those with the best interpersonal skills and the highest levels of empathy should be put into the complaints handling teams and be empowered to do something about the complaint, not having to hand it off elsewhere.

When handling complaints it is important that the complaint is not looked at in isolation, but rather in the context of the customer's total relationship with the bank, but not just the current relationship, but the potential life time value of that customer to the bank. This requires significantly more sophisticated customer insight and analytics than is currently found at most banks, but will ensure that the most valuable customers have the most effort put in to resolving their complaint and hence retaining them and, ideally, making them an advocate for the bank. A single view of the customer and their contacts with the bank is only the starting point, one that is missing for many banks. A senior banker from a global bank recently recalled that one of their ultra high rich customers had a problem with their credit card. The customer's complaint was moved from function to function without any part of the bank realising their status and their complaint took over nine months to resolve. Fortunately for this bank the customer was sufficiently forgiving that they did not take their significant portfolio away (yet), but how many of his wealthy friends did he tell about his experience bank and what was the consequent impact on the bank as a reuslt of this?

The most effective way of reducing complaints is to get feedback from customers before they complain. In the digital age this is far easier than it has traditionally been, whether it is prompting feedback by an SMS message, an email, a phone call or through social media, getting quality feedback, and acting on it gets results. A company in the telecommunications industry has shown that by implementing SMS  feedback following call centre interactions they got a 30-60% reduction in complaints. Not only were they able to reduce the complaints, but they were able to analyse the feeback and proactively re-design their processes to remove the causes of irritation.

Important to getting complaints down and customer advocacy up is to get the customer facing staff incentives right. Simply rewarding customer facing staff for a reduction  in the number of complaints will lead to the sorts of behaviour attributed to the cynic above. Linking the incentives to an improvement in the Net Promoter Score (Customer advocates minus customer detractors) is a far more effective way of improving behaviour and performance of customer facing staff. Particularly when the feedback on interactions, mentioned above, is specific and identifies the customer facing staff who dealt with the specific customer. Not to be used as a stick to beat the staff member with, but rather for positive feedback and coaching purposes. There are straight forward innovative technologies available today to support this.

So why the focus on complaints and why now? Certainly the banks are undoubtedly the most unpopular they have ever been with consumers, fuelled by constant media attention. Trying to stand out from the crowd on the quality of the service provided to customers is one of the few ways for retails banks to differentiate themselves. Getting customer complaints down helps to address this.

Secondly the Independent Commission on Banking is due shortly to give an early indication on which areas there recommendations are likely to be in. If one of their recommendations is to limit or even reduce the market share of banks such as Lloyds then it will be even more important for the banks to retain their customers as they may not be allowed to take on new customers, so customer satisfaction will become increasingly important. The Independent Commission on Banking will also have looked abroad for best practice. In Australia the banks are regularly ranked by customer satisfaction by segment e,g. consumer, micro SME, SME, business banking, etc. See Should the ICB decide to recommend that the UK should follow the Australian example then addressing complaints will become an even higher priority.

The announcements by Lloyds Banking Group are to be welcomed by consumers, following hot on the heels of the NatWest Charter. There is a lot of understandable consumer cynicism to overcome, but implemented sensibly, honestly and pragmatically this should be good not only for Lloyds customers, but also retail banking customers across the UK as the bar is raised on providing good customer service.


  1. I agree with what you've put forward in terms of timeliness and availability of unprecendented information about our clients. I think that the foundation of the relationship should not be the value/worth of the customer but more the appreciation of having them at all. Customers have too many choices in the marketplace, let's focus on keeping the ones we've got. Customer retention costs 6 times LESS than recruitment of new clients.

  2. Michelle, I agree customer retention is important for many reasons not least of the cost of retention versus acquisition, however there may be some customers which banks don't and won't make any money from and therefore whilst handling their complaint professionally may not be interested in retaining. The point I was particularly making was that handling complaints needs to be in the context of what the bank knows about the customer, hence the example of the UHNWI customer who the credit card division handled so badly since they had no customer knowledge.


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