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ombudsman news

issue 90

November/December 2010

learning from complaints

I'm now seven months into the job, having become chief ombudsman and chief executive at the end of March. That's long enough for me to have got a feel for the organisation and the environment we operate in - but short enough to still have a fresh pair of eyes.

When talking to financial services businesses - large and small, one of the most marked differences I've observed is in their attitude towards the complaints they receive. The more astute amongst them realise that effective and well-managed complaints-handling pays dividends for them - not just for their customers. There's nothing new about this idea - and it's what a number of researchers have been saying for quite a while. So it's been a surprise to me to find some businesses still clinging to outdated and negative perceptions about customer complaints.

According to Dr Janelle Barlow of the University of California at Berkeley:

Complaining customers give businesses a key opportunity to uncover problems. Resolving these problems can result in the conversion of these complaining customers into loyal ones who feel bonded to the company and will continue buying its products or services.

The Technical Assistance Research Project (TARP), who research customer service, have reported that customers who complain and are subsequently satisfied are 8% more loyal than if they had no problem at all. And some sources suggest that, on average, a customer whose complaint has been handled well will recommend the business to five other people.

On the other hand, customers who are dissatisfied are likely to tell eight to ten other people about the problem. Moreover, an average business may never even hear from over 90% of its unhappy customers. That's because instead of complaining to the business they tell their friends, family and colleagues.

So it's clear that the way to generate positive "word of mouth" is to make it easy for customers to complain - and to handle those complaints well. Businesses that succeed in doing this are those that are smart enough to learn from their mistakes. This idea is behind the FSA's current consultation on the complaints-handling rules, where it is looking at:

  • requiring firms to identify a senior individual responsible for complaints handling;
  • abolishing the "two stage" process - to shift the emphasis away from the mechanics of complaints-handling and on to the end result;
  • requiring firms to identify and remedy any recurrent or systemic problems with complaints; and
  • taking account of ombudsman decisions and previous customer complaints - and learning from the outcome.

It seems to me it should now be clearer than ever before to financial services businesses that their relationship with their customers doesn't end as soon as they have done the deal or sold the product. Taking the trouble to handle complaints well is an important part of their ongoing relationship with their customers - and it is the key to providing really excellent customer service.

Natalie Ceeney
chief executive and chief ombudsman

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ombudsman news gives general information on the position at the date of publication. It is not a definitive statement of the law, our approach or our procedure.

The illustrative case studies are based broadly on real-life cases, but are not precedents. Individual cases are decided on their own facts.