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£18m is the tip of the cost iceberg from 1 million complaints

by Ken Naismith | Posted in Complaints management solutions | 17 May 2016
£18m is the tip of the cost iceberg from 1 million complaints

It's a big headline number. A payment of £18m in consumer redress was imposed on Scottish Power following an investigation by regulator Ofgem into poor customer service and complaints handling. Problems which led to more than 1 million complaints within 18 months.

But the true cost goes beyond the compensation payments. Might it look something like this?...

Would £5 for phone calls to or from each of the disgruntled customers be a reasonable rule of thumb to use?  1 million calls? Estimate £5m in cost. 

Now add correspondence; a few e-mails or letters to and fro would soon clock up £10, £20, £30 per case.   Not counting discussions with and references to peers, supervisors, colleagues in other departments.

Then there are the more serious cases, raised at management meetings.  A few seniors around a table and the meters start whirring, measuring in hundreds of pounds.

Finally consider the root cause - the actual problem still has to be resolved. Most professionals agree that the least costly way to fix a problem is to do just that - fix it and fix it fast.  Dragging things out only escalates risk, leading to more cost and redress to placate the perplexed.

However you estimate, guesstimate or generalise, clearly the above factors multiply the millions involved.

Start counting the cost of lost customers (marketers say that finding new customers costs six times as much as keeping loyal ones), and revenues start to fall as costs increase.

Now the biggie - share price.  Ultimately the value of the business suffers.

Even good organisations get complaints.  The best use them as opportunities to improve. 

An effective complaints management system, such as Workpro software by CAS, will reduce complaints handling costs and risk. Workpro ensures compliance with procedure and legislation, using tools that support professional, consistent and fair complaints resolution. Root cause analysis and management information also facilitate learning from complaints.

You may also find our blog on The True Cost of Complaints of interest.

Ken Naismith


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