Every profit-based organization needs customers to remain in business. If you don’t believe that try doing without them for a while. Sam Walton said, “There is only one boss – the customer. And he can fire everyone in the company – from the chairman on down – simply by spending his money somewhere else.”

Dealing with customer complaints presents a “moment of truth” in which frontline employees have one chance to provide a lasting impression that your organization really cares about treating them fairly and with respect.

A study conducted in cooperation with Harvard Business School revealed some interesting results. The study encompassed 3,000 business units in 450 companies. The analysis showed that the top 20% of the business units with high positive customer perception averaged a 32% return on investment (ROI). The bottom 40% averaged 14% ROI.

There has been a plethora of literature on how to deal with unhappy customers. Some studies reveal that only 4% of unhappy customers let an organization know about their problem. The other 96% vote with their feet and take their purchasing power with them.

Below are a few principles to handle unhappy customers.

1. Treat Employees As External Customers.

In Tom Peters’ book, “Thriving on Chaos,” he stressed that it is impossible to get people’s best effort if they aren’t treated with respect, honesty, and trust.

Research has shown that management practices relate to employee satisfaction, which also influences customer satisfaction. When employees are satisfied with their treatment, given the right tools to do the job, and supported by management, customers are more likely to have higher perceptions and are more likely to continue to do business with your organization. To cite one study, a major fast-food chain found that 20% of the stores with the lowest employee turnover rate doubled the sales and had 55% higher profits than the 20% of stores with the highest employee turnover rate.

If the external customer is king, then the internal customer is a prince to be treated with the same courtesy and respect.

2. Select And Train Frontline Employees Carefully.

An organization’s “customer-contact” personnel are in direct contact with customers. Each one provides a “moment of truth” about their organization every time they have contact with a customer. They represent the face of the organization – good or bad.

Frontline personnel need to be selected from key behavioral characteristics, trained, and retrained, and the frontline level should be involved in the training effort. Organizations should remember the turnover statistics cited above and to retain this important training effort even during tough times!

3. Defuse The Situation.

A few years ago, when training people to go out to customer sites, we stressed the concept, “sincerely act as if the customer is always right, then back up from there.” What this meant in practice was to defuse the situation and let cooler heads prevail to resolve the situation.

Anger is like a volcanic eruption. Never try to interrupt the volcano while it’s spewing lava! Once the eruption is over, acknowledge the customer’s anger by saying something like, “I know you’re angry. I would be, too.” This tends to defuse the anger so resolution can be possible.

4. Measure Your Words Carefully.

 Avoid saying anything that sounds like a command or contradiction. For instance, don’t say “You must.” Say, “I need you to.” Avoid words like “but” and “however” because the unhappy customer will only hear the words that follow these qualifiers. If you have to say “no,” first put a look of regret on your face. Be sincere when saying you’re sorry you can’t do X. Explain why, then suggest an alternative. Maybe a full refund isn’t possible but a partial refund is, or a full replacement can be arranged.

5. Strive For A Partnership.

When faced with a dissatisfied customer, talk about solving the problem together. Make your challenge the customer’s challenge. What are we going to do, partner?

A salesclerk at a major upscale clothing store experienced a customer wanting to return an expensive evening gown after wearing it to her big event and getting a stain on it. When upset about being turned down, the store manager, in the “moment of truth,” stepped in to refund her money. This person with a positive experience went on to spend over $100,000 over the next 20 years and made sure that all her wealthy friends did likewise.

6. Get Personal.

Address the unhappy customer by name, and give him/her your name, too. Give the customer a business card if you’ve got one. If the customer hurts your feelings, let him or her know. This helps create a personal affiliation, support a partnership relationship, and can help defuse the situation.

When a customer complains, that person has just provided priceless information – free of charge. Henry Ford said, “If you satisfy the customer, you win the game.” Isn’t that what we all want? Create a win-win situation where everyone comes out on top.