www.socap.org.au
consumerdirections The official publication of the Society of Consumer Affairs Professionals Australia
December 2009
FMCG Special Legislative changes, how Cadbury is using social media and the growth of private label
page 12 ACCC: Christmas and the TPA
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page 15 Review: Consumer Rage Forum
page 17 Research: Customer retention
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2 | December 2009 | Consumer Directions
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SOCAP Australia Executive President: Andrew Taylor, CaseWork 02 8705 5406 Vice-President: Jane Pires, Suncorp 07 3836 1665 Vice-President: David Schomburgk, Office of Consumer & Business Affairs (SA) 08 8204 9755 Treasurer: Charlie Trkulja, National Australia Bank 03 8634 4744 Public Officer & Company Secretary: Ralph Simpfendorfer, TMI Australia 03 8687 9050
Board Members Andrew Gavrielatos, NSW Office of Fair Trading 02 9895 0479 Marilyn Grant, Johnson & Johnson 02 8260 8274 Peter Gillson, SFI International 03 8847 1301 Brendan French, Commonwealth Bank 02 9841 6350 Leigh Thomas, Listening Post 02 9879 6256 Sally Trevena, FaHCSIA 02 8255 7730 Glen Wells, Travel Compensation Fund 02 8227 3500
SOCAP Australia Secretariat Executive Officer: Amanda Blesing T: 03 8687 9061 E: ablesing@socap.org.au Projects and Events Coordinator: Eliza Smith E: esmith@socap.org.au SOCAP Australia Suite 205, 757 Bourke St Docklands VIC 3008 T: 03 8687 9060 F: 03 8687 9063 socap@socap.org.au www.socap.org.au
CONTENTS
4
President’s message: Andrew Taylor
4
Executive officer’s message: Amanda Blesing
5
News
6
Member profile: Steven Newton
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Legislation update: Consumer Credit Protection Package
FMCG Special 8
The changing FMCG landscape: Freya Purnell
9
Case study – Cadbury’s approach to social media: Nina Hendy
6 7
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11 Private label grows market share 12 ACCC – Christmas, customers and the Trade Practices Act: Peter Kell 13 Technology – Office of the Ombudsman and Health Complaints Commissioner, Tasmania 14 International – Training slashed to survive recession 15 The rage within – SOCAP Australia’s Consumer Rage Forum: Freya Purnell
14 19
17 Research – Complaints handling and customer retention: Lawrence Ang and Francis Buttle 19 Book review – Crucial Conversations: Karen Andrews 19 Recent SOCAP events and workshops: Eliza Smith
Consumer Directions is produced by FlapJack Custom Publishing on behalf of SOCAP Australia. Editor: Freya Purnell T: 02 9929 5465 M: 0412 602 579 E: editor@socap.org.au Designer: Justin Knights Disclaimer: Views and opinions reported in Consumer Directions are not necessarily those of SOCAP Australia. Whilst all care is taken for accuracy, no responsibility is taken by SOCAP Australia.
SOCAP AUSTRALIA WORKING PARTIES 2009/2010 Communication Working Party Glen Wells, Travel Compensation Fund (convenor), Sally Trevena, FaHCSIA, Andrew Gavrielatos, NSW Fair Trading, Karen Andrews, Nestle (non-director), Freya Purnell, Editor, Consumer Directions
Consumer Directions is printed on recycled paper. ©Copyright 2009 SOCAP Australia
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In Kind Sponsors Minter Ellison (Adelaide) TMI Watch24
Events/Education Working Party Jane Pires, Suncorp, Marilyn Grant, Johnson & Johnson (convenor), Leigh Thomas, Listening Post, Peter Gillson, SFI International 20th Anniversary SOCAP Symposium Working Party Brendan French, Commonwealth Bank, Marilyn Grant, Johnson & Johnson, Lindy Kerr, Australian Taxation Office (non-director), Juliette Mansted, AAMI (non-director), Charlie Trkulja, NAB, Jane Pires, Suncorp (convenor), Tanja Stephan, EWOV (non-director), Bill Dee (non-director), Andrew Gavrielatos, NSW Fair Trading Thought Leadership Working Party Sally Trevena, FaHCSIA (convenor), Ralph Simpfendorfer, TMI, Andrew Taylor, CaseWork, Brendan French, Commonwealth Bank, Leigh Thomas, Listening Post, Rhonda Day, ANZ Note: Working parties also include a SOCAP staff member. www.socap.org.au
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FROM THE PRESIDENT Andrew Taylor
Next month we move into SOCAP’s twentieth year, and we enter the second decade of the 21st century. We look back over the changes that have occurred in our professional domain since 1991, wonder what changes are in store as we move forward, and how the dynamics of consumer affairs may change. As for reflections on the past, there’ll be plenty of opportunity for that at the 20th Annual Symposium in August 2010, so for now I’m going to concentrate on the future. The life of the consumer affairs professional is getting busier and there seems little doubt that the work will continue to grow over the next few years. Firstly, consumers expect more. They understand their rights better, these rights are being extended through legislative changes, and their tolerance for unethical behaviour is diminishing. Secondly, there is strong anecdotal evidence that the emotional content of complaints is intensifying. The recent SOCAP Australia Consumer Rage Forum provided a host of examples of this. The forum was a dynamic session covering both theory and practice, with lively participation both from the floor as well as from the four panellists. It was much more than a mechanical discussion about how to identify and handle enraged customers. A lot of time was spent talking about how emotion and personality affects complaints handling, and discussing compassionate and inclusive approaches to managing difficult situations. The Education/Events Working Party is preparing a program of activities to follow up. Thirdly, and I think most importantly, some people in the community are choosing to conduct their conversations in a new way. A significant and growing number of individuals are opting to share and exchange their experiences, thoughts and feelings in public, using the platforms provided by social media such as Twitter and Facebook. My view is that, as consumer affairs professionals, we’re entering a transformative time. Everyone knows
that dissatisfied customers tend to air their experiences in private conversations with their fellow consumers. For the consumer affairs professional, these conversations have always been considered out of scope; they are out of reach, hard to measure and impossible to control. A change is occurring because an increasing number of people are just as inclined to discuss their negative product and service experiences in public conversations as they are in private. There are several significant characteristics of public conversations. People join a conversation based on their interest in the person talking or the topic, and the conversation may be heard by just a few people, or by millions. Public conversation is very convenient: you can listen to a public conversation as it happens, or tune in later, as a record is kept of every contribution. And public conversations are indexed, meaning that anyone can search all of the public conversations, for words, phrases or people. Of course there are caveats. Some people get a great deal of satisfaction and enjoyment from participating in social media. At this stage many (that includes me) don’t. When we read a public conversation, we often don’t know who the author is, what the context is or what their motivation may be (remember the famous cartoon, “On the Internet, nobody knows you’re a dog”?). And it’s also very important we don’t fall into the trap of drawing inappropriate statistical insights from qualitative data. The new trend towards public conversation may well change the game. If the habit of conducting conversations in public continues to grow at the current pace, the impact on consumer affairs will be immense, as the consumer affairs role will include listening for conversations about the brand, and analysing what is being said. Sometimes there’ll be a requirement to join in. SOCAP Australia is planning an event to explore the impact of these public conversations on our lives and our jobs. We don’t all have to be Twitterers, but we do have to understand the conversation.
FROM THE EXECUTIVE OFFICER Amanda Blesing
Welcome to the December issue of Consumer Directions. This is a great opportunity for me to reflect as we come to the close of 2009. The last six months have been incredibly busy for the SOCAP office with the delivery of a range of activities for both SOCAP members and their staff including the Symposium, various workshops and several hot topic seminars. Additionally, Eliza Smith, Projects and Events Coordinator, and I have been busy planning and scheduling more activities and improvements to engage with more of our members more of the time, including those not situated in Sydney or Melbourne. We look forward to meeting you all at some time or another in the near future.
One improvement that you will notice immediately is the new look of Consumer Directions. Working together with the Communications Working Party and Freya Purnell, Editor, Consumer Directions, we trust we have produced a newlook publication that will sit easily on your department coffee table and that you will be proud to circulate to generate interest in your area of expertise. Consumer Directions will now be more readable and engaging with the inclusion of member profiles, regular columns, book reviews and editorial features around specific areas of interest within the membership. We welcome your feedback and comments on our new-look publication as we endeavour to constantly improve what we do.
4 | December 2009 | Consumer Directions
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NEWS
New SOCAP Australia Members: Sep-Nov Allan Asher, Australian Communications Consumer Action Network (ACCAN) Teresa Corbin, ACCAN Sarah Wilson, ACCAN Glenda Picioane, Australian Unity Emma Smith, Australian Unity Stephan Thrasivoulou, Cambridge Integrated Services Paul McMurray, Child Support Agency David Higginbottom, Competitive Edge Dennis Webb, CUA Siew Khim Branston, Department of Immigration & Citizenship Gurpal Singh, Guy & Singh Barrister & Solicitors
Consumers engaged with online banking Asia-Pacific consumers are far more engaged with the online banking channel than those in the rest of the world. They also perform a broader range of tasks, and are more inclined to seek a somewhat closer relationship with their bank through the online platform, according to the findings of Datamonitor’s Financial Services Consumer Insight survey. In terms of day-to-day management of current accounts, consumers in the Asia Pacific region have keenly adopted online technologies. 26 per cent of Asia Pacific consumers have used the online channel to set up email or SMS alerts in the last six months, compared to only 10 per cent in Europe and the US, for example. Mobile banking is expected to take the same upwards trajectory as online banking and is expected to grow faster. Asia Pacific also has a higher rate of online saving activity than any other region in the world, with Japan showing the highest level of online savings activity (72 per cent), followed by China (65 per cent) and Australia (57 per cent). Datamonitor analyst Gilles Ubaghs said these figures indicate there is still a lot of room for growth by focusing on those not yet saving online in Australia.
Gina D’Angelo, IAG Ian Fuller, IAG Debbie Gabreal, IAG Mirella Principessa, IAG Peter Abdilla, Medibank Private David Lucy, Medibank Private Grant Stockwell, Medibank Private Ted Benjamin, n/a (retired, formerly Telstra) Carlene Colahan, NSW Fair Trading Vince Blancato, Schweppes Australia Merridee Cook, Schweppes Australia Vicky Sardo, Schweppes Australia Linda Broady, St George Bank Kristy Panton, The Royal Automobile Club of WA John Spooner, The Royal Automobile Club of WA
Energy bills of key concern for consumer advocates Victoria’s Financial and Consumer Rights Council (FCRC) has released an interim report showing that debts incurred through energy usage in the state’s poorest households are larger than many credit card debts. The report examined 81 financial counselling cases which involved utilities issues. FCRC CEO Richard Foster said debts of between $1000 and $4500 accounted for 26 per cent of electricity and gas case studies. The early findings of the full report indicated that many energy retailers are flouting Victoria’s Energy Retail Code by demanding that consumers who accumulate debt pay it off at unreasonably high amounts. The Energy and Water Ombudsman NSW (EWON), Clare Petre, is also concerned about billing problems turning regular paying customers into customers with a utility debt. “In some cases delayed billing and system problems resulted in customers receiving an unexpected high bill which they couldn’t afford to pay all at once. Many customers were anxious about receiving a large backbill and because of significant delays, they were not confident about the accuracy of the bills when they finally arrived. This situation was exacerbated by poor customer service by some utilities,” Petre said.
Will you be there to celebrate SOCAP Australia’s 20th Anniversary Symposium? 24-26 August 2010, Melbourne The 2010 Symposium will be the 20th Annual Symposium for SOCAP Australia, making it one of the oldest and most prestigious consumer affairs and complaints handling events in Australia. Taking as its theme, ‘Consumer Affairs: The Game Has Changed’, the 20th Anniversary celebration will be a wonderful opportunity to gather together, reflect on how far the industry has come, and set a vision for the future. To help us with our planning of the celebrations to mark this special occasion, SOCAP Australia is calling on members to provide photos, memorabilia and stories of SOCAP Australia’s history. If you have anything of interest that you would like to contribute, the 20th Anniversary subcommittee would greatly appreciate your contribution, so please email them via socap@socap.org.au.
Visit www.socap.org.au for more information www.socap.org.au
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MEMBER PROFILE
Meet Steven Newton To help you get to know your colleagues, in each edition, we will be profiling a SOCAP Australia member. The first cab off the rank is Steven Newton, general manager, risk, for Metcash Group. With over 30 years working in consumer affairs and a technical background as a food technologist and MBA, he has helped restructure large businesses and risk departments. Steve has spent the last 14 years with Metcash, which is a top 65 ASX company with 90 sites across Australia and New Zealand distributing 25,000 FMCG items. Metcash also supports 1350 IGA stores and services 200,000 retail premises. CD: How long have you been a member of SOCAP Australia? SN: I became a member in 2001. It actually came about through the Consumer Affairs Common Interest Group (CACIG), which is a working group of consumer complaints professionals in the FMCG area. Because I ran the consumer complaints centre for IGA, they invited me along to the NSW group meeting, and many of the people there were members of SOCAP. They advised me about the work SOCAP does, and as soon as they showed me the American ExpressSOCAP Study of Consumer Complaint Behaviour in Australia, I knew it would be worth my while to join.
CD: What have you gained through your membership of SOCAP Australia? SN: Direct networking opportunities especially. I also identified a number of new software options for the revamping of our complaints system. I have then been able to seek and source up-to-date behavioural information and complaints management protocols, plus I have had input into compliance and regulatory areas of the industry through my liaison with the ACCC, Consumer Affairs and other authorities, so it has been very helpful to me.
CD: What do you enjoy about consumer affairs? SN: I enjoy promptly and efficiently dealing with people’s problems. There is nothing worse than having a person who has had a bad experience and it doesn’t get addressed properly. I have a great record of making sure our team and the people I liaise with work hard to resolve people’s concerns fast and efficiently, and to identify how we can minimise problems into the future.
CD: What are some of the key trends you’re seeing in the FMCG and retail area? SN: I feel that there is going to be growing consumer education and social communication devices like Twitter that will continue to drive behavioural change. I think there are new and improved global standards reflected in ISO 10001 that are important for businesses to adopt, so use it as a
great checklist. And finally, consumer legislation is changing all the time. For example, the trade measurement legislation changing next year means that how our consumers complain will change dramatically as the regulations and compliance will be managed and responded via well-funded Commonwealth controls rather than variable State level controls.
CD: Has the unit pricing regulation had an impact on your business? SN: This has had a major cost impact – in the millions. Metcash has been at the forefront of the evaluation process, and our IT teams have driven our response to ACCC and others to get the optimum balance and reduce the regulatory burden for smaller-sized retail operators.
CD: What do you think are the challenges facing consumer affairs professionals in the next 12 months? SN: I think it is understanding that you have to be more professional, and be better prepared to listen to consumer concerns, because as they are becoming more educated, their demands are increasing. When you implement new technology like web-based complaints management, sometimes the IT, consumer and the business processes aren’t always clearly in sync, so what you think you’re promising doesn’t always go through smoothly. So you have to be professional about setting that up correctly from the beginning.
CD: What advice would you give to newcomers to the industry? SN: Start by adopting the standards in ISO 10001 and work hard with training your team and setting up the protocols and processes in conjunction with your software, so there are no gaps. That tends to be the area where I find complaints can fall over. You have to look at what your competitors are doing and try to do the best you can with the three areas of complaints handling: the monitoring, the management and the implementation. We’ve always recognised complaints as information to help us to fix problems at the business level, and to provide feedback so they can be fixed.
6 | December 2009 | Consumer Directions
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LEGISLATION UPDATE
Further changes to Consumer Credit Protection Package The process of consultation on the National Consumer Credit Protection Package rolls on, with Minister for Financial Services, Superannuation and Corporate Law, Chris Bowen MP, releasing draft regulations and explanatory material. The purpose of further public consultation was to extend a final opportunity for comment on the full suite of regulations following two previous rounds of consultations. Some changes and enhancements to the regulations were necessary in response to public comment on previous drafts. Key changes to the National Consumer Credit Protection Regulations 2010 (Credit Regulations) and National Consumer Credit Protection (Transitional and Consequential Provisions) Amendment Regulations 2010 include: • Excluding lenders from the requirement to hold professional indemnity insurance; • Extending the streamlined licensing procedures to lenders mortgage insurers; • Requirements for people who audit trust accounts; • Arrangements for the Australian Securities and Investments Commission (ASIC) suspension or banning powers to encourage licensees to provide correct and timely annual compliance certificates; • Exempting securitisation vehicles from licensing requirements where the vehicle is a legal assignee; • Minor changes to various licensing and registration exemptions in response to comments received from the latest round of public consultation; • The treatment of interest charged on credit provided to purchase or improve residential property for investment purposes; • Exempting credit or leases provided to company directors from the Code and licensing requirements; • Arrangements for the commencement of the registration period; • Application of registration, licensing and responsible lending conduct obligations to persons in relation to pre-existing contracts; • Extending the period which an unsuitability assessment can be relied upon to 120 days for credit provided for the purchase of residential properties, and secured by a mortgage over the property to be purchased; • Replicating a Queensland transitional provision to maintain its commencement date; • Clarifying that payment of an infringement notice does not affect the ability of a consumer to seek
compensation orders for conduct which is the subject of a paid infringement notice; • Exempting ASIC and consumers from the general rule that proceedings must be commenced in the jurisdiction in which the consumer currently resides; and • Changes to the streamlining of Western Australian Class A and B licensed brokers into an Australian credit licence. Other changes to the National Consumer Credit Protection (Fees) Regulations 2010 are: • A new method of calculating fees for lodgement of licensing applications and annual compliance certificates; • Removal of fees for inquiries relating to inspections of registers to avoid double charging when a person requests to inspect a register; and • An exemption from fees to allow ASIC to provide information from its credit registers on its website free of charge. The package of draft Regulations included the full suite of regulations previously released for consultation in August. The period for public comment on this new round of regulations was just three weeks, with submissions due by 11 December. The package of regulations and related explanatory material can be found at www.treasury.gov. au/consumercredit. www.socap.org.au
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FMCG SPECIAL
Changes to the FMCG landscape so there are now two ways of determining whether a package contains a shortfall – either using the existing UTML system or the AQS system. More information on the changes can be found at www.measurement.gov.au.
Consumer backlash
With major changes to the consumer affairs regulatory framework in Australia afoot, there are some significant impacts on the FMCG and retail space, and consumer expectations of manufacturers and retailers are higher than ever. Freya Purnell reports. Mandatory unit pricing regime As of 1 December 2009, unit pricing became mandatory in major Australian supermarkets, with the aim of providing consumers with more detailed information to enable price comparison. The law was introduced on 1 July 2009. Supermarkets larger than 1000 square metres were required to adopt the Federal Government’s Unit Pricing Code, with smaller supermarkets able to participate voluntarily. Under the Code, grocery items are priced by reference to common units of measure such as per 100 grams and per 100 millilitres. Minister for Competition Policy and Consumer Affairs, Dr Craig Emerson, said unit pricing will allow customers to compare different brands in different package sizes by reference to their price per unit, and that the regime is part of the Federal Government’s program to increase competition in grocery retailing. The ACCC is responsible for enforcing the Unit Pricing Code, and has produced a range of material for retailers and consumers about the new regime.
New trade measurement regulations Responsibility for trade measurement will next year move from state and territory jurisdictions to the Commonwealth. On 11 September this year, new national trade measurement regulations commenced in preparation for the transition, which will come into force on 1 July 2010. From this date, the National Measurement Institute will be Australia’s peak measurement organisation, and will be responsible for maintaining primary standards of measurement and providing the legal and technical framework for measurement standards. The new regulations are based on the previous Uniform Trade Measurement Legislation (UTML) currently administered by state and territory governments. The only significant change is the introduction of Average Quantity System regulation under the ‘shortfall’ provisions of the regulations,
The last 12 months has seen a number of issues raise the ire of consumers. Following controversy and media coverage about the dietary dangers of trans fatty acids (trans fats) in excess quantities, questions were raised about the disclosure of the amount of these nasties in food. Food labelling requirements state that the amount of trans fat in food must be declared on the label only if a nutrition claim is made about cholesterol, polyunsaturated, monounsaturated fats, omega-3, omega-6 and omega-9 fatty acids. In 2009, Food Standards Australia New Zealand conducted a formal scientific review of trans fats in the food supply. The review found that the average person’s intake of trans fats is around 0.5 to 0.6 per cent of total energy intake, well below the World Health Organisation’s goal of 1 per cent. However the review showed that intake of saturated fats is of greater concern. While in October 2009, the Federal Government announced it had formed a group representing government, the Australian Food and Grocery Council, the National Heart Foundation of Australia, Woolworth Limited, the Public Health Association of Australia and CSIRO, to work together on issues relating to food and health, including consumption reduction of riskassociated nutrients, some believe this is not enough. Consumer organisation CHOICE has called for stronger action – such as mandatory requirements for labelling food products with the amount of trans fat and saturated fat. Consumers have also responded angrily to moves by manufacturers to reduce pack size while maintaining the original price. The most public example of this was Mars Snackfood Australia’s reduction of the size of the Mars Bar, while positioning the change as being in the interests of taking action on obesity. Following a public outcry on this matter, Mars Snackfood Australia general manager Peter West was forced to make a statement clarifying the changes. West said, “Currently we manufacture approximately 90 different products, with these changes: • One-third of the range reduced in weight and held price, including the change in Mars from 60g to 53 g. • Two thirds of the range reduced in weight and price. The Mars Fun Size bar for example reduced in weight by 11 per cent and in price by 19 per cent. Last year, the price of this pack was over $5.00 and now is under $4.00.” While this is just one example, with Cadbury also coming under fire for changes in packet size, it shows that labelling, manufacturing changes and health issues will be ongoing concerns for consumers in the FMCG space.
8 | December 2009 | Consumer Directions
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A still from one of Cadbury’s recent advertising campaigns
FMCG SPECIAL
Cadbury courts consumers online The burgeoning social media scene is presenting FMCG brands with increasing opportunities to tap into new marketing vehicles, monitor consumer behaviour and communicate with their target market. Cadbury Australia and New Zealand is among the brands leading the way. Nina Hendy reports. When Cadbury decided to take the plunge into the social media world last year, the brand was already the subject of a growing number of conversations taking place online – some positive; others negative. Management decided that rather than ignore what was being said and continue to market the brand in its usual way, it would actively get involved in those online conversations where appropriate, while also starting some conversations about the brand of its own. Daniel Ellis, corporate communications manager, Cadbury Australia and New Zealand, says the company’s social media strategy is in its infancy, but has evolved fairly quickly in response to consumer demand. “To be honest, consumers own the brand more than we do and they’re the ones who’ll influence and shape the brand going forward,” Ellis says. In the past few months, Cadbury has created a range of online avenues that enable the company to market, monitor consumer behaviour and communicate with consumers, which Ellis says facilitates a deeper connection with consumers than traditional marketing methods.
Brand building YouTube was one of the first social media vehicles Cadbury tapped into. The company started breaking advertising campaigns via the social media site, with a piece of communication featuring a gorilla playing the drums to a Phil Collins song, which launched first in the UK, then in Australia in October 2008. The piece of communication proved hugely popular with consumers, attracting six million YouTube hits and
a range of spin-offs were created by consumers and uploaded to YouTube. Then in April last year, a campaign featuring a young boy and girl wiggling their eyebrows to electronic-style music launched on YouTube ahead of a television launch, with similarly strong results. “The gorilla and eyebrows campaign were put on YouTube because it enabled people to give these more unusual campaigns their own interpretation and to have some fun with the brand, in turn helping us remind consumers that chocolate and lollies are fun,” Ellis says. More recent initiatives include developing individual Facebook pages for a range of brands including Chupa Chups, Crème Eggs and the Natural Confectionery Company. Ellis says Cadbury chooses brands specifically marketed to a younger demographic when deciding how far to take each brands’ social media strategy. The company has also been using Twitter to inform consumers of various brand updates, with great success.
Conversations with consumers Cadbury recently developed a website called choclovers. com specifically for the Australian and New Zealand market, which gives consumers the chance to chat in an informal way with the brand via a blog. The company uses this site to make announcements to consumers at the same time as the media. Consumers are also able to pose questions, make observations or even say negative things about the brand on this site. Possibly more importantly, it also gives Cadbury the Continued on page 10 www.socap.org.au
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FMCG SPECIAL
Continued from page 9
chance to closely monitor consumer behaviour and trends. The comments left by consumers aren’t filtered, which could be a scary prospect for some brands. Ellis says choclovers.com presents an opportunity to create an alternative place for consumers to talk about the brand online. “Our choclovers.com site is a good tool for us to measure what people are thinking and get a sense of how people feel about the company. It also helps us to keep on top of consumer trends, and then make business decisions accordingly. Social media helps us learn what people are thinking and then target our marketing spend more effectively. “But we have to make sure we don’t force ourselves upon people. And if people are being critical about Cadbury on our site, that’s not the place to be heavy-handed with consumers,” Ellis says. Last year, the choclovers.com site proved to be the perfect avenue for the company to address issues that arose with some consumers (particularly those in New Zealand) who had concerns about Cadbury using palm oil in its chocolate. In August last year, Cadbury publicly apologised for using palm oil via choclovers.com and removed the ingredient from its products. As Cadbury realises consumers own the brand, it made the decision to fix the problem. The palm oil-free chocolate has recently made its way onto Australian supermarket shelves. “We were able to keep consumers updated with the changes to the products via the choclovers.com site, which worked really well for us. We were able to speak directly to consumers via this site at the same time we made announcements to the media, which consumers want these days,” Ellis says.
Treading carefully Brands need to be careful when stepping into the social media world. Deciphering comments and their meaning is key. Ellis says some comments about the brand are not worth engaging in, but if there’s a genuine complaint, the company follows it up. “Some people just want to express how they’re feeling and don’t necessarily want a resolution, so you’ve got to be able to recognise how people are feeling and understand that they don’t necessarily want you to weigh in. It’s a fine line and you’ve got to be able to recognise which is which. Sometimes we notice a conversation that we need to monitor and see where it goes, but we have to be careful because we don’t want to alienate people or enter into a space where you’re not welcome,” Ellis says. Social media has helped Cadbury to de-corporatise its brand and break down the walls to consumers. It has also proven a valuable research tool. Among the learnings to come from social media is the growing number of consumers
www.choclovers.com
talking online about wanting Cadbury Crème Eggs throughout the year, rather than just at Easter. Obviously this offers greater sales opportunities for the company, so it has been investigating the possibility of increasing availability of Crème Eggs. Cadbury has outsourced the corporate social media monitoring to an online communications agency, Melbourne’s The Online Circle, while marketing managers over each brand handle the social media conversations about their own brands. Ellis would not reveal the additional cost in being involved in social media, but would say social media is an increasingly important communication and marketing tool for the company. Jeff Richardson, chief executive, The Online Circle, has been helping the Cadbury marketing team perfect its social media strategy for the past five months. He says all brands need to form a social media strategy. “This is the case more and more every day, particularly for consumer-orientated brands. “The truth is that people are out there talking about your brand whether you like it or not.” Richardson says brand ambassadors need to realise that brands belong to consumers. “Once you accept and understand that and really engage consumers rather than doing nothing in your ivory tower, the better off your brand will be.” If consumers are making untrue statements about a brand online, the best thing to do is provide an alternative forum where you’re able to provide the facts and an alternative view, he says. “And this doesn’t necessarily have to be done in a corporate way.” Richardson says Cadbury is ahead of many brands when it comes to approaching social media, which will serve the company well. Meanwhile, Ellis says Cadbury is committed to the social media space, with plans to grow in this area during 2010. “It’s about getting that balance right of both traditional and online social media spend so that we’re communicating in a range of different ways.”
SOCAP Breakfast – Blogs, Social Networks, Twitter, Virtual Worlds How do I respond to the consumer evolution online? Thursday 25 February 2010, Melbourne – go to www.socap.org.au to register 10 | December 2009 | Consumer Directions
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FMCG SPECIAL
Private label growth indicates change in consumer mentality The battle for the supermarket floor is heating up with private label reaching a record share of the grocery market in Australia, according to new research by market insight and information group TNS. TNS director of consumer research, Nicole Marquardt, warned a new purchasing mentality has emerged, with private label growing amongst most shopper groups, particularly adult households, young singles and young couples. Surprisingly, the research found that a large proportion of Australians who buy private label do so despite being concerned over potentially lower quality, inferior status image, poor packaging and lack of innovation of the products. Private label buyers found in the research were: • The ‘Committed Cost Cutters’ (12 per cent of the population): They view buying private label as a responsible use of their family budgets and are happy with the quality. • The ‘Smart Selectors’ (24 per cent): They believe brands are all hype and private label products are just the same. • The ‘Success Symbolisers’ (30 per cent): Often young,
this segment is not convinced of its quality and feel selfconscious about buying it. • The ‘Label Lovers’ (11 per cent): They will sneak a private label product or two but they’re put off by poor packaging and a lack of innovation. • The ‘Belt Tighteners’ (10 per cent): They feel forced into purchasing private label due to their finances but are hoping it’s just a temporary thing. • The ‘Brand Believers’ (13 per cent): They feel strongly that brands are better and are annoyed that private label products are taking over the shelves. “We’re seeing that the majority show interest in private label regardless of the category, even in those that were traditionally resistant to the threat,” says Marquardt. “The implication for retailers and manufacturers is there is no one-size-fits-all approach when it comes to private label. There are huge variations across category and shopper types, but when it comes down to it, consumers have a new purchasing mentality that the cheaper product can be just as good.”
Protecting Your Brand? A new Australian study* has shown: s 85% of consumer complaints can lead to a loss of brand loyalty, and s 73% of consumers that complain will feel more loyal if the complaint is handled well. *“How Consumers are Feeling Now....”, Consumer Directions, September, 2009
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Your Product Retrieval Specialist www.socap.org.au
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FROM THE ACCC Peter Kell
Christmas, customers and the Trade Practices Act We all get busier as the Christmas season approaches. For businesses, this usually means increased pressure on staff dealing with consumers, who for their part are often hot, bothered and short of time. Thankfully, a few simple rules around marketing and customer service can substantially reduce any heat in business dealings with consumers. The Trade Practices Act 1974 (the TPA) contains a number of rules that regulate the conduct of businesses in relation to consumers. Among other things, these rules cover the types of representations businesses make to consumers (directly or indirectly) as well as certain ‘minimum standards’ that apply to all consumer transactions. The Australian Competition Consumer Commission (ACCC), as the body that enforces the TPA, receives thousands of complaints and inquiries from consumers every week. Two of the main issues are misleading and deceptive conduct and warranties and refunds. The TPA requires (among other things) that advertising, as well as any other form of promise or representation made to consumers, does not mislead or deceive them and is not even likely to do so. It’s important to ensure that the overall impression created by an advertisement is not misleading or deceptive. Vague promises like ‘lower prices’ could confuse a potential customer, so care must be taken when making them. The same applies for superlatives such as ‘cheapest’, ‘best’, and so on. Where those comparisons are not true, or are questionable, then they are likely to be challenged by competitors and/or the ACCC. Equally, they may create a particular expectation in the mind of a consumer which, if not met, leaves them dissatisfied with your business. The best rule to follow is the simplest: if an advertisement could potentially mislead some member of the target audience, then either refrain from making the claim of concern, or reword the advertisement. The law also contains implied, or statutory, conditions and warranties that apply to all consumer transactions, regardless of whether a business offers any additional warranties or promises of its own. These rights cannot be limited, changed or refused by a trader. Put simply, statutory conditions within the TPA require that goods are of merchantable quality, fit for purpose, match the description or sample provided, and consumers must receive clear title to the goods. If goods do not meet a statutory condition, consumers are entitled to a remedy, which could include refunds,
The best rule to follow is the simplest: if an advertisement could potentially mislead some member of the target audience, then either refrain from making the claim of concern, or reword the advertisement.
having goods replaced or having goods repaired. If your business provides services, the law imposes statutory warranties – that services must be carried out with due care and skill, that any materials supplied in connection with the service must be reasonably fit for the purpose for which they are supplied, and that the service, and any materials supplied in connection with the service, should be reasonably fit for any particular purpose the consumer made known to the seller. Services that do not meet a statutory warranty breach the contract between consumer and seller, meaning the consumer is entitled to a remedy for this breach. This can include having the services supplied again, payment of the costs of having the services supplied again or compensation for any loss suffered. Adhering to these rules not only means you are complying with the law, but also that you are helping your business to maintain high levels of customer satisfaction and minimising the amount of time and resources you spend dealing with customer complaints. Much more information can be found on the ACCC’s website at www.accc.gov.au. Peter Kell is deputy chairman of the Australian Competition and Consumer Commission.
12 | December 2009 | Consumer Directions
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TECHNOLOGY
Case study A need for system stability led the Office of the Ombudsman and Health Complaints Commissioner – Tasmania to seek a new complaints handling software solution. In the process, they have reaped significant benefits around workflow, case management and reporting. Freya Purnell reports.
The Office of the Ombudsman and Health Complaints Commissioner – Tasmania covers three different jurisdictions: the Ombudsman, who investigates complaints about Tasmanian Government departments, councils and public authorities; the Health Complaints Commissioner, who investigates complaints related to the provision of health services, and the Energy Ombudsman, who investigates complaints relating to the sale and supply of gas and electricity.
Defining needs According to business manager Lianne Jager, the Office was running a 10-year-old database, which was becoming increasingly unstable with significant risks for the organisation in terms of complete system failure and loss of data. This instability heightened the urgency to find a replacement, but there were also clear opportunities for process improvement. The Office was seeking a system that provided a registry module, to record all enquiries and case details; a case management module which would help officers to manage their day-to-day cases easily, and assist managers in supervising workloads and case complexity; and a planning module. Other important features were document management, a strong search module, easy-to-manage system administration, and security. After defining their requirements, the Office underwent a national open tender process, and chose Resolve as its preferred solution.
Implementation The solution implemented by Resolve can be used to track and monitor complaints and enquiries across all three jurisdictions, with security and workflow to operate these separately within the one database. The Office has 18 users and one system administrator, and while initial training was provided to each of the teams, follow-up training was required a couple of months down the track to ensure all the users were completely familiar with the system. “At the same time as we were implementing Resolve, we were also streamlining business processes, so there was more happening than just learning the system for staff,” Jager says. “We went live in the middle of October 2008, and it did take a few months for them to find their feet and feel comfortable.”
Challenges and lessons learned One of the most difficult aspects of the process, according to Jager, was the user acceptance testing. As the staff were new
to the system, they had to learn how to use it before they were able to effectively test. Setting aside sufficient time for this phase and having users interested in the testing process are also important. Another challenge was finding the time to focus on the project. As Jager was the only person dedicated to the implementation, she was also juggling other responsibilities. Other staff in the Office were involved in the project but having a focused resource would have ensured it was completed more quickly and easily. “It was a success, but I think it would have been even more successful if we had a dedicated team for that period of time.” Jager also recommends taking detailed notes about users’ requirements for a new system in the months prior to preparing a specification. This helped to ensure the solution chosen met their needs. “It was good to consult staff so that they were happier about adopting the new system. Taking ownership is important,” Jager says.
Benefits The new system has streamlined the Office’s process of complaint management. “It has allowed us to capture and share information much more easily. It’s a one-stop-shop of information for all our cases, so that makes a big difference for staff needing to get things done quickly,” Jager says. For managers, the system is providing much better reporting. “Managing case loads and complexity and powerful, accessible reporting have been standout features and improvements for us.” Other benefits include a step-by-step case management workflow and the ability to be able to make configuration changes in-house. “The important steps when managing a case are set out in the system workflow. When an investigation officer uses the system to manage a case, they are taken through that process, and the system ensures that all the correct notifications and correspondence go to the right people at the right time, which makes handling a complaint easier. Managers can rest assured that staff are being prompted to do the right things, they can see at a quick glance where a case is in its lifecycle and they can also receive email alerts from the system if an action has not been completed by its due date,” Jager says. “The ability we have to make our own system changes as and when the business requires them is a distinct advantage.” www.socap.org.au
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INTERNATIONAL
Training slashed to survive recession In the UK, new research shows staff training and management are suffering as the global financial crisis takes its toll. Freya Purnell reports.
A recent survey by the UK’s Institute of Customer Service (ICS) has found that 30 per cent of organisations surveyed have cut investment in customer service training and 21 per cent have laid off customer-facing staff in 2009. This is despite research by the Institute showing that companies with a reputation for service excellence and committed frontline staff have a 24 per cent higher net profit margin than same-sector rivals who do not enjoy similar standing, and can achieve 71 per cent more profit per employee. The latest poll was conducted amongst customer service professionals between July and October 2009. Respondents were asked, “How has the recession most affected the customer service you offer?” While 21 per cent of respondents said they have laid off customer-facing staff, and 30 per cent had cut investment in customer service training, 6 per cent had cut investment in customer service technology, 19 per cent said they had increased their investment in customer service, and 21 per cent said it had had no effect on their plans. The Institute has warned that this “slash and burn” approach to cost-cutting could damage relationships with customers at a time when competition is fierce and high satisfaction levels are vital to survival. Jo Causon, the Institute’s chief executive, believes it is dangerous to see training as the place to cut costs because in the current climate there is more competition for customers than ever. It is those who develop the talents and contributions of all their staff that will motivate their people, improve customer loyalty and boost profits, Causon says. “Investing in your people is a key differentiator in business today. An organisation that emphasises customer service, through training and development, goes a long way to retaining staff – which motivates them to satisfy customers.” The good news from the poll is that one in five organisations increased investment in customer service and a fifth said the recession had no effect on their business plans. “Experts predict we are looking at a flat Christmas, particularly in retail, and our advice is to embrace a strong service culture to keep customers satisfied,” Causon says. The poll also found only 6 per cent of organisations have cut investment in technology. “Technology can only take you so far in customer service
delivery. It is your people who are on the front line and they need to be highly trained and motivated to consistently meet and even exceed a customer’s expectations, with technology working in parallel, so that people, processes and strategy are truly aligned around the whole customer experience.”
Performance management lacking Not only are UK organisations cutting staff to cut costs, but they may not be using the people they have to best advantage.
Investing in your people is a key differentiator in business today.
Customer Strategy magazine reported that the Chartered Institute of Personal Development (CIPD) has released research that reveals a third of organisations with a performance management structure in place failed to back up their schemes with regular business reviews. While 85 per cent of UK organisations recognise the need to set staff objectives, only 75 per cent followed through with plans. 21 per cent of surveyed organisations do not even believe performance management is a useful tool. CIPD engagement adviser Angela Baron suggested more emphasis should be put into improving this area of business. “It seems that although the practice of performance management has not changed significantly over the years, there are still some issues with its implementation and in many instances it is not being used to its full potential,” Baron told Customer Strategy. “The practitioners we interviewed demonstrated that performance management is still a very important tool and done well is a powerful driver of engagement and can ensure alignment between individual objectives and effort and business priorities.”
14 | December 2009 | Consumer Directions
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CONSUMER RAGE
The rage within SOCAP Australia recently held a Consumer Rage Forum in Sydney, to share information and experiences on this growing issue, its causes and tactics for managing customer rage. The expert panel assembled for the Forum included: • Francis Buttle, adjunct professor, Macquarie Graduate School of Management; • Tania Sourdin, professor of law and dispute resolution, University of Queensland; • Charmine E. J. Härtel, professor of organisational behaviour and development, Monash University; and • Chris Wheeler, deputy ombudsman, NSW Ombudsman. The discussion was kicked off with participants sharing experiences on the types of consumer rage they have experienced, and the strategies they used to deal with them. While the discussion indicated that the problem of consumer rage is indeed widespread and has a variety of expressions, there was also a concern that increasingly consumers seem to think that if they show rage, they will receive more by way of compensation from the organisation. Härtel agreed that “consumers think that rage gets better results”. She cited research into complaints to the Queensland Office of Fair Trading, which found that rage actually backfires on complainants and they receive less if they react in this way. Härtel believes consumers need to be educated about how to have an effective conversation when making a complaint. Email was highlighted as a channel through which customers seem comfortable being more aggressive, although participants also felt that abusive or threatening emails can be easier for the complaints handler to deal with than shouting down the phone, for instance, because there is a sense of distance with email. A recommendation for dealing with email, especially if the tone is aggressive, was to switch channels, and instead call them on the telephone. Sourdin commented that particularly with the extreme displays of customer rage, there can be issues for complaints handling staff experiencing second-hand trauma and being very deeply affected by their experience – which creates OH&S and duty of care problems. Some of the other practical strategies suggested for managing consumer rage included understanding that rage may be prompted by other issues, looking at ways to defuse emotion, reassuring the customer by saying “I’m listening and I’m here to help you”, and asking the customer how they would like to resolve the situation. Wheeler said a range of different mechanisms need to be used to take control of the situation, and managing expectations from the outset is key. “It’s very difficult to calm someone down when they are angry and feel that they are acting completely reasonably,” Wheeler said. While taking the level of emotion down a notch was considered helpful, there was a recognition that the complaint handler showing a lack of emotion can actually accelerate
consumer rage, and a degree of empathy needs to be shown when speaking to customers. Buttle said he believes CRM systems can be responsible for the mechanised approach to complaint handling. As consumers can move into a state of rage at any point in the process, different strategies and tools to manage this might be necessary for different channels.
Learning more about the background to rage Presentations from the panel members then provided more information from the worlds of marketing, management, law, neuroscience and of course, complaints handling about what causes rage and how to manage it. In addition to providing some examples of extreme customer rage, Buttle provided some of the common characteristics, and discussed customers’ need for justice, and the various forms this generally takes. Sourdin then examined some of the neurophysiological or psychological factors – that is, what is actually happening in the brain – when a customer exhibits rage. The work of Professor Jennifer Lerner from Harvard University suggests sadness and fear can result in additional production of cortisol – a stress hormone – and this flood of cortisol can impact behavioural responses to a negotiation. Lerner also found that feeling a sense of appreciation and autonomy are important factors in a behaviour response. In practice this means that even if a customer is given what they want, if there was no negotiation or consultation in the process, they may still feel negative about the experience. Personality can also play a significant role in conflict. Sourdin drew on her work with what are known in the legal world as high conflict participants (or HCPs). With around 15 per cent of the US population now thought to fit the diagnostic criteria of or display traits of personality disorders, “if you are working in the complaints handling system, you can anticipate that a reasonable proportion of the people you deal with have personality disorders or display these traits”, Sourdin said. With the problem of consumer rage only expected to grow in tandem with increasing emotional instability in the population, creative strategies are needed to shift the impulsive Continued on page 16 www.socap.org.au
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CONSUMER RAGE
Continued from page 15
behaviour some consumers exhibit. “This needs to be addressed not just from a skills perspective but a systemic perspective as well,” Sourdin said. While the emphasis was not on learning to classify or diagnose individuals as HCPs or with personality disorders, understanding that the brain works differently for people with these characteristics can be helpful. One of the common issues is that emotion dominates their thinking, and they find it difficult to move to the more rational, logical, left side of the brain. This means they can have difficulty empathising with others, and are angry and aggressive. For these people, any loss or frustration can seem lifethreatening, and any negative feedback you give is perceived as dangerous. When dealing with an enraged consumer, it is important to ensure they don’t become stuck in a cycle of negative emotions. Helping the person switch from right-brain thinking can start to break that emotional cycle, and Sourdin described a list-making technique for this. Härtel then gave some background on consumer emotion. “Emotions in complaints are commonly evoked by what people believe is a breach of their belief system,” Härtel said. Emotions can be both rational and irrational, and very sustained – with thinking through the situation or other triggers re-evoking the negative emotions. Härtel said it can be helpful for service providers to work out what might have triggered the emotional response from the customer – known as the affective event. Härtel also spoke about customers getting ‘stuck’ in a loop of negative emotions, and outlined a way in which organisations can help customers move through these. Firstly it is important to listen to what they say, as venting may be the thing they need to do. This also provides the complaint handler with a chance to gauge emotion. “It is important to try to diagnose the root cause of what is going on for the caller,” Härtel said. “You don’t want the customer to keep cycling through their emotions.” Complaint handlers need to try to calm the person, for example, by making speech slow, calm and even. It’s also extremely important to show empathy. If the person is starting to slip back into the cycle of negative emotions, the complaint handler needs to gently break in and work with them to move forward, by taking an empathetic rather than adversarial approach. Finally, Härtel said it is important to agree on the outcome, so they feel valued and that they have added value in some way, by hopefully preventing the issue from happening again to others. While these techniques will not guard against losing the customer, “they won’t necessarily be damaging themselves or damaging the reputation of your organisation”, Härtel said. From an organisational perspective, Wheeler said, one of the central issues with consumer rage is the threshold – when does conduct cross the line from being merely difficult to
The panellists
Suggestions for managing rage
something unacceptable? As Sourdin suggested, displays of rage not only impact on the consumer, but on staff as well. According to Wheeler, management of an organisation needs to take several actions to safeguard its staff: 1. Conduct a risk assessment of the organisation’s interactions with the public; 2. Implement necessary measures to address physical security risks; 3. Adopt an appropriate risk management protocol to be implemented if security or safety problems occur; and 4. Provide appropriate and ongoing advice and training for staff in ways to respond to anger and what they should do if threatened. If a customer is overstepping the line, the organisation should have a clear policy on how to respond. For example, Wheeler said generally when the caller starts to abuse or threaten the complaint handler, Ombudsman staff are empowered to end the call.
Moving forward on consumer rage Participants in the workshop then brainstormed options that their organisations could use to deal with consumer rage. The suggestions were grouped under a number of themes, such as how to break into conversation, reducing call waiting times, making sure staff have authority, setting appropriate expectations, and putting in place specific processes for customer rage.
SOCAP Workshop – From Rage to Reason Strategies for handling and diffusing angry complainants Available March/April 2010 – go to www.socap.org.au 16 | December 2009 | Consumer Directions
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RESEARCH
How complaints handling delivers customer retention benefits By Lawrence Ang, Macquarie Graduate School of Management and Francis Buttle, Listening Post Pty Ltd Introduction Management guru Peter Drucker once famously claimed that the sole purpose of a business is “to create a customer”. Creating customers (whether growing the customer base or merely replacing lost ones) has a cost, as marketing budgets prove. Research has found that a small increase in customer retention generates an increase in customer net-present-value (NPV) and the figures are quite arresting. A retention increase of just 5 per cent can generate up to 95 per cent NPV increase across a wide range of business environments. That potential has made retention a primary goal in many companies who now regard keeping their existing customers as equally important, and sometimes even more so, than creating new ones. There has emerged a general consensus that focusing on customer retention can yield several benefits: • As customer tenure lengthens, the volumes they purchase grow and the referrals they make increase. • Simultaneously, relationship maintenance costs fall as both customer and supplier learn more about each other. • Because fewer customers churn, customer replacement costs fall. • Finally, retained customers may pay higher prices than newly-acquired ones and, mostly, do not receive discounted offers made to attract new customers. All of these conditions combine to increase the net present value of retained customers.
Complaints handling processes We decided to investigate the impact of documented complaints handling processes on customer retention. There were primary and secondary reasons for our interest. There are indications that well-implemented complaints handling processes can have a positive effect on customer retention. Indeed, customers who complain and are well recovered can be more satisfied and less likely to switch than customers who had no cause for complaint at all. We wanted to find out if the presence of a documented complaints handling process was a factor in this, with a greater or lesser impact on customer retention outcomes than other customer retention strategies. The secondary factor was the timely publication of an international complaints-handling standard, ISO 10002, from the International Organization for Standardization. It provides a documented guide to the design and implementation of an effective complaints handling process. Its importance and relevance to business is enhanced if the linkage noted in our primary interest can be shown.
Methodology We formulated a questionnaire to probe the topic, and piloted several versions. The majority of the questions required simple ‘yes’, ‘no’, or ‘don’t know’ responses. One key question, ‘In the last 12 months, to what extent has the number of customers retained by your company met your expectations?’ used a 7-point scale, with 1 labelled “greatly under-performed expectations”, 7 labelled “greatly exceeded expectations” and the mid-point, 4, labelled “met expectations”. Beginning with the Dun and Bradstreet database of top 1,000 companies in Australia, we selected a stratified random sample of 732 which covered the full spectrum of primary, secondary (manufacturing) and tertiary (service) sectors of Australian industry. Following an initial telephone discussion and invitation to participate, the questionnaire was mailed to each organisation in the sample group, with follow-up calls and reminders issued after one month where required. We encouraged response by offering participants a report of the study’s results. Two basic forms of analysis were performed. First, simple descriptive statistics were computed for the variables and, second, correlations were performed to test relationships between variables.
Our results One hundred and seventy responses were obtained, representing a 23 per cent response rate, with a good spread across all major standard industrial classification (ANZSIC) codes. Continued on page 18 www.socap.org.au
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RESEARCH
Continued from page 17
We found the responding companies generally were not very advanced in customer retention management. Only 39 per cent had an explicit, documented, customer retention plan. Even fewer, 28 per cent, had a specific budget dedicated to customer retention activities, but 70 per cent claimed to have either a nominated person or a group in charge of customer retention. Of those companies which had a formal retention plan, the objectives of those plans were most commonly expressed in terms of revenues to be earned from retained customers. Very few were thinking in terms of customer profitability in their retention objectives, which involves deeper issues than just revenue. We also found a large proportion of the companies do not segment their customer base when implementing retention strategies. 41 per cent said “we don’t want to lose any of our customers” rather than select the alternative answer “we focus our retention efforts on particular customers”. Interestingly, this is at odds with the recommendations of a number of today’s authoritative business commentators. Most companies (85 per cent) say they look for clues and advance warning that a customer might be about to switch but only a much smaller group (19 per cent) use any formal models and methods to predict those defections. Nearly all the rest (79 per cent) said that that the most common indicator of a customer’s likelihood to switch is the receipt of a complaint. This finding provides an important justification for our focus on complaints handling processes for, amongst other uses, providing this early warning system. We found 79 per cent of surveyed companies to have a documented complaint handling process with 74 per cent believing their process to be effective. Slightly more than half (56 per cent) of all companies reported that they had exceeded their customer retention expectations in the previous 12 months. We put these findings together to find what the common factors were amongst companies that are very good at customer retention. • Was it the existence of an explicit, customer retention plan? No. • Was it the existence of a dedicated customer retention budget? No. • Was it that they had an executive in charge of customer retention? No. • Was it that they had a documented process for handling customer complaints? Yes! This leads to an interesting conclusion. It indicates that excellent customer retention is predicted by the presence of a documented customer complaints handling process. This linkage shows that organisations can improve retention – a clear benefit – by having a documented complaints handling process. This benefit is not alone, either, but is accompanied by benefits shown by other independent research to flow from handling complaints well: improved employee performance and business processes, which in turn contribute to financial performance. Overall, our results coupled with others’ shows that
companies that capture customer complaints and handle them well: • are well-placed to resolve a particular complainant’s problem and thereby retain that customer’s residual value; and • have a head-start in identifying systemic or repetitive problems that affect the bottom line and, therefore, have an advantage in developing solutions to those problems. The documentation supporting ISO 10002 also notes that excellent complaint handling processes “enhance the ability of an organisation to identify trends and eliminate root causes of complaints, and improve an organization’s operations”, which are important benefits as well. In order to shed more light on the association between retention outcomes and complaints handling processes, we ran some additional tests. These revealed a number of significant associations between having a documented complaintshandling process and other variables investigated in our study. We found that companies that have a documented complaints handling process are also more likely to: • have an explicit customer retention plan; • use a formal switching model to predict defection; and • have a person or group in charge of customer retention.
Conclusions and implications There are two major conclusions to this study. First, excellence in customer retention is strongly associated with the presence of a documented complaints handling process. Secondly, and perhaps counter-intuitively, the standard management practices of planning, budgeting and assigning accountability for customer retention prove not to be associated with achieving excellent customer retention performance. For managers, the most important implication from this research is to consider implementing a documented customer complaint handling process. In so doing, attention should be paid to features that can identify and act upon the problems that motivate customers to take some or all of their business to competitors. Guidance in how to do that is available in the ISO 10002 standard. Managers may also need to revise their customary approaches and intuitive beliefs to retention management in the light of our findings, which show that a documented complaints handling process is much more important than having a budgeted customer retention plan under the control of a responsible manager. Lawrence Ang can be contacted at lawrence.ang@mgsm.edu.au Francis Buttle can be contacted at francisb@listeningpost.com.au. This article is a summary of a paper published in 2006, entitled ‘Customer retention management processes: a quantitative study’, European Journal of Marketing. Vol. 40(1/2), pp. 83-99.
18 | December 2009 | Consumer Directions
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Book review By Karen Andrews Crucial Conversations: Tools for Talking When Stakes are High Authors: Kerry Patterson, Joseph Grenny, Ron McMillan and Al Switzler
Want to learn more about having an effective conversation? The authors take you on a journey through a stepped approach for more effective conversations by defining a ‘crucial conversation’. By following this approach, you’ll be more effective in handling emotive response, tune your listening ability, recognise your role in the conversation and keep the conversation on the issue and with the facts in focus. You will also be more comfortable in handling tricky conversations that you need to initiate with employees or your loved ones at home. Through observation, the authors have researched the art of engaging in crucial conversations. In the book, they focus on how individuals successfully complete these conversations to reach decisions on resolutions to issues or situations that arise in their professional or personal lives. Whilst I encourage you to read to the end of the book, even the first few chapters will provide you with new skills or reinforce techniques you may already be using. It’s as simple as recognising whether the person you are
talking to is in ‘silence’ or ‘violence’ and how to help them or yourself move on to ensure a meaningful conversation. The authors also show you how you might be contributing to an ineffective conversation and what signs to look out for so you can contribute proactively. How often have you added your own interpretation of a situation? The book helps you sort through this by separating the stories from the facts. Toward the end of the book, the importance of decisionmaking and having clear direction at the conclusion of a discussion to avoid misinterpretation is highlighted. So rather than reach for the fiction take a moment to read this book and then practice, practice, practice for the perfect ‘crucial conversation’. You can buy Crucial Conversations at the new SOCAP Australia Bookstore at www.socap.org. au. If you would like to review a book for Consumer Directions, please email editor@socap.org.au.
Recent SOCAP workshops and events By Eliza Smith In the last quarter, SOCAP Australia members and their staff have attended a number of successful workshops and events, held in both Sydney and Melbourne. The response to our launch of these sessions was extremely encouraging and shows that topics designed specifically with a complaints handling focus in mind deliver exactly the types of key skills our members want to build on. First up in October was our halfday Letter Writing for Complaint Handling workshop, presented by Jack Ayerbe. Attendance was excellent – in Melbourne, 16 people took part and in Sydney, we had a group of 13 participants. I was fortunate enough to attend the Sydney session and enjoyed the process of learning a number of
essential writing techniques that will definitely help in improving my written communications with you all. The feedback we have received from each workshop was excellent, with participants particularly complimentary of Jack’s relaxed presenting style and challenging content. This particular session has generated such rave reviews that we are delighted to invite Jack back again to present repeat sessions in March 2010. We were also delighted with the response to our second workshop, Coaching for Complaint Handling, held in November with Kate Tedstone of TMI Australia as facilitator. With 10 people taking part in Melbourne and 12 in Sydney, Kate led small groups through several practical role-play situations. This method of learning assisted attendees in demonstrating, assessing and developing their current coaching skills, while
incorporating the new techniques and strategies they had learnt during the day. Feedback from participants praised the direct relevance of content to their everyday work as well as Kate’s industry knowledge and professionalism. The Consumer Rage Forum, an activity designed by our Thought Leadership working party, was also held in Sydney and attracted a great deal of interest and produced fascinating discussions. Thirtyfi ve attendees from across the membership sectors participated in a robust discussion of the issues surrounding consumer emotion. This forum will lead to future development of a range of activities for members in 2010. If you are in Perth, Brisbane or Adelaide and would like one of these workshops near you, please contact us directly. I look forward to seeing you all soon! www.socap.org.au
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SOCAP Australia presents
Complaints Handling Workshops For both team members and managers working in complaint handling Full and half day workshops
A Complaint is a Gift Complaints Handling 101 Full day workshop Sydney: 17 February 2010 Melbourne: 24 February 2010
Letter Writing for Complaint Handling Limited workshops scheduled for Sydney and Melbourne. For workshops on these topics in other locations please contact us directly.
How to manage written complaints Half day workshop Melbourne: 17 March 2010 Sydney: 24 March 2010
Multiple booking and distance discounts are available.
From Rage to Reason
For details and bookings go to www.socap.org.au, email socap@socap.org.au or contact us on 03 8687 9060. Early booking recommended.
Full day workshop Sydney: 25 March 2010 Melbourne: 14 April 2010
SOCAP CD_0409.indd Workshop 20 ad Nov09 indd 1
Back by popular demand
Strategies for handling and diffusing anger
26/11/09 3/12/09 11:26:03 4:30:02 PM AM