On March 2, 2016, we posted some key takeaways from our 6th Annual Consumer Products & Retail Summit held on February 25, 2016, and are following up with a series of posts to provide more detail on our top tips from the presentation Product Liability: Practical Strategies for Managing Consumer Complaints.

Tip #1: Developing a complaint management and response protocol can offer advantages such as building up one’s brand and generating good will with customers, suppliers and regulators alike.

Experience has taught us that many consumer complaints do not signal a material issue. As a result, dealing with them can seem like a distraction from conducting your business, and many companies approach consumer complaints with suspicion or frustration. However, consumer complaints are an inevitable part of modern commerce—where they cannot be avoided, it is worthwhile examine the ways they can benefit the company.

Instead of approaching these inevitable complaints with skepticism and fear or dealing with them on an ad hoc basis, developing and implementing a complaint management system can allow companies to use complaints not only to minimize legal risks, but also as an opportunity to enhance their relationships, credibility and goodwill with consumers, suppliers and regulators. An appropriate response from the company to an unhappy customer increases the chances of retaining that individual as a customer. Customer feedback, both positive and negative, is also a potentially valuable form of “crowdsourcing” that can be used to better understand customer experiences and preferences and generate ideas to improve and refine company processes and products.

Tip #2: The advantages of having a system in place include preventing escalation of complaints, minimising legal and reputational risk, and being in a position to defend and respond to legal proceedings in the event they arise.

While many consumer complaints pose no material risk to your company, in some cases, customer complaints can be the first sign of a more serious issue—of developing media scrutiny, brand damage, regulatory issues, product recalls, civil claims and even class action litigation.

A timely, professional and appropriate response to a customer inquiry or complaint decreases the risk that the customer will escalate the situation by, for example, filing a regulatory complaint, suing the company, or propagating concerns through social media. Prompt responses to complaints permit companies to identify and correct misinformation before it is disseminated further. In the case of meritorious complaints, an effective complaint management system (including a system of appropriate escalation) permits companies to identify and investigate problems at an early stage when there is greater ability to resolve them and contain their impact. In the rare case where litigation or escalation is inevitable, a complaint management system permits companies to be in a better position ready to respond to and defend claims and deal with crisis situations.

Having a system in place to identify and manage risks at the earliest possible stage gives companies more control over the process. If these systems are not in place before the problem arises, it is more difficult to implement a considered response strategy.

Tip #3: The most effective strategies are developed proactively and enable businesses to assess and respond to consumer complaints in a timely and meaningful way, with a view to minimising risk.

There is no one-size-fits-all approach to management of customer feedback. The system that works best for your company will depend on the needs of your organization. However, the following are some best practices to consider to augment your company’s existing compliance and risk mitigation programs:

  • Get good intake information. Intake information is the information you get from a customer when the complaint is made. The quality of the information obtained at this initial stage has a ripple effect going forward. It can help “crystalize” the customer’s concern. It preserves institutional memory and prevents loss or destruction of information. It also gives corporate decision-makers the best information upon which to base its response strategy.
  • The power of aggregation – identifying patterns. Companies can use the information obtained from inevitable complaints to identify trends and patterns, for example, by making feedback data searchable, or implementing a classification system for different types of complaints. If unmonitored, feedback data can in fact be a source of risk to companies—that they were or ought to have been aware of a potential issue and failed to act.
  • Consider moving decision-making authority as close to the customer as possible. Most customer concerns pose very little risk to companies. Training and empowering front line staff to deal with minor complaints (but escalate when appropriate) can help companies deal with minor complaints efficiently and cost-effectively.
  • Avoid inadvertent admissions of liability. Acknowledging customers’ concerns can help de-escalate complaints. However, it is crucial to educate company employees on how not to make inadvertent statements that could be taken for admissions of liability or fault, which could be used against the company if legal or regulatory proceedings ensue.
  • Develop a system of appropriate escalation. Front line staff who deal with complaints in the first instance sometimes need guidance to understand what types of issues need to be escalated. Companies want to avoid situations where employees don’t recognize a potential broader issue, or where they recognise the issue but do not escalate it because there is no system for doing so. One way to do this is to develop a list of “red flags” to indicate for customer service personnel when a matter should automatically be escalated.
  • Assemble your team in advance. When a complaint requires escalation, employees need to know who to escalate complaints to. Identifying, in advance, the people within or outside your organization who might be necessary to deal with more serious complaints can help companies be prepared to respond to urgent crisis situations and prevent oversights, such as failing to report to an insurer or regulator.