The Cost of Customer Complaints

“Think the cost of each customer complaint doesn’t have much effect on your bank account? You’re kidding, right?”

When it comes to the cost of customer complaints, most auto shop owners and dealerships seem to know that there’s some economic price they’ll pay, but when asked how much each complaint may cost, they typically have no idea. So consider this: When a customer complains, the first direct cost that you’re going to incur is a loss of your “time.” This is the time you spend listening to the customer, discussing the resolution, and following up with the customer to ensure their complaint has been resolved. Let’s call this direct expense “customer communication” time. Now I realize the amount of time will vary with each complaint, so let’s assign 25 minutes as a realistic number for your average complaint (5 minutes when the customer first calls you with a complaint, 15 minutes when they return for correction or resolution, and then an additional 5 minutes for follow up).

Now let’s look at the time you spend on the “internal” communication that comes along with each complaint. This is the time you spend with your technicians and service advisors discussing the cause, the resolution, and the prevention of future complaints. Here at Elite, we feel 15 minutes is a realistic number when it comes to this “internal” communication, and then we’ll also need to consider the same amount of time, at a minimum, of your employee’s time. So your “internal” communication will cost you at least 30 minutes with each complaint.

Now let’s shift gears and talk about the cost of customer attrition and the cost of marketing that will come along with each customer complaint. In regard to “customer attrition,” regardless of how well you handle the customer complaint, you run a higher probability of losing that customer than losing an otherwise satisfied customer. So, going under the presumption that you run a good business, and with the assumption that you’ll be able to retain 80% of the customers that complain, you’ll still be losing 20% of those that do complain. Subsequently, you’re now faced with the marketing cost of replacing those lost customers.

Lastly, you have what we here at Elite call the “loss of productivity.” Simply put, while your employees are discussing the complaint with you, they are unable to generate additional income for the company. Now, based on everything we discussed, here’s the math that you and your employees may very well find surprising.

Note: The below cost of customer complaints calculation is predicated on a shop labor rate of $90 per hour, the shop producing $180 per hour per technician, and the cost of generating a new customer being set at $30.

25 minutes of customer communication $38
30 minutes of internal communication $45
Direct Marketing cost to replace 1 of 5 $6
Loss of productivity (30 min) $90
$179

Now if you think $179 is a big number, please bear in mind we’re talking about the cost of customer “complaints”, not warranty “repairs.” In addition, we haven’t taken into consideration the economic damage to your reputation, the damage to employee morale, the loss if income that’s associated with the loss of the customer or the direct cost of any repair. This is why the industry superstars invest in training, they go the extra mile to deliver extraordinary service, and they follow up with each and every customer. They know that they are far better off investing a little more money in their people rather than losing a fortune … through customer complaints.

If you’d like to limit your customer complaints in the most affordable and effective way ,learn more about our Elite Masters Service Advisor Training Program.