The Business World: You must worry if your customers don't complain

If a customer doesn't complain when something is wrong, it means they don't give a hoot whether the business succeeds or fails

START WITH this test. You are in a restaurant and the food and service are just about acceptable but really not very good. Do you complain? Some people say they would as a point of principle; others (and I count myself in this category) would not bother and merely never go there again. But the wisest response to this question came from a colleague.

"It depends," he said, "on whether you are a regular."

That must be right. A customer complains if he or she has, or wants to have a continuing relationship with the company that provides the service or supplies the goods. Not to complain if there is something wrong means the customer does not give a hoot whether the business succeeds or fails.

This is why a rise in complaints, for example on the railways, is actually a positive sign. Few people bothered complaining to British Rail because they knew it was a waste of time. Now customers expect a better service and rising complaints mean they are prepared to expend energy to try to achieve it. This principle - that a complaint is a gift that a customer gives a business to help it perform better - applies to manufacturing and service industries.

But it is particularly important for service industries because they depend, to a much greater extent than manufacturers, on the quality of delivery. You can get the quality of a manufactured product right in the factory, ie, at a handful of sites but to get the service right at point of delivery means controlling quality at maybe thousands of outlets. For service industries, using complaints positively is a vital tool enabling a company to improve its business prospects.

I'm grateful for the expression "A complaint is a gift" to a firm called TMI, a Danish consultancy with offices around the world (including the UK), which has produced a booklet with this title, explaining to companies how to stop customers becoming dissatisfied and how to turn those that are into an asset.

The practical starting point is that it is not only much easier to increase sales to existing customers than it is to win new ones, but existing customers are more valuable. It costs about five times as much to win a new customer as it does to keep an existing one. But cost aside, replacing 1,000 existing customers with 1,000 new ones might seem a straight trade. It is not, because the lost customers give the company a bad reputation and make it harder to bring in the new ones.

In the US, a person who is pleased with the purchase of their car tells on average eight people about it; a customer who is unhappy with the purchase tells 22 people. Some of those 22 will tell others - and so on.

How do you use complaints positively? The TMI advice is common sense presented in an orderly way: be polite, listen, welcome the complaint, try to make sure the customer leaves feeling satisfied, etc. But the order is itself important, for if you do not register and examine all complaints you don't learn from them the full lessons available.

So what do you do? Well, TMI publishes a questionnaire-based system for "developing an organisation's complaints culture" in this booklet, which is as good a starting point as any. Until you have the appropriate culture to welcome complaints you cannot begin to use them. But the really new opportunities for using complaints come not from attitudes but from technology.

Think about the standard way in which service industries monitor quality: forms in hotel rooms asking visitors whether they have had a nice stay, or questionnaires from the bank asking customers what they thought of the service. How do we react to those? I usually bin them on the grounds that filling out a questionnaire counts as one more thing to do, unless the company concerned promises to make a donation to charity for each form received.

But that is crude. What a company needs is not a response from an unscientific sample of customers. It needs a response from all customers, compiled more or less automatically as part of the delivery process. Present technology, used thoughtfully, can provide this.

Go back to the hotel example. It ought not to be necessary for a hotel to ask guests to fill out a questionnaire about whether they have used the restaurant and if so, whether they like it. The hotel computer system knows whether meals have been charged to rooms, and by looking at the patterns of use - how many non-residents use the facilities - they can see quickly whether the restaurant is popular or not. All accounts could be tagged with a crude satisfaction rating if check-out staff are trained to ask whether guests are happy and mark the account with a comment.

That is simply using existing kit better. When you apply the new communications technologies to consumer service vast new opportunities burst out. The new technologies (and for the moment these are Internet-based) enable the vendor to open a two-way communication. Anyone who buys a service over the net - a book, a hotel room, a flight, whatever - can immediately start a continuing relationship with the vendor, subject, of course, to the buyer's wants. The Net gives a cost-effective, simple (and for many Net-headed buyers) attractive way of handling complaints and establishing which customers are most helpful in reporting shortcomings.

The new technologies enable firms to create "clubs of complainers" - regulars willing to act as monitors of performance, who represent the attitudes of the customer base. Finding and rewarding these, and handling the information they provide, would be impossibly expensive under old technologies. The prize for figuring out how to apply the new ones is enormous.

Quality control in service industries is extraordinarily difficult. Without customers who care it is impossible. Ideally, all customers would be "regulars", who saw their duty as keeping providers up to scratch. The trick is to take non-regulars and encourage them to behave like regular customers, using new technology at an acceptable cost. But first you have to plant in your mind that a complaint really is a gift. Well, sort of.