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THE ROLE OF
COMPLAINTS HANDLING SYSTEM IN ENHANCING CUSTOMER SATISFACTION
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
Customer
complaint is a customer’s expression of dissatisfaction towards a product,
service or purchasing situation (Nakibin et al., 2011). Tronvoll (2012) calls
it a formal or informal customer report regarding a problem with a product or
service. Research has shown that, the way a company handles company complaints
can affect its business success in the long term (Robert-Lombard, 2011).
Gelbrich & Roschk (2010) assert that poor complaint handling procedures
could damage company-customer relationship and cause customer dissatisfaction.
It could promote negative word of mouth advertising causing potential customers
to refrain from doing business with the company. It could cause low customer
loyalty and significantly chances of customer retention. Awara (2010) opines
that poor customer complaints handling ultimately cause companies to lose
customers thereby losing market share, whilst the recruiting of new customers
through marketing promotions cost money, effectively reducing company
profitability.
When
companies retain effective customer complaint handling procedures, customer
attrition is reduced, customer satisfaction is increased, sales figures are
boosted and customer loyalty and retention assured (Robert-Lombard, 2011).
Various studies have put forward diverse lists of procedures to guide the
customer complaint handling process. Gelbrich & Roschk (2010) conducted a
meta-analysis of company complaint handling procedures and how they affect
future customer response. The study showed that listening to customer
complaints, being understanding, and jotting down salient points to gather
relevant facts, discussing the complaint and following up with effective
solutions was a very effective complaint handling process. Tronvoll (2012)
however rejects a stationary procedure, insisting that complaint handling
procedures are different in various companies, reaping varying levels of
success. Komunda & Oserankhoe (2012) advocates for a comprehensive customer
complaints management system, complete with complaint handling procedures,
customer satisfaction checks, customer feedback acquisition and customer
retention measures.
Every
business organization`s success depends on the satisfaction of the customers.
Whenever a business is about to start, customers always come “first” and then
the profit. Those companies that are succeeding to satisfy the customers fully
will remain in the top position in a market. Today’s business company has known
that customer satisfaction is the key component for the success of the business
and at the same time it plays a vital role to expand the market value. In
general, customers are those people who buy goods and services from the market
or business that meet their needs and wants. Customers purchase products to
meet their expectations in terms of money (Awara, 2010). Therefore, companies
should determine their pricing with the quality of the product that attracts
the customer and maintains the long-term affiliation.
The
organization should make sure that they are providing full service, equivalent
to their monetary value. This will increase the number of customers and holds
the long-term relationship between the customer and the organization (Tronvoll,
2012). And the existing customer will help to attract the new customers by
providing or sharing the information about the products and services of the
companies. Satisfaction means to feel content after what the person desired or
wanted. It is difficult to know whether the customers are satisfied with the
availability of the product or services. So, giving satisfaction to the
customers is not an easy task, for this different factor is needed to be taken
into consideration. Nowadays, competition can be noticed between the business
organizations and marketplaces everywhere and has been one of the challenging
tasks for the competitors. Though it seems to be tough in the growing market,
competitors are developing their marketing channels effectively (Komunda &
Oserankhoe, 2012).
Globalization
has increased competitiveness in the marketing environment, giving rise to the
need for companies to adopt diverse strategies to stay competitive. Tronvoll
(2012) posits that market competitiveness demands that companies employ
measures to influence potential customers and retain existing customers,
thereby increasing market share and profitability. To increase market share,
Komunda & Oserankhoe (2012) assert that companies must ensure customer
satisfaction through counter-measures before sales, during sales and after sales.
According to Gruber (2011), one of the most significant counter-measures
companies can adopt is customer service, for which customer complaints
management is a critical component.
Even when
companies put forth their best efforts to serve their customers, customer
complaints are inevitable and are a regular part of doing business (Fierro et.
al. 2015). Complaint handling systems are the ultimate test for a company’s
customer orientation as they strive to create satisfactory resolutions to
customer concerns. A company may risk losing previously loyal customers when
grievances are poorly handled. This implies that existing levels of customer
satisfaction do not offer foolproof protection against the consequences of
ineffective complaint handling. Looking at the issue from the other side of the
coin, satisfactory handling of customer complaints may likely enhance customer
loyalty. Studies have shown high returns on investment in effective complaint
handling systems (TARP 1986; Fornell et. al. 2006; Fierro et. al. 2015). Thus
many companies are seeking to develop such systems to cultivate loyalty among
their customers. In doing so, two distinct approaches have been cited, the
first of which involves setting standard procedures to program complaint
handling employees on how to deal with customers in specific situations. The
second approach takes a more open stance and consists of training and
motivating employees to adopt a set of shared values that would likely lead to
the desired behaviors. Therefore, this study focuses on the role of complaints
handling system in enhancing customer satisfaction, a case study of First Bank
PLC.
1.2 STATEMENT OF THE PROBLEM
There is an
increasingly fast-paced competition for excellent customer service amongst
banks, handling customer complaints effectively has become a real point for
competitiveness. When companies show an inability to deal with customer
complaints, customer allegiance could be affected, resulting in high customer
turnover and low customer retention. Morrisson & Huppertz (2010) posited
that, when companies fail to effectively handle customer complaints, that
particular customer could be lost in the process, sparking a chain reaction
involving the customer telling at least 27 others, who might also continue to
spread negative news about the company involved. Consequently, the loss of one
customer could cause a chain reaction where a lot more customers are lost:
reducing market share, reducing bank profitability and increasing negative
perceptions about the bank.
In light of
these assertions, it is imperative that banks perfect their customer handling
procedures to avoid the bleak repercussions that come with failure. The
challenge here is that, most banks hardly, if not never, assess their customer
complaint procedures to find out if it is delivering in terms of handling
customer complaints effectively. Due to this, some banks adopt a nonchalant
approach to customer complaints, especially if it is related to customer
service, oblivious of the latent harm being caused to the bank. Therefore, this
study necessitates the need to carry out a study on the role of complaints
handling system in enhancing customer satisfaction, a case study of First Bank
PLC.
1.3 OBJECTIVES OF THE STUDY
The general
objective of this study is to examine the role of complaints handling system in
enhancing customer satisfaction, a case study of First Bank PLC. The specific
objectives include the following:
1. To examine customers’ opinion on the level
of complaints handling system in First Bank PLC.
2. To ascertain the influence of complaint
log book in policy formulation in First Bank PLC.
3. To find out the records of prevalent
customers’ complaints in First Bank PLC.
4. To investigate the approaches of managers
in in First Bank PLC in handling customers’ complaints.
5. To find out whether retention resulted in
all cases after the resolution of customers’ complaint?
1.4 RESEARCH QUESTIONS
The relevant
research questions related to this study include the following:
1.
What
are customers’ opinion on the level of complaints handling system in First Bank
PLC?
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