Author: Patrick O'Connor
There is no mistake that 2019 was a tough year for big brands, with household names such as Mothercare, Thomas Cook, Jamie's Italian, Debenhams and Patisserie Valerie all having to file for administration. These high-profile upsets were indicative of a broader trend. The Insolvency Service reported that in the first quarter of 2019 there were 451 companies going into administration, not only was there a 22% rise on the previous quarter, but it was also the highest number in five years. The next three months did not see much of an improvement, with a further 400 insolvencies being registered.
Analysts have cited numerous reasons for the uptick in insolvencies. Some of the biggest failures can be put down to a fragile macro-economic climate, the "B-word", technological disruption and even changes in consumer tastes. All were potential factors. However, a common thread connects them all: none of these companies saw it coming until it was too late. But there were signs.
Signs can often come from complaint data. A healthy and thriving company will have a different complaint topic profile from one that is entering difficult times. Two foreboding signals are:
The energy sector has seen a number of companies going bust or requiring Ofgem to intervene. The example below is of Solarplicity, which shows spikes in customer service complaints and a growth in refund complaints in October and November 2018. This friction when terminating a service demonstrates poor organisational health. Then in February 19, Ofgem intervened.
Thomas Cook is good example of cascading complaints. The company had failed to respond to competition from online travel agents and low-cost airlines. Customers were also unhappy but their complaints, it seemed, went unheeded. In the first half of 2019, Thomas Cook had a higher portion of complaints that were second-time attempts to get resolution from the customers than most other companies in their sector. This is shows that customers were not being listened to.
Image is everything in this sector. This reality proved deadly for Thomas Cook. One former travel industry executive who had dealt with the company told the BBC in September: much of the company's value was perceived to be its brand and the loyalty of its customers, this accounted for in its books as goodwill. So many customers struggling to get resolution resulted in a lot of goodwill depletion. Compare Thomas Cook Holidays (by percentage of second-time complaints) to some of the top UK goodwill brands and the difference is striking.
Once this was goodwill exhausted, so was the business.
If there was one valuable lesson to take away from the last year into 2020, it is that you cannot trust your instincts. There have been numerous examples where business leaders that have thought they were doing right by their customers when in reality they were wide off the mark, costing them dearly.
The disconnect in expectations between company and customer was perfectly illustrated in a recent report by Huntswood that made a survey of companies in the financial services and utility sectors, and their customers. The data revealed that 69% of businesses believe their customers are satisfied with their complaints handling. In truth, just 26% of customers said they are satisfied.
The financial services sector, in particular, faced fierce disruption in 2019 in the form of fintech businesses and challenger banks who are able to better connect with their clients. A recent report by KPMG on customer resolution in the sector notes that if financial services companies are not committed to fair and effective complaints resolution, they risk destroying shareholder value and losing customers.
As KPMG notes, going into 2020, companies need to realise that not only is the customer king, they wield more power than ever before. They know their rights and are well-informed, they judge over social media and share their opinions indiscriminately, as the recent TSB IT meltdown revealed. Regulators are using complaints data to measure how a business treats its customers, with a focus on protecting vulnerable.
Going into 2020, many companies will bear the scars of poor complaints handling. What's more, customer will only get more sophisticated in the way they educate themselves about their rights, how to enforce them and—more importantly—how to publicise their complaints. Having a powerful complaints analysis tool and using it to anticipate early cracks in your business, will be the best New Year's resolution an organisation can make. It will not just save your bottom line; it could also save your business.