How to handle customer complaints

Most small businesses will receive complaints at one stage or another. But it's how you deal with them that matters.

A small business owner handling a customer complaint over the counter

Opportunity for improvement

When your small business receives a complaint, the natural reaction is for you, as business owner, to feel defensive. Managing most complaints will be genuine issues from upset or disappointed customers. They aren't trying to make trouble for you – they're letting you know that your business has made a mistake.

It’s important you don't take offence when you receive a complaint. Instead, try to see the issue from the customer's point of view. It's not always easy, but if you can manage this then you'll learn about the areas of your business that can be improved or changed. And that in turn will win you more customers.

Why you should embrace complaints

The most successful, customer-focused companies embrace complaints – because complaints are unsolicited feedback. No surveys, no loaded questions, no focus groups required.

A complaint is raw, direct interaction from a customer and it should be treated as a valuable source of information about your business.

Customers don't complain just to be rude to you. They complain because they’ve experienced a problem with the way your business operates and they’re trying to tell you about it.

If you can resolve their problem, you'll also be resolving the problem for other customers who have experienced it but didn't have the time or energy to complain.

Understand the customer's perspective

It's common for complaints to be made due to growing frustration. Customers don’t usually complain aggressively about minor issues – it's when those issues aren't properly dealt with that problems start to occur.

This is the typical experience most complaining customers go through:

  • They approach you with a request
  • They see no movement to resolve the issue
  • They complain

The majority of customers who complain are sensible, normal people who’ve taken steps to try to find a reasonable solution first. When their efforts are ignored or badly handled, they understandably become upset.

In general, customers complain because they feel they've been treated unfairly or had no response. Nobody likes being ignored, especially when they've paid money for a product or service.

Resolve the issue to the customer's satisfaction

You need to make sure a customer's issue is resolved properly. Here are six tips to help you do that:

  • Talk to the customer: Sending standard letters or emails might work in some cases. But often you can achieve more, faster, with a phone call. This will help you properly understand their complaint. It'll also feel more personal to the customer, and reduce the risk of them misunderstanding the tone of your response.
  • Find out what they want: You might have an idea of what it takes to resolve the complaint. Your customer's idea might be different. Ask them what they want and listen carefully to the response. You might not be able to grant every wish, but perhaps you can meet them halfway.
  • Ask about wider issues: Is the customer happy generally with your service or product? What other feedback can they give that might be useful? Asking them questions like this will help them feel engaged and valued.
  • Give something back: You might want to do more than just solve the customer's problem. You could go further – maybe offer them a discount on their next bill, or send them a voucher for your products or services. This small additional cost will help you retain them as customer, and could pay for itself many times over.
  • Confirm your solution: Go through the details of your proposed solution on the phone, then follow up by email or letter. Make sure your agreement is fully understood on both sides. Your customer will feel engaged and it should reduce the risk of disputes and misunderstandings later.
  • Keep in touch: Get a member of your staff to follow up with the customer a week later, to check that all is well. If it is, you have a happy customer. If it's not, find out why and repeat the process. They'll appreciate your proactive behaviour.

Don't ignore complaints

Always respond to a customer complaint. If you deal with the issue quickly enough, you should be able to resolve it and keep your customer. Remember, it takes a lot more effort and expense to gain new customers than it does to keep existing ones.

Also, in this connected age, if you ignore complaints you run the risk of your unhappy customer spreading the word through social media and personal contacts.

Complaints are part of business life. Having an established process for handling them will minimise their negative impact on your business.

Be prepared for anger and emotion

Complaints can sometimes escalate into emotional, insulting and offensive behaviour. This can be traumatic for the customer, and also for the person in your business who's handling the complaint.

Why does this happen? Because customers see your business as an entity, as a single unit – almost as a person. When that 'person' ignores them or treats them unfairly, they take it personally, just as if they'd been insulted by a human being.

Customers don't want to complain, in fact most people try to avoid conflict. So when they find themselves in a position where they feel they have to complain, they are often stressed and angry about it.

Respond rationally, not emotionally

Customer emotion might come out in a letter, email or phone call when they're interacting with your business. You can reduce the tension and anger by taking a few sensible steps:

  • Make it easy for customers to complain: Provide contact details on your website and your stationery. Go out of your way to ask your customers for feedback, good or bad. It'll help you refine the way you do business.
  • Respond to complaints quickly: Get in touch with your complaining customers within a week – preferably less.
  • Be polite: Always treat your customers with respect. Apologise when it's clear that your business has let down the customer.
  • See their perspective: Try to view the events leading to the complaint from your customer's perspective, to understand what has upset them. This will help you resolve the issue.
  • Don't deny that there's a problem: Disagreeing with the customer's perspective is the same as calling them a liar. It's unhelpful and will upset them further. You might not see the problem, but they clearly feel there is one. Try to resolve it.
  • Have an escape route: When talking to customers who become irrationally angry or abusive, be prepared to say “I'm sorry, we'll have to stop this conversation now.” Nobody has the right to treat you or your staff badly.
  • Train your staff: Complaints-handling is a delicate business. Send your staff on training courses if necessary, to help them handle customer complaints.

Look for the underlying cause

If you're receiving numerous complaints about the same issue, there's probably something wrong with that part of your business.

Fixing that problem will reduce complaints and probably also help your business grow. Remember: for every unhappy customer who complains about a problem, there could be many more unhappy ones who don't.

So try to fix the problem at source:

  • Get feedback: Wherever you can, ask your customers to tell you how well – or poorly – your business is performing. Ask specific questions about different areas of your business.
  • Talk to your staff: What issues are they seeing? Are the same problems occurring repeatedly?
  • Audit your business processes: Go through the way you run your business, perhaps with the help of a business advisor or mentor, and check that you're doing the right things.
  • Make necessary changes: If something isn't working properly, change it. Fixing a broken process might cost money, but it'll save you more money further down the line.

Use customer complaints to help build a better business

Complaints are inevitable once your business reaches a certain size. But as we've shown here, you can use them to improve the way your business operates.

Try to develop a company-wide attitude where complaints are opportunities to be welcomed. If you teach your staff to listen, you'll find out a lot more about what makes your customers unhappy. And that will also tell you what you need to do to make them happy.

Happy, loyal customers can do wonders for your business. They spend more, enhance your reputation and help you hit sales and revenue targets. They can also provide your team with a sense of purpose and drive.

So don't be scared when your customers complain. Handle customer complaints carefully, learn from them and use them to build a better business.


Xero does not provide accounting, tax, business or legal advice. This guide has been provided for information purposes only. You should consult your own professional advisors for advice directly relating to your business or before taking action in relation to any of the content provided.

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