How can you handle customer complaints? 8-step guide

Published Thursday 26 February 2026

Table of contents

• Why you should embrace complaints
• Common types of customer complaints
• Understand the customer's perspective
• Resolve the issue to the customer's satisfaction
• Be prepared for anger and emotion
• What to do when you can't resolve the complaint
• Look for the underlying cause
• Train your staff to handle complaints well
• Use customer complaints to help build a better business
• FAQs on handling customer complaints

Key takeaways

• Listen without interrupting and acknowledge the customer's frustration before offering solutions, as most complaints arise after earlier attempts to resolve issues were ignored or mishandled.
• Follow up within a week after resolving any complaint to confirm satisfaction and demonstrate your commitment to customer care, which builds loyalty and trust.
• Track complaint patterns systematically using a simple log to identify recurring issues that signal underlying business problems requiring process improvements.
• Train your staff with clear decision-making authority and an eight-step complaint resolution framework so they can handle issues consistently without constant escalation.

Why you should embrace complaints

Customer complaints are free, unsolicited feedback that reveals what your business needs to fix. The most successful small businesses don't just tolerate complaints; they welcome them.

Here's why complaints are valuable:

• Direct insight: Complaints highlight problems you might not otherwise see
• Customer retention: Resolving issues well builds loyalty and trust
• Silent majority: For every customer who complains, many more stay quiet and simply leave
• Improvement opportunity: Each complaint shows you exactly where to focus your efforts

Your first instinct might be to feel defensive. That's natural. But customers who complain are giving you a chance to make things right, and that's worth more than silence.

Common types of customer complaints

Understanding complaint categories helps you spot patterns and respond more effectively. While every business is different, most customer complaints fall into a few key types.

• Product or service quality: The item doesn't work as expected or the service fell short of what was promised
• Billing and payment issues: Incorrect invoices, unexpected charges, or payment processing problems
• Long wait times: Slow responses to enquiries or delays in service delivery
• Poor communication: Misunderstandings, lack of updates, or unclear information
• Staff behaviour: Unhelpful, rude, or dismissive interactions with your team
• Delivery problems: Late arrivals, damaged goods, or missing items
• Unmet expectations: What the customer received didn't match what they thought they were buying

Recognising which type of complaint you're dealing with helps you respond appropriately and identify areas of your business that may need attention.

Understand the customer's perspective

Most customers don't complain about minor issues – they escalate when earlier attempts to resolve problems were ignored or mishandled.

Here's the typical journey a complaining customer goes through:

1. They make a request or report an issue
2. They see no response or movement
3. They escalate to a formal complaint

By the time someone complains, they've usually already tried to find a reasonable solution. When those efforts fail, frustration builds.

The core reasons customers complain:

• Feeling ignored: No response to their initial contact
• Perceived unfairness: They believe they've been treated poorly
• Unmet expectations: The product or service didn't deliver what was promised

Understanding this perspective helps you respond with empathy rather than defensiveness.

Resolve the issue to the customer's satisfaction

To handle a customer complaint effectively, follow these eight steps:

Here's how to apply each step:

1. Listen without interrupting: Let the customer explain the full situation before responding. Take notes so you capture the key details. Avoid jumping to conclusions or solutions too quickly.
2. Acknowledge their frustration: Show you understand why they're upset. Use phrases like 'I can see why that's frustrating' or 'I understand this has been difficult.'
3. Apologise sincerely when appropriate: If your business made a mistake, own it. A genuine apology goes a long way, so don't make excuses.
4. Ask questions to understand the issue fully: Clarify details to avoid assumptions. Find out what outcome they're hoping for. Ask about their broader experience with your business.
5. Explain how you'll fix the problem: Be specific about your solution and timeline. If you can't meet their exact request, explain why and offer alternatives.
6. Take action quickly: Implement the solution without delay. Keep the customer updated on progress. Use phone calls for complex issues and email for documentation.
7. Confirm the resolution: Summarise the agreement in writing. Make sure both sides understand the outcome. Document the complaint and resolution for your records.
8. Follow up to ensure satisfaction: Contact the customer a week later to check all is well. If issues remain, repeat the process. Thank them for bringing the problem to your attention.

Be prepared for anger and emotion

Angry customers aren't trying to be difficult – they're reacting to a situation that's caused them stress. Understanding why emotions escalate helps you respond with confidence.

Here's why customers become emotional:

• They feel ignored: Their earlier attempts to resolve the issue went nowhere
• They take it personally: Customers see your business as a single entity, so poor treatment feels like a personal slight
• They've avoided conflict: Most people don't want to complain, so by the time they do, frustration has built up
• The problem has persisted: Ongoing issues create mounting stress

Knowing this context helps you stay calm and focus on resolution rather than reacting to the emotion.

How to respond calmly and professionally

Staying composed during difficult conversations helps de-escalate tension and keeps the focus on resolution.

• Respond quickly: Aim to acknowledge complaints within 24–48 hours
• Stay rational: Don't take anger personally – focus on the problem, not the emotion
• Use a calm tone: Speak slowly and clearly, especially on phone calls
• Acknowledge their feelings: You don't have to agree with everything, but show you understand their frustration
• Never deny the problem exists: Dismissing their concern will only escalate the situation
• Make complaining easy: Provide clear contact details so customers can reach you without added frustration

When to end the conversation

Some interactions cross a line. Know when to step back.

• Recognise abusive behaviour: If a customer becomes threatening, insulting, or aggressive, you have the right to end the conversation
• Use a clear exit phrase: Say something like "I'm sorry, but we'll need to stop this conversation now"
• Document the interaction: Keep a record of what happened for your protection
• Protect your team: Nobody should tolerate abuse – ensure staff know they can escalate or end difficult calls

What to do when you can't resolve the complaint

Sometimes you won't be able to give a customer exactly what they want – and that's okay. What matters is how you handle the situation.

Here's how to manage unresolved complaints professionally:

• Be honest about limitations: Explain clearly why you can't meet their request
• Offer alternatives: Even if they're not perfect, show you're trying to help
• Know when to escalate: If you have a manager or senior team member, involve them when appropriate
• Document everything: Keep records of what was discussed and offered
• Accept you can't please everyone: Some complaints won't have a satisfactory resolution, and that's part of business
• Protect your team: Don't let unreasonable demands compromise your staff's wellbeing

Handling these situations with honesty and professionalism protects your reputation, even when the outcome isn't what the customer hoped for.

Look for the underlying cause

Repeated complaints about the same issue signal a systemic problem that needs fixing at the source. To find it, some firms use the 'Five Whys' problem-solving technique, which involves asking 'why' five times to challenge assumptions and uncover the true root of an issue.

Here's how to identify and fix root causes:

• Gather feedback systematically: Ask customers specific questions about different areas of your business
• Talk to your staff regularly: Find out what issues they're seeing and whether problems keep recurring
• Audit your business processes: Review how you operate, ideally with a business advisor or mentor
• Implement changes promptly: Fixing a broken process costs money upfront but saves more in the long run

Addressing the underlying cause reduces future complaints and improves the experience for all customers – not just those who speak up.

Train your staff to handle complaints well

If you have employees, they'll likely handle complaints on your behalf. Equipping them with the right skills and confidence makes all the difference to your customer experience.

Here's how to prepare your team:

• Share the eight-step process: Give everyone a clear framework to follow
• Practice with role-play: Run through common scenarios so staff feel prepared
• Clarify decision-making authority: Let staff know what they can offer independently, such as refunds, discounts, or replacements
• Create an escalation path: Make it clear when and how to involve a manager
• Debrief after difficult complaints: Support staff emotionally and identify learning opportunities
• Use complaints in team meetings: Review patterns and discuss how to prevent recurring issues
• Consider formal training: If budget allows, customer service courses can build confidence and skills. One option is Skills Bootcamps, which are government-supported, flexible training courses lasting up to 16 weeks that can be tailored to an employer's needs.

When your team knows how to handle complaints consistently, customers get a better experience – and you spend less time firefighting.

Use customer complaints to help build a better business

Customer complaints are opportunities to strengthen your business, if you handle them well. Every resolved complaint builds loyalty and reveals what you need to improve.

Create a company-wide attitude where complaints are welcomed, not feared. When your team learns to listen, you'll discover exactly what makes customers unhappy – and what it takes to make them happy.

Happy, loyal customers spend more, recommend your business to others, and help you hit revenue targets. They also give your team a sense of purpose.

Handle complaints carefully, learn from them, and use them to build something better. Managing this alongside your day-to-day finances is simpler when your business systems work together. Get one month free and see how Xero helps you focus on what matters most.

FAQs on handling customer complaints

Here are answers to common questions about managing customer complaints in your small business.

What's the best way to handle complaints over email versus phone?

Phone calls work best for complex or emotional issues because they allow real-time clarification and empathy. Email is better for documentation and when the customer prefers written communication. Whichever channel you use, follow the same eight-step process and always confirm agreements in writing.

How long should I spend trying to resolve a single complaint?

Aim to respond within 24–48 hours and resolve most complaints in one to three interactions. If resolution is taking longer, reassess your approach or escalate to someone with more authority. Balance thoroughness with efficiency – prolonged back-and-forth frustrates everyone.

Should I offer refunds or discounts to resolve complaints?

It depends on the situation and your business model. A small gesture like a discount or freebie can repair relationships cost-effectively, but focus first on fixing the actual problem. Consider the customer's lifetime value and don't make promises you can't keep.

How can I track and learn from complaint patterns?

Keep a simple log noting complaint type, date, and resolution; a spreadsheet or CRM works well. Review it monthly to spot trends, use the insights to prioritise business improvements, and share your findings with your team.

What if a customer leaves a negative review even after I've resolved their complaint?

Respond publicly and professionally: acknowledge the issue and briefly describe how you resolved it. Don't argue or get defensive. This shows potential customers you take complaints seriously and handle them well.

For more guidance on managing your online reputation, see our guide on online reputation management.