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How to handle customers that ask for compensation

If customer complaints are dealt with effectively you can improve customer loyalty and enhance your reputation. Emma Allen finds out when to offer customers compensation

"Whether or not you decide to offer compensation to a dissatisfied customer, and what exact form that compensation takes, depends largely on the nature of the complaint," says Duncan Baker, communications director at the Institute of Customer Service .

“If customers have experienced a late or absent delivery, poor service in some way or have been sold a faulty product, many businesses may feel that on top of rectifying the actual problem, some form of compensation is required,” he explains.

“Going beyond the minimum can often be done at no great cost to the business, but it adds a personal touch,” points out Baker. “The rewards in terms of customer loyalty and future business can be significant.”

Your legal obligation to compensate

In some cases, offering customers compensation is a legal obligation. For example, if your product is faulty, you are legally required to offer a refund, replacement or repair to customers. Consumers have up to six years to claim compensation in this way.

However, aside from the legal minimum, you could additionally offer customers vouchers, free delivery or money-off tokens for future purchases. Equally, gift tokens, flowers or even a box of chocolates could act as a compensatory gesture of goodwill.

“You need to assess each case individually to determine the need for any recompense,” advises Baker. “Firms don’t necessarily want a blanket

policy on compensation, as it could end up being quite expensive.

“Consider how serious the complaint is, and crucially, the customer’s point of view,” he stresses. “For example, did the person end up having to miss an important appointment because they were waiting for a delivery? Or are they asking for compensation unnecessarily?”

Handle customer complaints

Whether you choose to offer compensation or not, handling complaints in a consistent manner is essential. Make sure that members of staff are trained to handle customers sensitively and appropriately, and where necessary, can take action to deal promptly with a problem.

Always record information, including details of faulty goods or poor service, and retain receipts and customer correspondence.

If you do decide to offer any recompense, offer it unconditionally and without quibbling. It is also advisable to take any appropriate follow-up action, such as a letter of apology or a phone call to make sure that the problem has been fully resolved.

“Remember that people react in different ways,” says Baker. “What could be a minor irritant for one person is actually a big problem for somebody else. Good customer service isn't about rigid processes, but treating people individually.”

Whatever level of compensation you decide, it is important to consider the expectations of your customers. “People are much more demanding these days,” warns Baker. “They are more aware of their rights and they are more willing to complain. Businesses need to be acutely aware of that.”

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