The Silver Lining of Customer Problems (Part 2)

This is the second article in a four-part series.

With a click on their mobile devices, dissatisfied customers can broadcast their frustrations to their social networks.

This makes the brand-tarnishing power of customer problems enormous -- and easily capable of undoing millions of dollars of brand marketing and advertising.

But it doesn't have to be that way: Companies can transform customer problems into business opportunities. Gallup finds that when an organization handles problems effectively, it can end up with higher customer engagement than it had before the problems occurred. After an engaging problem resolution experience, customers are more likely to repurchase and act as brand ambassadors.

On the other hand, frustrating problem resolution experiences (e.g., those that require customers to speak with multiple employees) are far more damaging to customer engagement than the initial problems were. Because problems are often unavoidable, all companies need world-class problem resolution strategies to avoid demolishing customer engagement with subpar resolution experiences.

Engaging Customers via Problem Resolution

To help leaders engage customers via problem resolution, Gallup identified the factors that sway problem resolution experiences the most. For example, customer-centric processes and people are paramount -- so companies need to understand and deliver what their customers want.

Another vital consideration for leaders is customers' previous brand perceptions -- how customers felt about the company before encountering problems. At face value, it may seem as though stronger brand perceptions would lead to improved satisfaction with problem resolution experiences, but it's not that simple.

In reality, the better a customer's previous brand impression was, the more sensitive that customer is to positive or negative resolution experiences. In other words, a customer who loves a particular company and then is very satisfied with a problem resolution experience will love the company even more. On the other hand, a customer who loves a company and then is dissatisfied with a resolution experience will view the company much less favorably afterward.

In contrast, customers who strongly dislike a company are less likely to change their perceptions of it regardless of whether their problems are handled effectively. This means that strong branding before problems arise can help companies turn positive resolution experiences into profitable customer engagement.

Prior Brand Perceptions and Future Purchase Intent

Prior brand perceptions also influence customers' future purchase intent. Among customers who love a particular company and then are very satisfied with their resolution experience, a strong majority (73%) say they are very likely to purchase again in the future. By comparison, 31% of customers with an unfavorable impression of the company who are then very satisfied with their resolution experience say they are very likely to repurchase in the future.

But here's the kicker: Just 13% of customers who love the company but then are dissatisfied with a problem resolution experience are very likely to purchase again in the future.

These findings point to an underlying truth: When it comes to handling problems, resolution experiences matter far more than compelling branding does. Positive brand perceptions are beneficial -- but ultimately, they require satisfying resolution experiences to produce desirable customer outcomes such as higher customer engagement and increased repurchase intent.

In other words, no matter how good a company's reputation is, it needs to deliver on that brand promise when problems arise.

Of course, the best-case scenario for any company is to consistently maintain a world-class reputation and bring brand promises to life via customer-centric problem resolution experiences. In fact, Gallup finds that these best-in-class companies minimize problem incidence, with only 5% of their customers experiencing problems in the past six months.

Still, problems happen -- and when they do, righting the wrong requires positive resolution experiences.

Bailey Nelson contributed to this article.

The next article in this series discusses how to deliver world-class problem resolution experiences.

Sign up for the "Silver Lining of Customer Problems" webinar, during which Gallup experts will share more insights and best practices on how to turn customer problems into drivers of engagement.