A foundational principle of third-party risk management is that you can outsource the activity but you can't outsource the risk. This means that even if a vendor provides products or services on your organization's behalf, the organization is still ultimately responsible for any negative impacts resulting from that relationship.
This is an especially important consideration when vendors interact with your customers. Customers rarely distinguish between your organization and its vendors, so if they have a complaint, it’s always a reflection of your organization and not the vendor. And regulators will hold your organization accountable if your customer's consumer rights are infringed upon. This is why your organization must establish very strict complaint management requirements, management, and monitoring for its customer-facing vendors.
This blog examines why complaint management is important, the elements of effective complaint management, and tips for integrating it into your organization's vendor oversight practices.
No business can survive without customers, and unhappy customers usually aren't customers for very long. In today's competitive business environment, customers have choices about with whom to place their business and spend their money. Still, how you treat your customers, and their complaints, matters for reasons beyond simply maintaining their business. Maintaining regulatory compliance and preserving consumer rights are important benefits of properly managing customer complaints. And it's important to remember that proper complaints management can provide you with valuable data to help your organization determine where changes and improvements are necessary. Lastly, effective and timely complaint management can help protect your organization's reputation and brand.
Let's explore each of the reasons why customer complaints matter in more detail:
Depending on the products and services you’re offering your customers, you may be subject to these regulations and more. More importantly, your vendors must comply with these regulations when offering products and services on your behalf. It doesn't matter if your vendor caused the compliance infraction; your organization will pay the price. And that "price" may be in the form of regulatory fines, expensive litigation, or even criminal penalties.
Respecting consumer rights. Consumers have rights in the United States (and many other countries), and businesses must respect them. Let's explore the four basic consumer rights in the United States:
The right to safety. Consumers have the right not to be harmed by products or services if they are used as prescribed. The US federal government further formalized this right in 1972 through the Consumer Product Safety Commission (CPSC); to defend consumers against products other than automobiles that cause injuries.
The right to be informed. An organization's product or service information should always be complete, truthful, and appropriate. Several pieces of legislation were passed between 1960 and 1980 to protect consumers against misleading information about financing, advertising, labeling, and packaging. Consumers are entitled to adequate information to make intelligent and informed choices.
The right to choose. Consumers have a right to free choice among product offerings and should have a variety of options provided by different companies from which to choose. The federal government has taken many steps to ensure the availability of a healthy environment open to competition through legislation, including limiting the ownership of concepts, preventing anticompetitive business practices through antitrust legislation, and bans on price-cutting and price-gouging.
The right to be heard. Consumers have the right to voice product or service concerns and complaints and have them addressed quickly and effectively. No federal agency is assigned the specific mission of providing a forum for this interaction between consumer and business. However, state or federal attorney generals can assist their constituents in pursuing compensation when a party provides a product or service that is unsatisfactory to the consumer and violates the law. The Better Business Bureau (BBB) is also a non-governmental organization dedicated to lobbying for consumer rights and taking action on behalf of wronged consumers.
The right to be heard is especially relevant to customer complaint management. Your organization and your vendors must demonstrate that complaints are taken, recorded, and resolved appropriately and within a reasonable timeframe.
Generating important data to help you identify improvements and inform your decisions. Your customers have a range of expectations around the products and services they purchase from your organization. Customer complaints can help your organization better pinpoint where product or service adjustments may be necessary to improve customer satisfaction. And the frequency and nature of complaints can also help your organization determine if your customer-facing vendor is a part of the problem. As they say, "feedback is a gift," and complaints are essentially supercharged feedback. While the absence of complaints doesn't necessarily mean customers are fully satisfied, when complaints are provided, at least you know what needs improvement.
Protecting your reputation and brand. Managing customer complaints is one of the many aspects of customer service. And your organization's reputation can be dramatically affected by a real or perceived lack of customer service. In today's tech-heavy environment, dissatisfied customers will not only complain directly to you (or your vendor) but may also complain about your organization in social media posts or through online review sites. This means that for every customer complaint, there is also the potential for rapid, widespread reputational damage. If you respond to your customers' complaints and resolve them fairly, you can reduce the possibility of unwarranted reputational attacks in the all-too-public cyber environment.
Whether complaints come directly to your organization or through your vendor, it’s essential to have a robust complaint management framework in place. But what does that look like? Let's take a look at what an effective complaints management framework entails:
Many organizations outsource complaint management to vendors to provide customer service. Customers may receive customer service and complaint management through various methods, including live agents answering phone calls, online chats, emails, responding to online reviews, or sending traditional mail. As with any vendor risk, your organization will be held accountable if there are issues, such as regulatory non-compliance, poor issue resolution, or customer dissatisfaction. So, it’s important to define your expectations for the vendor, memorialize service level agreements in the contract, monitor performance, and collaborate to identify and implement improvements. When outsourcing customer service and complaint management, it’s important that your organization carefully reviews the vendor's background and experience with complaint management.
In addition to their complaint management processes and performance. Consider the following:
Customer complaints aren't pleasant, but they do provide your organization with important information that can be used to improve your products and services, customer services, and relationships with your customers. Make sure you carefully vet and closely monitor any vendor providing customer-facing services.