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Management Report

Management reports, briefs issued by Samsung Economic Research Institute

Consumers in the Smart Era: 
Turning “Complaints” into “Trust”

Consumers in the Smart Era: Turning “Complaints” into “Trust”

Dec. 3, 2012

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Turning “Complaints” into “Trust”  PDF email Print

Starting with 8,063 in 1987, the number of consumer complaints registered with the Korea Consumer Agency has surged by 96-fold in the past 25 years. In particular, the figure increased by from 309,545 in 2006 and to 778,000 in 2011, a 2.5 times increase that coincided with the introduction and explosive use of smartphones, social networking services, online sales channels, etc.

The arrival of the smart era has fundamentally altered the scale, scope, speed and potential impact of consumer complaints. This requires companies to recalibrate the way they respond.

Naturally, mishandled treatment of consumer complaints can suffer huge financial losses and a tarnished reputation, as shown by Japanese automaker Toyota and Kryptonite, US maker of bicycle locks. The US government fined Toyota a record $32.42 million in 2010 for failing to properly report defects in its vehicles. Toyota’s market value also plunged 18% in one month. The automaker was slow to react to the complaint of drivers and denied for months that any serious problems existed. Kryptonite suffered from consumer complains that its locks could be opened with a cheap pen. The company spent US$10 million, or 40% of its annual profits, in handling this problem.

In managing complaints, companies also must be aware that they are probably hearing only a small sample of the negative opinions that customers have. In general, less than 10% of unhappy customers take the time to complain to companies. So when hearing about a problem, a company is safe to assume that other buyers have had a bad experience, too.

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