How to Handle Product Liability Claims

Q. I am a new customer Service Supervisor for a small company and I’ve discovered that the plant does not have a plan in place for how to respond to product liability complaints and claims from customers. Can you point me toward resources for handling these situations?

 

Myra’s answer to: How to handle product liability claims

Frontline customer service representatives are the greatest influence in keeping product complaints from becoming product claims.  Your customer service representatives are the first line of defense against product liability claims and their carefully planned response and diligent handling of the complaint can help keep the issue out of court.  

From the first moment you and your team realize you’re dealing with a product liability complaint, there are four things you need to do, right off the bat and I’ll walk you through each of them step-by-step. 

1. Log all complaints. Product liability complaints must be documented completely with verbatim comments from both the customer and the employee. If you use a contact management system to track complaints, this is where you’ll want to capture the product liability complaints. In addition to complete documentation, you’ll need to archive the data for at least three years. If you don’t have a sophisticated complaint tracking system, document the complaint completely and carefully in your favorite data tracking software.

2. Get complete information from the customer. Attorneys have found that the first description of the incident by the consumer tends to be the most truthful and least calculated. So get as much detail on what happened and exactly how the incident occurred as you possibly can during the initial phone call with your customer. You need to know this: Information obtained by you from the customer may serve as impeachment evidence if the consumer later changes their story – so be sure to get as much information as you possibly can. Capturing this data with complete accuracy is CRITICAL.

3. Disseminate complaints to Quality Assurance and Legal departments. Every product liability complaint needs to be escalated for review and investigation by your Quality Assurance and Legal Departments. Your Quality Assurance Department needs the complaint data so they can improve the product, or at the very least research the problem. Your Legal Department needs this data so they can initiate their investigation before notice of a claim is given. (Note: Many contact management systems will automatically do this when a specific category is selected).

4. Resolve the complaint immediately. The faster the resolution, the lesser the chance of the customer suing the company.

Follow these four steps whenever you’re faced with a product liability complaint and you will have captured everything your organization will need to investigate the claim and help protect the organization from a product liability lawsuit.

Additionally…when you know what not to say to consumers in product related complaints, you can help keep your company out of court, or at least avoid making damaging admissions that may harm the company’s chance of defending the claim

Here are three reasons avoiding damaging admissions is critical:

A. What you tell the consumer may be admissible into evidence in court before a jury.

B. Admitting or acknowledging fault (verbally or in writing) without the opportunity to investigate, may preclude the company from denying liability later on, regardless of what the investigation shows.

C. You can be called as a witness for deposition or trial and asked about what you said to the consumer and why you said it.

Here’s what not to say:

1. “I knew this was a problem in the past, but I thought it was corrected.” Do not admit the existence of a defect.

2. “WOW! You’re the sixth person I’ve talked to this month with this problem.” – This is damaging for obvious reasons.

3. “Making the changes you suggest would drive up the cost of the product to our customers.” This shows that the company values money over safety. If jurors sense this, they are much more likely to award punitive damages against you.

4. “Don’t worry. We’ll take care of everything.” What if your investigation ultimately exonerates you – but you’ve told the customer you would ‘take care of everything’? Also, your insurance policy may require you to refrain from making any payment or promise to pay without the insurer’s consent. Be circumspect in making verbal commitments.

5. “I am so shocked that his happened again.” This comment may imply that you have been on notice of a product problem. If the company has failed to adopt remedial measures, this could spawn on a punitive damages claim against your company.

The bottom line here is: Do not accept responsibility.

What is the customer’s true motive?

Q. What do you make of customers calling to complain and saying they don’t want anything – they just want to “share feedback.” Do you have any idea of wheter sending them a travel voucher or something in anyway helps recover/retain them as customers. Or should it be taken at face value and no compensation be offered?

Myra’s Answer to: What is the customer’s true motive?

When I was leading a Consumer Affairs Department years ago, I faced the same thin g often. Irate callers would escalate to me and after I listened with a true intent to understand and offered a sincere apology, they’d surprisingly tell me that they wanted no compensation, but instead wanted to be “heard”.

I would take the customer at face value and not automatically try to force compensation or follow-up with compensation. What I would do, however, is follow-up the conversation with a thank you letter to thank the customer for their feedback and to once again apologize for the problem they experienced. This letter will serve to create goodwill and re-establish trust. And it will increase the chances that the customer will fly with you again. At random or as you feel it’s appropriate, you can offer a concrete form of apology such as a travel voucher.

Myra Answers YOUR Questions

Myra Golden

Myra looks forward to answering your questions about customer service, contact center management, and customer service training. Please e-mail Myra at info@myragolden.com or tweet her at @myragolden.

How to Completely Restore Customer Confidence After Things Go Wrong 

7 Crucial Elements of Service Recovery

Yesterday afternoon I dropped off a prescription for my daughter at my neighborhood pharmacy. I had some errands to run and I told the pharmacy cashier I’d be back in 2-3 hours.

Three and half hours later I returned to pick up the medicine and an employee nonchalantly said, “Looks like we’re out of stock on that one.” And that’s it. She offered no apology, showed no remorse, and had no solution. Shocked, I replied, “I didn’t get a call about that.” And she said, “Yeah, we don’t usually call when we run out of something. Plus, we’ve been, like, crazy busy today.” “Well, what am I supposed to do?” I asked. “Like I said, we’re out; I don’t know what else to tell you.”

Every day things go wrong in the service world and we are faced with the challenge of turning service failures into service recoveries. But what does it really take to restore customer confidence and regain goodwill? (Obviously, my pharmacy didn’t know or care.) I began to explore that question more than 10 years ago and since that time I have studied service failure and service recovery from every possible angle and I have benchmarked best-in-service companies throughout the world. My research has led to me uncovering a series of 7 simple, but remarkably effective strategies that will unequivocally position any organization to keep customers coming back after even the worst has happened.  Each of the 7 strategies is scientifically proven and surprisingly easy to execute.

I present to you How to Completely Restore Customer Confidence After Things Go Wrong: The 7 Things You Must Do

 

1. Courtesy. Certainly, anyone in the position of interacting with customers must be friendly, helpful, polite, courteous, and flexible. These attitudes and behaviors are not just nice, but they are indeed expected. But when it comes to complaint handling specifically, we know that employee politeness while addressing the issue helps diffuse the problem in the customer’s mind (Liao, 2007).

Research by Hui Liao found that when customers feel like they are being treated with respect, dignity, and sensitivity by employees, they feel a sense of justice and fairness from the company (Liao 2007).

As simple as it may sound, politeness is a tangible asset that can positively impact customer satisfaction with service recovery. If you solve the customer’s issue, but are rude or indifferent in the process, you can still negatively impact the relationship. Simply put, when your employees are polite and courteous, customers will experience more satisfaction and reward you with stronger loyalty.

2. Apology. Making an apology to customers after things go wrong is positively related to satisfaction with the recovery (Liao, 2007).  When a service employee apologizes to a customer, she conveys politeness, courtesy, concern, effort, and empathy and this goes a long way (Smith, Bolton, & Wagner, 1999). Consider the following research:

  • Gallup research has shown that a genuine apology can actually strengthen a customer’s emotional bond to a company, leaving him or her more emotionally connected than customers who never experienced a problem (Fleming & Asplund, 2007).
  • Research by TARP has shown that when an apology is perceived as genuine, customer satisfaction increases 10 – 15%.
  • A revolutionary program appropriately called Sorry Works! encourages doctors and hospitals to apologize quickly when mishaps occur and to offer a fair settlement upfront to families and their attorneys. One of the first hospitals to implement Sorry Works was The University of Michigan Hospital. The results have been astonishing. The University of Michigan Hospital has cut lawsuits in half, reduced litigation expenses by two-thirds (or $2 million annually), and reduced their insurance reserves from $72 million in 2001 to less than $20 million in 2007.(Wojcieszak, 2008).

Offer your customers a heartfelt apology after a service failure and you will not only restore customer confidence and regain goodwill, but you should also realize the benefits of reduced litigation expenses and claims costs.

3. Justification. A vital, but often overlooked element of customer recovery is to provide an explanation for how or why the problem happened. Taking the time to explain to a customer what might have caused the problem helps organizations re-establish trust.

In an article titled, Manage Complaints to Enhance Loyalty, John Goodman says, “In many cases, a clear, believable explanation as to why the policy or performance is reasonable will at least mollify the customer and, in some cases, satisfy him or her.” (Goodman, 2006). Hui Liao had this to say about the importance of providing an explanation, “Explaining to customers what might have caused the service failure may (also) enhance customer satisfaction.  Similarly, in the service recovery context, open communication may alleviate customers’ bad feelings about the service failure.”

Providing an explanation can be as simple as saying, “Thanks for taking the time to let us know about _____. We appreciate customers who let us know when things aren’t right.  Here’s what we think may have happened…”

4.  Resolution. One of the gifts of a voiced complaint is that if offers the company an opportunity to re-perform the service. When given this second chance, companies must bend over backwards to fix the problem and restore customer confidence. When a company fails to resolve the issue, the customer is left hanging, she begins to lose trust in the organization, and feels like voicing the complaint was a waste of time.  

TARP, Inc. studies have discovered that a customer who goes to the effort to complain, but remains dissatisfied is usually 50% less loyal than someone who did not bother to complain (Goodman, 2006). As a result, a poor problem resolution process will produce a “double deviation” effect and will result in perceived injustice, hence intensifying customer dissatisfaction (Bitner, et al 1990).

Resolving the customer’s problem will have a positive impact on customer satisfaction and customer loyalty. Failing to fix a problem after a customer has gone through the trouble of voicing a complaint is treacherous because customers have been let down twice and they may not be as willing to forgive you.

5. Immediateness.  Not only is resolving the customer’s problem obviously important (point # 4), but a speedy recovery response will enhance customers’ evaluations of your company (Smith, Bolton, & Wagner, 1999). Your goal with problem resolution needs to be “One and done”. What I mean is, your employees need to be equipped with the trust (from you), empowerment, and training to be able to resolve complaints on the first phone call or first visit.

Not only does a speedy recovery improve the customer’s perception of the company, but it actually has a greater impact on loyalty than the resolution itself. TARP, Inc. found that ninety-five percent of complaining customers would remain loyal if their complaint was resolved on the first contact. That number dropped to seventy percent when the complaint was not immediately resolved.

The longer it takes for the service provider to provide a full recovery, the greater the customer’s perception is that they have been treated unfairly (Smith, Bolton, & Wagner, 1999).

Improve your organization’s ability to handle problems quickly and well and you’ll undoubtedly realize increases in customer satisfaction and loyalty.

6. Compensation.  Reparation (in the form of discounts, free merchandise, refunds, gift cards, coupons, and product samples) after a service failure has been found to restore equity and improve customer satisfaction (Smith, Bolton, & Wagner, 1999).

A Society of Consumer Affairs Professionals customer loyalty study found that 58% of complaining consumers who received something in the mail following their contact with consumer affairs departments were delighted, versus only 40% of those who did not receive anything.

Don’t hesitate when it comes to compensating customers after a service failure. Your reward will be increased customer satisfaction, loyalty, and powerfully persuasive positive word-of-mouth advertising.

7. (Bonus) Surprise & Delight.  This bonus element is all about going beyond problem resolution and inspiring a feeling of astonishment through unexpectedness.

One of my clients in the beauty industry is maximizing surprise & delight by creatively using gift cards in a way that is generating profits. They used to compensate customers dollar-for-dollar; a $3 overcharge was resolved with a $3 check. Makes sense doesn’t it? Well, now they give a $10 gift card for a $3 overcharge. The customer is WOW’d. But not only is the customer WOW’d and telling her girlfriends about the unexpected gift card, but the company is enjoying a redemption rate of 67% with customers spending 2x the gift card amount in the store.

Try a little surprise & delight and you’ll get your customers talking and, if you design it right, you’ll also enjoy growth as a direct result of the WOW factor.

Closing Discussion

Remember, one of the gifts of a voiced complaint is that if offers the company an opportunity to re-perform the service. Don’t mess up your second chance with customers who give you the gift of complaints. Take these 7 crucial elements and make them your gold standard. When you do, I promise, customers will reward you with repeat purchases and positive word-of-mouth.  Good luck!