The costs of complaint handling

The cost of complaint handling in public sector organisations is not always as apparent as in many private sector complaint interactions. Our own studies of complaint handling in a local authority have shown that a complaint resolved in one contact with a complaints team will have an average cost of between £2.50 and £3.00. Two or three contacts will increase the average cost to between £10 and £15. The same costs would apply to a complaint handled at the point of service delivery.

Case study

The cost of complaint handling

A council tenant phones the local Estate Manager to complain about a missed appointment. The Estate Manager arranges for the contractor to visit and possibly makes a small payment for the inconvenience (some local authorities require a £10 payment that is reimbursed by the contractor). The cost of dealing with the phone call and taking corrective action is £2.50 for 15 minutes of handling time.

A complaint requiring further investigation increases the handling costs considerably. A study carried out during the late 1990s of complaint handling costs at stages 1 and 2 of a local authority complaint scheme showed that the average cost of a stage 1 investigation totaled £57.00 and a stage 2 investigation had an average cost of £153.20.

The cost of handling a complaint at Chief Executive or Ombudsman stage will increase the costs to somewhere between £300 and £1000. The costs will depend on the level of management involved in investigating the complaint. Interestingly, a centralised customer relations team or officer will actually be cheaper than allocating a director or other senior manager. The customer relations role will be better placed to gather the necessary information and assist more customers in gaining satisfaction at a lower level. The customer relations team or officer can also reduce the number of contacts needed for "lost" customers to be placed at the correct stage of the organisation's complaint scheme.

Update

Recently, OfWAT made use of the National Audit Office (UK) data to calculate the cost of handling customer complaints across the UK water industry. The findings identified the transactional costs of complaint handling to be: