It pays to say I'm sorry

Do you believe in the power of redemption? It's now a proven fact that a simple phone call and apology can keep dissatisfied customers from going to your competitor. Two Domino's Pizza franchisees recently put this statement to the test. Steve Leonard and Tom Wallace wanted to know the real impact of a timely apology so they started tracking the buying habits of dissatisfied customers before and after a complaint. They took a sample of customers that indicated any dissatisfaction on their automated customer feedback survey system and split them into two groups – one group was called and offered an apology and the other was not. They tracked the number of orders for each group 60 days prior to and 60 days after they complained. The results were startling.

At Tom's location they used a sample size of 20 dissatisfied customers and split them into two groups of 10. (See Chart 1 – slow loading in new browser) In the group that didn't receive an apology, 50 percent stopped ordering altogether and there was a 50 percent decrease in order volume among those who continued to order in a 90-day period after the complaint. In the group that was called, all of the customers placed orders again and there was a 74 percent increase in order volume and a 58 percent increase in revenues.

Steve also used a sample size of 20 dissatisfied customers; half they called and half they did not. (See Chart 2 – slow loading in new browser) Sixty days after the complaint, 40 percent of the group that was not called did not order again and there was a 90 percent decrease in revenues. The group that was called continued to order, and there was only a 51 percent decrease in revenues.

In most cases, pizzeria owners never really know when or why customers switch to the competition. If sales remain constant, it most likely means the new customers are replacing those who are dissatisfied. If you can prevent dissatisfied customers from leaving, sales should rise so long as you are also attracting new ones. "The key," Steve says, "is to be able to identify dissatisfied customers who wouldn't ordinarily complain and apologize immediately."

What's their secret?

Tom and Steve use Qualistics' computerized inbound telephone survey service called CriticalAlert! Not only does the system identify dissatisfied customers, it tells them specifically what the problem was. CriticalAlert! also produces a broad spectrum of feedback including positive feedback, thus letting them know the strengths and weaknesses of each store.

Let's get down to the nuts and bolts of how it works. Tom and Steve invite their customers to call a toll free 800 number, which is typically printed on boxtoppers, boxes or register receipts. The surveys are designed to be brief (two-three minutes) and only about the things their customers care about most – friendly and efficient service, correct order, and hot and tasty pizza, delivered on time. So, how do you get people who are happy with their order to give feedback? Steve offers a free pizza to every 15th caller and Ken Alexander, operations director for Tom's five Domino's locations in Roanoke, Virginia, offers a free one-topping pizza to every 25th caller. It's one of the key elements to Qualistics system.

Steve has found that he needs at least 60 customer feedback surveys per store each month to insure the accuracy of the data and telling customers about the free pizza offer really helps. He says that even when he received hundreds of surveys per store, the satisfied/dissatisfied percentages correlate with the reports he receives from 60 calls. Ken averages about 100 surveys per store per month.

Once customers call into the survey system, they are prompted by a prerecorded questionnaire to indicate their level of satisfaction by responding to the questions using their telephone keypad. If they are calling with a complaint, the system automatically gives the caller the opportunity to identify the reason for the complaint by introducing reason options. For example, in the pizza-rating question, callers are asked to press one if they thought the pizza was excellent, two if good, three if fair and four if unsatisfactory. If they press four, the system gives the caller the option to identify the reason by pressing one if it was the crust, two if there weren't enough toppings, three if your pizza was over cooked or under cooked, four if your pizza was cold and five if your pizza wasn't the way you expected it. Dissatisfaction and critical data is automatically faxed, emailed or sent to a wireless device back to the store manager for immediate action. The data can also be merged with the POS transaction data to match surveys with the employees involved in the transaction.

The ManagementAlert! report {- slow loading in new browser} provides the customer's phone number (no call blocking allowed) and responses to each question. Steve says that he keeps a binder in each store for managers log complaints and keeps track of the customer recovery follow ups. In many cases a simple apology left on the customer's answering machine if they aren't home is enough to offset appease dissatisfied customers. "We aren't ruining their (the customer's) life," Steve says. "Customers just want us to acknowledge mistakes."

Steve's managers have "I'm sorry" cards with a "Good for ____" spot on them, which they can send to customers who have valid complaints and deserve a free pizza, topping or other item related to the complaint. And when his drivers occasionally forget to deliver the soda, his managers put a 'reminder' in the POS system to provide the customer with a free soda or whatever is appropriate at their next visit. Steve stresses follow-ups by his managers on the 'critical alerts' by checking the complaint logs on a regular basis to make sure managers are addressing the problems immediately.

Ken says he handles the critical alerts for the five stores he oversees. "The action I take is based on what I feel will make the customer happy," Ken says. "If the problems calls for a comp, I will send gift certificates and/or an apology letter." "The good news is that the CriticalAlert! system tracks every call and complaint so that I can easily identify 'chronic' complainers vying for a freebie!"

Each month, a suite of management reports are posted to a private website where Steve and Ken can easily view or print reports representing each store, each supervisor's area and the entire company. Both Steve and Ken know that the data is accurate because they've compared it over time against numerous other external measurements in use. The system even tracks fraud and filters out callers trying to abuse the system.

"I have learned through experience that if trends on these reports go down, in six months sales are down," Steve says. "If they go up, sales go up. It's a fact. And it's great when evaluating the performance of a new manager. Using the reports, I can determine the strengths and weaknesses of each of the 13 store managers I supervise. When a manager is doing well, I can move him to a better performing store where he can make more incentive money. I avoid basing financial incentives on the reports because they will be tempted to 'pre-select' which customers receive the survey invitation on the boxtopper. Also, the CriticalAlert! system makes it possible to determine how well a new manager is doing in two months rather than having to wait six months after the damage is done if the manager wasn't performing well. "I know immediately whether a new manager needs special help or training when the scores for a given store fall after the new manager took over."

"The only challenge I see with this system is choosing who will manage it. It's an operational tool designed to keep customers not a marketing tool. It's important to follow-up with managers and see that they are addressing areas where the reports show lagging levels of satisfaction." He says that this report system provides true employee accountability unlike the mystery shopper service he used to use. You simply cannot use one or two shoppers' observations a month as an actionable and reliable management tool.

Ken says the biggest hurdle they had to overcome was getting managers to believe in the system. He says that at first his managers just believed it was another way for them to evaluate their job performance and didn't understand it wasn't so much about monitoring the managers as it was keeping customers and building loyalty. Ken says they were surprised at their pizza rating at first. "We always thought we had a great product," he said. "We found out there were some problems based on the scores we received from CriticalAlert!. But once we realized the data was accurate we were able to identify the problems and correct them. The system is also a great way to create competition between our stores. In the end, it really has an effect on sales. Now each store manager can't wait to retrieve their scores on the Internet and compare them to all the other Domino's Franchisees on the system. "CriticalAlert! has also helped manage our drivers better. Once they receive too many complaints, action is taken. We even had to let a couple of drivers go once our customers complained, giving us the opportunity to call the customer to verify the complaint," Steve said.

Qualistics provides the CriticalAlert! system to thousands of pizza operators in the U.S., Canada and now in Europe. They have agreed to provide PMQ with a quarterly look at our industry's overall performance based on millions of surveys. This will provide pizza operators with an idea of how the industry is perceived overall and allow them to compare the scores to their stores. The graph here indicates the scores for 12 months ending December 31, 2001. ( – slow loading in new browser}