Before making a major purchase commitment, many people like to do their homework by researching and comparing the companies they are considering. If one of those companies has comparably more credibility due to recommendations from trusted sources, past experience, or good results in product testing, they have a higher chance of being selected.
One long-time source for many consumers is the Better Business Bureau. More than a century old, the Better Business Bureau is dedicated to promoting trust between consumers and businesses. One way they do this is by helping businesses improve their level of service through education in such areas as administration, tax and copyright compliance, and data privacy. They also encourage proper advertising standards when promoting to children.
A popular feature is a report card-style grade they give companies that is based on a series of 16 factors, each of which is assigned a point score within a range that varies depending on the category, and which can earn points or deductions for changes in performance quality. The factors, and point range assigned to each, are:
1. Type of business 0 to -41
Some business sectors, which feature a high incidence of outright fraud or other suspect behavior can earn a lower score on this factor.
2. Time in business 8 to -10
3. Competency licensing 0 or -41
4. Complaint volume 20 to 2
5. Unanswered complaints 20 to -21
6. Unresolved complaints 10 to 1
7. Serious complaints 15 to 0
8. Complaint analysis 8 to -12
9. Complaint resolution delayed 0 or -5
10. Failure to address complaint pattern 0 or -5
11. Government action 0 to -30
12. Advertising review 0 to -41
13. Background information 5 or 0
If it is provided, 5, if not, 0
14. Clear understanding of business 0 or -5
15. Mediation/arbitration 0 to -41
16. Revocation 0 or -10
It is clear that some factors are given more weight than others. Take away time in business and providing information and the only way to receive positive points is in the way you handle complaints. A company with few complaints for its size scores well, as it will if it resolves a good number of complaints.
“A business’s complaint handling and complaint volume are significant elements in the formula,” said Tracy Anton, the Director of Marketing and Communications for the BBB New York City office.
A response to arbitration judged to be poor, misleading advertising, involvement in a suspect business sector or bad result in competency licensing can hammer you.
Once the information is gathered, it is entered into a computer program which is based on an automatic formula, Ms. Anton added.
What happens if a company you wish to research is not a BBB member? Kickstarter is not. Earlier this year when I began working on this story they received a grade of F. The BBB’s entry for Kickstarter says their rating was lowered because of the length of time the business has been in operation and the failure to respond to six complaints, the latter fact confirmed by Ms. Anton.
Two of those complaints revolve around the failure of a company making a pitch on Kickstarter to deliver promised incentives. That is not Kickstarter’s fault, as it is clearly stated on its site and which schooled crowdfunding supporters know. A vast majority of complaints handled by Kickstarter, and Indiegogo for that matter, revolve around supporters being unaware of the rules.
A second category of complaints involve timeliness of fund release and other communication issues. Time and time again the problem revolved around either an incorrect e-mail address or improper banking information that prevented funds from properly being transferred. In many cases the site involved in the complaint made several attempts to contact the customer but were unable to reach them.
Indiegogo, on the other hand, is BBB accredited. Whereas Kickstarter is a professional fundraiser, Indiegogo is classified as an internet service provider. Their A grade is based on low complaint volume and proper handling of the complaints that were filed. Many of the complaints were of a similar nature to those on Kickstarter, but an additional chunk of complaints revolved around Indiegogo’s fraud algorithm, which identifies campaigns that display certain characteristics consistent with fraudulent campaigns. Like Kickstarter, their shorter length of time in business was a negative factor.
Indiegogo’s BBB file has been open for three years and has a total of 39 closed complaints for an average of 13 complaints per year. Kickstarter’s has been open for 18 months and has 18 combined complaints between those which are resolved and the half dozen that were not responded to. That is an average of 12 per year. So they are about equal.
Take away the similar areas and you are left with failure to respond to six complaints via the BBB for Kickstarter, including at least two that are not their fault and a fraud algorithm issue at Indiegogo that occasionally catches a legitimate campaign in the net. There is little difference to be seen.
Yet if you are considering a crowdfunding campaign and know little about the concept but stumble onto the BBB site, you would lean toward Indiegogo, even though the appearance of difference is much greater than any actual ones that exist when areas assessed by the BBB are compared.
Both have customer service departments who, based on the complaints reviewed, take steps to assuage the concerns of their patrons. In talking to both they take much pride in addressing these complaints, as they are aware the crowdfunding industry is in its infancy and the better they address the concerns brought to them the more credible the industry as a whole becomes. That benefits all.
For their part, Indiegogo says their “industry-leading Customer Happiness team is dedicated to helping its customers and empowering people to fund what matters to them, by offering unparalleled support and a rapid response time.”
Kickstarter was aware of this grade difference between them and Indiegogo and over the last few weeks resolved less than a half dozen issues that raised their rating from F to A-. If only calculus was that easy.
So it comes down to marketing. Indiegogo has a BBB certification logo at the bottom of its main page. Kickstarter does not. Yet when you look at the difference between the two, it’s hard to find one.
On the peer-to-peer lending side, both Prosper and Lending Club receive an A+. Time in business, complaint volume and the provision of sufficient information worked in their favor. Lending Club adequately responded to 29 complaints and Prosper to 49, with the difference in amounts largely coming down to a few complaints filed from people who received advertisements from Prosper but lived in states where they could not participate with Prosper at the time of the mailing. In their correspondence to the BBB Prosper acknowledged a distribution error in some advertisements. Based on no new complaints received, it was assumed the problem was rectified.
So does a top grade from the Better Business Bureau serve as a nice marketing plus? Lending Club was the only one of the four companies to directly respond to the question. COO Scott Sanborn said:
“At Lending Club we consider the monitoring, response, and incorporation of all forms of customer feedback to be vital for the delivery of an outstanding customer experience. We do consider ourselves an active participant in the BBB; we monitor and respond to all communications and use the feedback to improve our site, our process, and our training. In the online world where it can be hard to trust the source of reviews and to know what is genuine vs. a critic “for hire”, we believe that the BBB provides a trusted third party information source to support a prospective customer’s decision making process. We are proud of our A+ rating.”
Mr. Sanborn raises a good point when he touches on the location and motivation of online reviews. If I wished, I could spend my days being hired by anonymous companies on Elance to write favorable reviews of their product or service. Some encourage this at the expense of competitors. Whether or not I know anything about said product or service is irrelevant to them.
When most comment pages on even the more reputable news sites are filled with “opinions” from such thespians as Noodles66 and The Overlord, it pays to self-educate.
Perhaps the generations born into the age of the internet accept this dichotomy. Just because they do does not mean they do not need credible places to go where they can rely on the opinion provided. It’s not like they’re reading Good Housekeeping to see which ones got the Seal of Approval. Maybe they’re looking for a hipper system they can call their own. Maybe they can still be marketed to. After all, hush puppies came back.
Judging by the fact that Kickstarter spent some time in remedial to get their grades up signifies that while they do not necessarily believe in the positive value of a good grade, they acknowledge the negative value of having a grade substantially below that of their competitors, especially one that can be as easily cleared up as this one.
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