As a customer service head, what do you do if the customer is pointing out a big known problem with your product?

You ask questions, learn from him, acknowledge his concerns and try to fix the problem

first apologies to the customer and ask for the replacement of the product... I try to make the customer satisfied with my product

It is best way to know and understand your product for you handle and fix the issue. Listen to the customers concern, analyze and sets assurance to make the customers feel that you understand his/her concern. Then, fix the issue.