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Chapter 13:AchievingServiceRecovery andObtainingCustomerFeedback

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2

Reliability is Critical in

Service butn all service conte!ts" service #ailure isinevitable$

Service failureoccurs %hen serviceper#ormance #alls belo% a customer&se!pectations in such a %ay that leads to customerdissatis#action$

Service recoveryre#ers to the actions taken by a'rm in response to service #ailure$

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3

American Customer

Satis#action nde!: Selectedndustry Scores" ())(

Industry:

Softd

rinks

Exp

ressm

ail,

parcels

Cars,v

ans

,

etc.

Lifeinsura

nce

Com

m.ban

ks

Hotels

Personal

compute

rs

irlines

Hospitals

!astfood

"estaur

ants

#roadcas

tin$

%natl.ne&s'

I"S%tax'

()*+ (, *+

*- * *//

*,*/

/) /0

,

,

0,

1,

-,

),

/,

*,

(,

+,

,,

1.*2 .12 ,.,2 .12 0.(2 ,.,2 ,.,2 (.02 0.+2 30./2 -.(2 1.122 C4an$e0,,0 vs 0,,

Score%5ax 6 ,,'

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4

*ey +uestions #or ,anagers to

Ask about CustomerComplaining -ehavior.hy do customers complain/

.hat proportion o# unhappy customerscomplain/

.hy don&t unhappy customers complain/

.ho is most likely to complain/

.here do customers complain/

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Obtain compensation

0ent their anger

elp to improve the service

For altruistic reasons

Create an impression o# being moreintelligent and discerning

74y 8o Customers

Complain9

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2on&t kno% %ho to complain to

2on&t think it %ill do any good

,ay doubt their o%n subective

evaluation ,ay accept part o# the blame

,ay %ant to avoid con#rontation

,ay lack e!pertise

Why Dont CustomersComplain?

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Causes -ehind Service

S%itching

ServiceSwitchingBehavior

High Price Price Increases Unfair Pricing Deceptive Pricing

Pricing

Location/Hours Wait for Appointment Wait for Service

Inconvenience

Service Mistakes Biing !rrors Service "atastrophe

Core Service Failure

Uncaring Impoite Unresponsive Unkno#e$gea%e

Service Encounter Failures

&egative 'esponse &o 'esponse 'euctant 'esponse

Response to Service Failure

(oun$ Better Service

Competition

"heat Har$ Se Unsafe "onfict of Interest

Ethical Problems

"ustomer Move$ Provi$er "ose$

Involuntary Switching

Source) Sue *eavene+, -"ustomer S#itching Behavior in Service In$ustries) An !.porator+ Stu$+, Journal of Marketing, Apri, 0112, pp3 405673

Core service failure was the cause of switching for 25% of the respondents.

Service encounter failure was the cause for switching services for an additional 20%

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Courses o# Action Open to a

2issatis'ed Customer

ServiceEncounter is

8issatisfactory

ServiceEncounter is

8issatisfactory

ake someform of

public action

ake someform of

public action

ake someform of private

action

ake someform of private

action

ake no actionake no action

Complain tot4e service

;rm

Complain tot4e service

;rm

Complain to at4ird party

Complain to at4ird party

ake le$alaction to seek

redress

ake le$alaction to seek

redress

8efect %s&itc4provider'

8efect %s&itc4provider'

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4ype o# Complainers 5assives

6east likely to take any action$ O#ten doubt the e7ectiveness o# complaining$

0oicers Actively complain to the service provider$ 6ess likely to spread negative %ord o# mouth" to s%itch

patronage or to go to third parties %ith their complaints$

rates 6ess likely to give the service provider a second chance$ ,ore likely to s%itch to a competitor$ ,ore likely to engage in negative %ord o# mouth$

Activists above average propensity to complain on all dimensions$

n e!treme cases can become terrorists$

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Customer Feedback and .ord8o#8,outh 4he average business only hears #rom 9 o# their customers

%ho are dissatis'ed %ith their products or services$ O# the;

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?nhappy Customers&

Repurchase ntentions

95%

!%

"#%

$%

&%

5"%

'9%

9%

Complaints Resolve( )uic*ly

Complaints Resolve(

Complaints +ot Resolve(

,inor complaints -.'/.5 losses0 ,a1or complaints -over .'!! losses0

2nhappy Customers 3ho 4ont Complain

2nhappy Customers 3ho 4o Complain

Percent o6 Customers 3ho 3ill Buy 7gain

Source:A$apte$ from $ata reporte$ %+ the 8echnica Assistance 'esearch Program3

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?nhappy Customers&

Repurchase ntentions

9%

37%

19%

46%54%

70%

82%

95%

0102030405060

708090100

Customer did notcomplain

Complaint wasnot resolved

Complaintwas resolved

Complaint wasresolved quickly

Problem cost > $100 Problem cost $1 - 5

Source: TARP study

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13

2imensions o# 5erceived

Fairness in Service Recovery5rocess

Proce(ural8ustice

Interactive8ustice

utcome8ustice

Complaint :an(ling ; ServiceRecovery Process

Justice Dimensions of the Service Recovery Process

Customer Satis6action with the

Service RecoverySource: Tax and Brown

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Procedural =ustice5rocess

Fle!ibility o# system"consideration o# customerinput" time etc$

Interactional =usticeuman content

empathy" #riendliness" genuineness

>utcome =usticeOutcomes

compensation #or the loss or inconvenience

Compensation #or time " energy and e7ort$

?ustice 8imensions oft4e Service "ecoveryProcess

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Fairness 4hemes in Service

Recovery

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Fairness and Satis#action

Source: 'epro$uce$ from S3S3 8a. an$ S3 W3 Bro#n, -'ecovering an$ Learning from Service (aiure, -

Sloan Management Review, (a 0116, p3 693

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Components o# an @7ective

Service Recovery System

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Service recovery parado!

Customers %ho e!perience a service #ailure and thenhave it solved to their #ull satis#action are sometimesmore likely to make #uture purchases than arecustomers %ho have no problem in the 'rst place$

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Service Recovery 5arado!4he service recovery parado! is more likely to

occur %hen: the #ailure is not considered by the customer to be severe$

the customer has not e!perienced prior #ailures %ith the 'rm$

the cause o# the #ailure is vie%ed as unstable by the customer$

the customer perceives that the company had little control over thecause o# the #ailure$

Recent studies have challenged the e!istence o#recovery parado!$ @mpirical evidence sho%s that some 9) to

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Strategies to Reduce

Customer Complaint-arriersComplaint #arriers for8issatis;ed Customers Strate$ies to "educe 4ese #arriers

Inconvenience 2i7icult to 'nd the right

complaint procedure$ @7ort" e$g$" %riting a letter$

5ake feedback easy and convenientby:

5rinting Customer Service otlinenumbers" e8mail and postal addresses

on all customer communicationsmaterials$

8oubtful Pay >@ ?ncertain %hether any

action" and %hat action %ill

be taken by the 'rm toaddress the issue thecustomer is unhappy %ith$

"eassure customers t4at t4eirfeedback &ill be taken seriouslyand &ill pay o@ by:

aving service recovery proceduresin place" and communicating this tocustomers$

Featuring service improvements thatresulted #rom customer #eedback$

Anpleasantness

Complaining customers#ear that the ma be

5ake providin$ feedback a positive

experience: 4hank customers #or their #eedback$

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o% to @nable @7ective

Service Recovery -e proactiveon the spot" be#ore customerscomplain

5lan recovery procedures

4each recovery skills to relevant personnel

@mpo%er personnel to use udgment and skills todevelop recovery solutions

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Buidelines #or @7ective

5roblem Resolution Act #ast Admit mistakes but don&t

be de#ensive

?nderstand problem #romcustomer&s vie%point

2on&t argue

Ackno%ledge customer&s#eelings

Bive bene't o# doubt

Clari#y steps to solve

problem

*eep customersin#ormed o# progress

Consider compensation

5ersevere to regain

good%ill

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Service Buarantees guarantee an assurance o# the #ul'llment

o# a condition

#or products" guarantee o#ten done in the

#orm o# a %arranty services are o#ten not guaranteed

cannot return the service

service e!perience is intangible Dso %hat do you

guarantee/E too many uncontrollable e!ternal variables

#ears o# cheating by customers

costs o# the guarantee are too high

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Force 'rms to #ocus on%hat customers %ant

Set clear standards

ighlights cost o# service#ailures

Re>uire systems to get act on" customer #eedback

Reduce risks o# purchase

and build loyalty

Service Buarantees elp

5romote and AchieveService 6oyalty

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4ypes o# Service

Buarantees Sin$le attribute3speci;c $uarantee G onekey service attribute is covered

5ultiattribute3speci;c $uaranteeG a #e%

important service attributes are covered !ull3satisfaction $uarantee G all service

aspects covered %ith no e!ceptions

Combined $uarantee G like the #ull8satis#action" adding e!plicit minimumper#ormance standards on important attributes

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4he ampton nn 1))

Satis#action Buarantee .hat are the bene'ts o# such a

guarantee/

Are there any do%nsides/

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-ritishAir%ays

Buarantee

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*ey Obectives o# @7ective

Customer FeedbackSystemsAssessment and benchmarking o# service>uality and per#ormance

Customer8driven learning and improvements

Creating a customer8oriented service culture

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-uilding a Customer

Feedback System 4otal market surveys 5ost8transaction surveys

Ongoing customer surveys

Customer advisory panels @mployee surveysHpanels

Focus groups

,ystery shopping

Complaint analysis

Capture o# serviceoperating data

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Strengths and .eakness o# *eyCustomer Feedback Collection4oolsSelection of a cocktail of effective customer feedbackcollection tools.

Potential6or ServiceRecovery

Collection earning

CostE66ective

CostE66ectiveService

Satis6actionProcess

Satis6actionSpeci6ic

Fee(bac*

8ota Market Surve+ :incu3

competitors;Annua Surve+ on overasatisfaction

8ransactiona Surve+:process specific;

Service (ee$%ack "ar$s:process specific;

M+ster+ Shopping:service testers;

Unsoicite$ (ee$%ack 'ec$:

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Characteristics o# an

@7ective Service Buarantee ?nconditional4he guarantee should make its promise unconditionally 8 nostrings attached$

,eaning#ul t should guarantee elements o# the service that are

important to the customer$4he payout should cover #ully the customerIs dissatis#action$

@asy to ?nderstand and CommunicateFor customers 8 they need to understand %hat to e!pect$For employees 8 they need to understand %hat to do$

@asy to nvoke and Collect4here should not be a lot o# hoops or red tape in the %ay o#

accessing or collecting on the guarantee$

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Service Buarantees

service guarantees %ork #or companies %ho are alreadycustomer8#ocused

e7ective guarantees can be -B deals 8 they put thecompany at risk in the eyes o# the customer

customers should be involved in the design o# serviceguarantees

the guarantee should be so stunning that it comes as a

surprise 88 a .O.JJ Factor

Kit&s the icing on the cake" not the cakeL