Contact: +923006641921 Usman Waheed

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SMBELTEI BELTEI

INTERNATIONAL INTERNATIONAL UNIVERSITYUNIVERSITY

Faculty of Business Faculty of Business AdministrationAdministration

Bachelor’s ProgramBachelor’s ProgramMoeung Phanny

Master of Business Administration (MBA) / ( MJM )

Tel: 011 78 78 80E-mail: phannyart@yahoo.com

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SMSMChapter 7

SERVICE RECOVERY

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SMObjectives for Chapter 7:

Service Recovery

• Illustrate the importance of recovery from service failures in building loyalty

• Discuss the nature of consumer complaints and why people do and do not complain

• Provide evidence of what customers expect and the kind of responses they want when they complain

• Provide strategies for effective service recovery• Discuss service guarantees

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SMFigure 7-1Figure 7-1

Unhappy Customers’ Repurchase Intentions

95%

70%

46%

37%

82%

54%

19%

9%

Complaints Resolved Quickly

Complaints Resolved

Complaints Not Resolved

Minor complaints ($1-$5 losses) Major complaints (over $100 losses)

Unhappy Customers Who Don’t Complain

Unhappy Customers Who Do Complain

Percent of Customers Who Will Buy Again

Source: Adapted from data reported by the Technical Assistance Research Program.

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SM What is Service Recovery

Service recovery is a procedure for dealing with customers’ problems and complaints. An effective & timely recovery procedure will turn a complaining customer into a satisfied, loyal customer most of the time.

It is trying to do something Right from a situation that went wrong.

“Customers value reliability over all other dimensions.” Parasuraman, Berry & Zeithaml. (1991)

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SM

Figure 7-3Figure 7-3

Customer Response Following Service Failure

Service Failure

Do NothingTake Action

Stay with ProviderSwitch Providers

Complain to Provider

Complain to Family & Friends

Complain to Third Party

Stay with ProviderSwitch Providers

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SM What does Service Recovery involveSolving customer’s problem quickly & fairlyGiving the customer something of value as compensationKeep your promise & follow up

What a customer feels about their complaints

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SM

Don’t know who to complain toDon’t think it will do any goodMay accept part of the blameMay want to avoid confrontationSource: Thomason Learning, Inc. South-Western

Because of the above, organization may miss the opportunity to learn instead of repeating the same mistakes again and again

Why Don’t Customers give their FEEDBACK?

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SMWhy Do Customers Complain?

Correct the problemEmotional release from frustrationGain some measure of compensationSolicit sympathy Test for consensus

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SM

Action

No Action

Public Action

Private Action

Seek redress directly from the firm

Take legal action

Complaint to business, private,or governmental agencies

Stop buying the product or boycott the seller

Warn friends about the productand /or seller

Dissatisfactionoccurs

What happens after they express

their dissatisfaction

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SM

What are the current processes that your organization adopts in serving the customer?

Customer Complaints looking at the level of urgency, crucial

factor

What are some alternatives or Compensations

Empowerment in decisions

Hiring & Training

Incentives

What Technology of Problem Tracking System does you organization adopt? – Real time? www.qualityinaction.net

Why – Why Analysis

Voice of Customer

Fish bone Diagram (Cause & Effect)

Focus Group

Telephone interview

Feedback (Online –Offline)

Addressing the concerns, issues, needs, values of customer

Were the Problems, concerns, issues, needs & values of customer addressed effectively?

What - (Details)

Why – (Big Picture)

How – (Solutions)

Continuous Improvements

Interpretations of the Effective Service Recovery System

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SMFigure 7-5Figure 7-5

Service Recovery Strategies

Learn fromRecovery Experiences

Treat C

ustomers

Fairly

Learn

from

Lo

st Cu

stom

ers

Welcome and

Encourage ComplaintsFail S

afe the S

ervice

Act Q

uickly

Service Recovery Strategies

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SMFigure 7-6Figure 7-6

Causes Behind Service Switching

Service Switching Behavior

• High Price• Price Increases• Unfair Pricing• Deceptive Pricing

Pricing

• Location/Hours• Wait for Appointment• Wait for Service

Inconvenience

• Service Mistakes• Billing Errors• Service Catastrophe

Core Service Failure

• Uncaring• Impolite• Unresponsive• Unknowledgeable

Service Encounter Failures

• Negative Response• No Response• Reluctant Response

Response to Service Failure

• Found Better Service

Competition

• Cheat• Hard Sell• Unsafe• Conflict of Interest

Ethical Problems

• Customer Moved• Provider Closed

Involuntary SwitchingSource: Sue Keaveney

Why do we always have

to wait ?

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SM Service Guarantees

• guarantee = an assurance of the fulfillment of a condition (Webster’s Dictionary)

• for products, guarantee often done in the form of a warranty

• services are often not guaranteed– cannot return the service– service experience is intangible

–(so what do you guarantee?)

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SMTable 7-7Table 7-7

Characteristics of an Effective Service Guarantee

Unconditional The guarantee should make its promise unconditionally -

no strings attached.Meaningful

It should guarantee elements of the service that areimportant to the customer.

The payout should cover fully the customer'sdissatisfaction.

Easy to Understand and Communicate For customers - they need to understand what to expect. For employees - they need to understand what to do.

Easy to Invoke and Collect There should not be a lot of hoops or red tape in the way

of accessing or collecting on the guarantee.

Source: Christopher W.L. Hart, “The Power of Unconditional Guarantees,” Harvard Business Review, July-August, 1988, pp. 54-62.

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SMWhy a Good Guarantee

Works

• forces company to focus on customers

• sets clear standards

• generates feedback

• forces company to understand why it failed

• builds “marketing muscle”

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SM Service Guarantees

• Does everyone need a guarantee?

• Reasons companies do NOT offer guarantees:– guarantee would be at odds with company’s

image– too many uncontrollable external variables– fears of cheating by customers– costs of the guarantee are too high

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SM Service Guarantees

• service guarantees work for companies who are already customer-focused

• effective guarantees can be BIG deals - they put the company at risk in the eyes of the customer

• customers should be involved in the design of service guarantees

• the guarantee should be so stunning that it comes as a surprise -- a WOW!! factor

• “it’s the icing on the cake, not the cake”

Contact: +923006641921 Usman Waheed

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SMIf you change your thinking, you will change

your actions.“ A customer is the most important visitor of our premises. He is

not dependent on us, we are dependent on him. He is not an interruption in our work; he is the purpose of it. He is not an outsider in our business, he is part of it. We are not doing him a favor by serving him; he is doing us a favor by giving us an opportunity to do so.”

Mahatma Gandhi

Contact: +923006641921 Usman Waheed

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SM THANK YOU FOR YOUR ATTENTION !

Any question?