Johnnie Ko- University of Greenwich -CIM Assignemnt (Nov-02)

8/9/2019 Johnnie Ko- University of Greenwich -CIM Assignemnt (Nov-02)

http://slidepdf.com/reader/full/johnnie-ko-university-of-greenwich-cim-assignemnt-nov-02 1/21

University of Greenwich

CIM ASSIGNEMNT

THE IMPORTANCE OF SERVICE RECOVERY

IN SUCCESSFUL RELATIONSHIP

Student¶s Name : KO, Wang Yin, Johnnie

Student ID Number : Dr Seven Kuenzel

Professor Name : Mr. P C Yu

Due Date : 2 nd November, 2009



ABRS-UNIVERSITY OF GREENWISH ±CIM ASSIGNMENT -2009t

Page 2 of 21

Table of Content

Index Heading Page

1. Executive Summary«««««««««««««...««...«« 4

2. Introduction«««««««««««««««««««.....«. 5

2.1 Company Description and Business Background«««

..««

... 5

2.2 Company Mission and Vision and objectives«««««««... 5

2.3 Company key management personnel««««««««««.. 6

3. Industrial Analysis«««««««««««««««««.«... 7

3.1 Operating Environment«««««««««««««««««..«. 7

3.2 Barriers to Entry««««««««««««««««««««.«. 8

3.3 Intensity of Rivalry««««««««««««««««««««. 9

3.4 Determinants of Suppliers Power ««««««««««««««« 11

3.5 Determinants of Buyer Power ««««««««««««««««. 12

3.6 determinants of Substitution Threats««««««««««.«««..14

3.7 Industry Boundaries«««««««««««««««««««... 15

4. Target Market«««««««««««««««««««««««. 16

4.1 Target by Income«««««««««««««««««.«««.... 16

4.2 Target by Educational Level«««««««««««««.«««... 17

4.3 Target by Age Group«««««««««««««««««««... 18

4.4 Target by Gender «««««««««««««««««««.«.... 19

4.5 Target by Region«««««««««««««««««««««. 19

5. Marketing Plan««««««««««««««««««««.««.. 20

6. Operations«««««««««««««««««««««..«.«« 23

7. Management and Organization««««««««««««««««

. 288. Long Term Development««««««««««««««««««« 32

9. Financial Plan«««««««««««««««««««««««. 34

9.1 Break-even Analysis«««««««««««««««««««... 35

9.2 Projected Profit and Loss«««««««««««««««««« 35

9.3 Projected Cash Flow««««««««««««««««««« ... 39

9.4 Important Assumptions««««««««««««««««««... 40

9.5 Projected Balance Sheet«««««««««««««««««« .. 41

9.6 Business Ratios«««««««««««««««««««««... 42

10. References«««««««««««««««««««««««« ... 44




Page 3 of 21

The Importance of Service Recovery in Successful Relationship

Abstract (Executive Summary)

This paper is focused on the importance of service recovery in successful

relationship by stating the interactions between relationship marketing,

customer satisfaction, service failure, service recovery and customer loyalty. It

illustrates how relationship is formed, why customer satisfaction is keen, where

service failure is emerged, when service recovery is applied and what customer

loyalty is.

Introduction

We have learnt from numerous marketing literature that it is ut most important to

develop a mutually beneficial ongoing buyer -seller relationship (Cosby, Evans,

& Cowles, 1990; Dwyer, Schurr, and Oh, 1987; Gwinner, Gremler, and Bitner,

1998: Gundlach, Achrol, and Mentzer, 1995). Satisfying customers in exchange

relationships is the ultimate goal of all businesses that wish to build repeat

business. Because marketing relationship emphasizes mutual gains and

co-operation, it is long-term oriented (Ganesan, Shankar, and Hess, 1997). If

we can develop, maintain and enhance the dynamics of the relationship with

our client, the end result will likely to be a loyal customer (Duck, 1991). Even in

the best run organizations, service failures are inevitable and will affect on

customer¶s loyalty and the long-termed relationship, and when it happens,




Page 4 of 21

here¶s when service recovery comes in. Service recovery is a crucial, yet too

often missing or neglected in business (Tschohl, 2005). ³A good recovery can

turn angry, frustrated customers into loyal ones. It can, in fact, create more

goodwill than if things had gone smoothly in the first place´ (p. 148, Hart,

Heskett, and Sasser, 1990). Service recovery is one of the key factors to

customer loyalty (Tax and Brown, 2000), it is a series of actions that a service

provider takes in response to service failure (Gronroos 1988). Researches

show customers hold expectation on what the service company will do in case

of a service failure (Kelly and Davis, 1994), and most customers expect to be

compensated for service failures (Berry and Parasuraman, 1991; Blodgett, Hill,

and Tax, 1997; Goodwin and Ross, 1992). An effective service recovery policy

can stabilize the endangered relationship of dissatisfying customers (Strauss

and Friege, 1999), therefore, a successful service recovery is needed to rebu ild

the relationship after a service failure (Levesque and McDougall, 2000).

However, inadequate service recovery can raise double deviation from

customer expectations (Bitner, Booms, and Tetrault, 1990), service recovery

policy has to be tailored for each individual case.

This paper is to define the importance of service recovery in successful

relationship and how to adequate deal with the situation when service failure

happens.

Theoretical Background

Interactions between relationship marketing, customer satisfaction,

service failure, service recovery and customer loyalty ± a total demand

for awareness, precautions and preparations.




Page 5 of 21

Abiding rules and regulations- relationship marketing and customer satisfaction

Relationship marketing requires that a company views its transaction with

clients in a long-term orientation. To keep these relationships, the basic rule is

to understand fully the specific business it is in and the requirements to keep

customers satisfied (Gronroos, 1990; Thomas, 1978). Successful in

maintaining long-term relationships with customers can lead to building

customers¶ satisfaction and customer loyalty, and which in turn results in higher

profitability and mutual benefits (Schneider, Benjamin, White, and Paul, 1998);

and it is the priority concern, in today¶s business, to focus on the customers¶

benefits and trust (Rust, Roland, Zeithaml, and Lemon, 2000).

Expect the unexpected, because it will happen ± service failure

Satisfying customers in exchange relationship is the ultimate goal of all

businesses that wish to build repeat business. However, service failures are

inevitable even in the best run companies. Service failure is commonly defined

as a mistake, problem or error that occurs in the delivery of the service (Bitner

et al., 1990; Colgate and Norris, 2001; Hoffman et al., 1995); it also breaks the

implied norms of the on-going customer-brand relationship (Aaker et al., 2004).

Service failure can lead to negative word of mouth (Richins, 1983),

dissatisfaction and defection (Keaveney, 1995), behavioral changes adversely

affecting the profitability of the company (Smith et al., 1999; Tax et al., 1998).

Examples of service failures (Bitner, Booms, and Tetreault, 1990) include

unavailable service, unreasonable slow service and other core service

problems. When service is not delivered as expected, customers¶ negative

dissatisfaction triggers them to exhibit multiple options like exit, voice,




Page 6 of 21

complaints, doubts and trusts (Hirschman, 1970). Organizations which are

keen to understand service failures and are eager to recover the customers¶

businesses, and to restore their pre -failure level of trusts and satisfactions, and

at the same time, to minimize their bad feelings (Hart et al., 1990; Reichheld

and Sasser, 1990). Service failures are viewed as customers¶ economic and

social loss in exchanges (Smith, Bolton, and Wagner, 1999), and service

providers will make their bests to recover the balance by offering customers

economic values in forms of compensation; for example, percentage di scount

or apologies (Smith et al., 1999).

The appropriate remedy ± service recovery to retain customer loyalty

This is when service recovery comes in.

As we have mentioned before, service recovery is critical, but yet often

neglected because it is only functional when service failure occurs. Since

service failure can affect our relationship with our customer and further

influence the trust, satisfaction and defection, service recovery is an important

factor for any business to be well-planned, well-prepared and well-equipped for.

Service recovery has always been defined as ³the actions of a service provider

to mitigate and/or repair the damage to a customer that results from the

provider¶s failure to deliver service as it is designed´ (p.467, Johnston and

Hewa, 1997).

A successful service recovery is needed to rebuild the relationship after a

service failure (Levesque, Terrence, and McDougall, 2000).

³To simply say that you¶re sorry is nice, but it¶s not very powerful,´ (Tschohl,

2005). ³You must give the customer something that has value in his eyes,

something so powerful that he not only will continue to patronize your business




Page 7 of 21

but will tell everyone he knows about the wonderful service you provided to him.

Nothing is more powerful as a personal recommendation from a satisfied

customer. Every company has something of value it can give to a customer who

has experienced a problem. It can cost the company from nothing to a few

dollars but, as long as it has value in the customer ¶s eyes, it will be effective.´

Dissatisfied customers expect that service failures will be recovered when they

complain (Sundaram, Jurowski, and Webster, 1997). In response to customers ¶

complaints about service failures, service providers take action to return

aggrieved customers to a state of satisfaction (Gronroos, 1998; Zemke and Bell,

1990).

Non-loyal customers are more influenced by convenience and cost (Goodwin

and Gremler, 1996), while loyal and relationship -based customers react

differently to the same service failure (Hedric k, 2007).

Fournier et al., 1998, proposed that consumer-service provider relationships

consist of different combinations of trust, commitment, social attachment, love

and need of the product, and/or investment. These different combinations can

affect how different customers respond to the same service failure. And

because relationship-based customers experience dissatisfaction in different

ways, they subsequently have different needs in service recovery.

Service recovery aims at service failure should not only address at putting

things right when they go wrong, but extend to prevent from errors happening in

the future (McCollough et al., 2000). Although service recovery has been

described as short-term activity, it embedded within reliability of the service

provider in the long-term (Boshoff, 1999).

Customer satisfaction with service recovery efforts is also influenced and

calculated by a number of factors, such as, whether the failure is core and main




Page 8 of 21

concern to the service delivered (Keaveney, 1995), how c ritical the failure is to

consumption and sales (Hoffman and Kelley, 2000), and the magnitude of the

failure (Smith, 1999).

As obvious as it seems, still, service recovery is a foreign concept to many

businesses. They do not understand it nor believe it, s o they do not practice it.

And as a result, they are struggling at their worst ever to survive and to keep

their customers.

Adequate service recovery not only builds customer loyalty, it also draws more

customers to a business.

As part of developing long-term relationship with customers, more

organizations strongly believe in their mutual growth and are increasingly

concerned with loyal customers who contribute to increased revenues and

profits (Reichfield, 2003), make further and repeated purchases (Payne, 2000),

and generate positive word-of-mouth (Gremler and Brown, 1999).

Good recommendations and positive word-of-mouth are favorably associated

with customer loyalty (Sividas and Baker-Prewitt, 2000), as well as a powerful

influence on the behavior of others including business associates and

perspective new customers (Gremler and Brown, 199).

According to all these writers, the loyalty of a customer is determined by the

strength of the relationship between attitude and behavior and ³true loyalty´

only continuously exists when levels of both relative attitude and intention to

purchase are high. Other loyalty types include ³no loyalty´, where both relative

attitude and intention to repurchase are low, ³latent loyalty´, where attitude is

high but purchase behavior is low, and ³spurious loyalty´, which is largely based

on behavioral measures (Dick and Basu, 1994). And according to Dekimpe et

al., 1997; and Kau and Lou, 2006, behavioral measures are frequently used to




Page 9 of 21

determine customer loyalty when favorable att itude is lacking in the

relationship.

Service recovery policy allows organizations to develop more effective and

cost-effective methods of resolving conflicts, and, in turn, achieve higher levels

of customer intention as well as higher profits (Blodgett et al., 1997).

In addition, service recovery not only rectifies service failure but also develops

long-term relationships with customers and builds customer loyalty.

The Role of Service Recovery and Service Failure in Relationship

Marketing

Why, how, when and where will service failure occurs?

According to Boshoff (p. 110, 1997), ³Mistakes are an unavoidable feature of all

human endeavor and thus also of service delivery´. Still, as unavoidable as

service failures appear, organizations cannot afford the significant costs that

result when customers at lost (Liao, 2007).

Organizations experience an increased risk of losing customers when services

fail (Zemke and Bell, 1990). It is acknowledged that occasional mistakes are

inevitable in the service delivery process; however, negative post-failure

consumer perceptions and behavior may be minimized and possibly even

prevented if organizations undertake effective recovery actions (Tax et al., 1998;

Andreassen, 2001; Hart et al., 1990; Bailey, 1994). Such actions c an often turn

dissatisfied consumers into satisfied customers (Boshoff and Leong, 1998),

although in some cases attempts at service recovery may reinforce customers¶

negative views (Hart et al., 1990). All these mean that there may be significant




Page 10 of 21

discrepancies in customer expectations of service recovery and the attempted

recovery actions taken by the service provider.

Service failure occurs when outcomes or service delivery are inadequate, or the

service delivered does not meet customer¶s expectation (Parasuraman et al.,

1991; Spreng et al., 1995). The impact of failure will vary based on the specific

service situation, individual consumer perceptions, and the type of failure

involved. Moreover, all of these factors will influence on the customer ¶s

evaluation and acceptance of the service provider (Smith et al., 1999; Weun et

al., 2004).

Service failure can also occur for other range of reasons such as customers are

perceived as rational information processors (Folkes, 1984); service failure in

particular industries like retailing (Kelley et al., 1993); service delivery failures,

including the failure to respond to customer needs and requests, as well as

unprompted and unsolicited employee actions (Bitner et al., 1990; Schroefer

and Ennew, 2002); outcome failures (Bitner et al., 1990; Stauss, 2002). The

services marketing literature also recognizes service failure not only by type but

by the degree of severity and failure magnitude (Smith et al., 1999; Weun et al.,

2004).

Hart et al. (1990) suggests that the formation of recovery expectations is based

on the type of failure that occurs. For example, consumers believe that

monetary types of failure can be easily remedied, through warranties, product

replacement, and/or complimentary services. However, non-monetary failures

create a range of difficulties for service -providers, which often requires creative

corporate solutions (Gilly and Gelb, 1982).

When faced with a service failure, customers want to be compensated for the

inconvenience and loss (Tax and Brown, 2000), and for having to go through




Page 11 of 21

the recovery process (Zemke, 1995). They will form a new set of expectations

which are based on consumer experience with past satisfactory encounters

and past failed experiences (Smith et al., 1999; Spreng et al., 1995; Colgate,

2001; Andreassen, 1999; Singh, 1990). Even for consumers with no past failed

experiences, they will also develop these new expectati ons (McGill and

Iacobucci, 1992). Other factors that affect consumer expectations include

cultural factors (Kanousi, 2005) and gender (Magnini and Ford, 2004).

Variations in expectation also base on specific industries, for example airlines

(Beou and Palmer, 1998), hospitality (Schroefer and Ennew, 2002) or financial

services (Lewis and Spyrakopoulos, 2001). In conclusion, all these state that

customers expect justice and fairness.

Prior research suggests that customer perceptions of fairness are based on

three components: distributions, procedures, and interactional treatment (Tax

and Chandrashekaran, 1998). Compensation is strongly linked to perceptions

of distributive justice (Tax and Brown, 1998), whereas an apology

communicates empathy to customers who have experienced a service failure

(Hart, Heskett, and Sasser, 1990). Consistent with past research,

compensation with an apology led to significantly higher satisfaction with the

problem handling than situations in which the perceived justice was low (Sm ith,

Bolton, and Wagner, 1999; Tax and Chandrashekaran, 1998).

Service failure is always associated with a customer¶s complaint; however,

while a relationship between the cost of the service and the likelihood of

complaint is often assumed (Andreasen and Best, 1977), complaints are not

often related to the expense incurred by the customer in the service encounter

(Gilly and Gelb, 1982; Hart et al., 1990). Furthermore, it is recognized that up to

two-thirds of customers never complain or express dissatisfaction with failed




Page 12 of 21

service encounters (Stephens and Gwinner, 1998), it is important to study as

many customers¶ responses to service failure as possible.

Customers who do not say anything about a service failure represent the

biggest problem for service firms, and many become ³the silent killers of many

companies´ (p. 74, Barlow and Moller, 1996). Many customers do not register a

complaint because they perceive the service provider would not be responsive

to a complaint (Singh, 1990; Richins, 1983: Andreasen, 1988), because of their

attitude toward complaining (Richins, 1983), because they lack the

sophistication to complain (Richins, 1985), and because of the level of product

importance (Richins, 1985). It has also been suggested that whether

consumers perceive the problem to be stable or to have been controllable also

impacts the likelihood that a consumer will complain (Folkes, 1984). Andreasen

(1988) also suggests that most customers do not know how to complain about

poor service.

When a service failure goes unnoticed by the service provider or goes

unreported by the customer the resulting levels of dissatisfaction, decline in

customer confidence and negative word-of-mouth behavior will be higher than

when any service recovery is attempted.

Understanding the source of the service failure is an important component in

engineering and managing a service system. It allows organizations to identify

bottlenecks (Shostack, 1992) and the root cause of the failure (Zeithaml et al.,

1993) and is therefore essential in developing effective strategies of service

recovery (La and Kandampully, 2004).

Service failures can lead to various serious consequences for the business,

namely:




Page 13 of 21

- Dissatisfaction (Kelley et al., 1993);

- Decline in customer confidence (Boshoff, 1997; Bosh off and Leong, 1998);

- Negative word-of-mouth behavior (Bailey, 1994; Mattila, 2001);

- Customer defection (Keaveney, 1995; Miller et al., 2000);

- Loss of revenue and increased costs (Armistead et al., 1995); and

- Decrease in employee morale and performance (Bitner et al., 1994).

We must be well-prepared in advance for their occurrences and rectify the

problem with the most appropriate solution.

Service recovery comes to the rescue!

Hart et al., 1990, in his article - ³The profitable art of service recovery ´ ± makes

it very clear that, unless an organization is committed to resolving

dissatisfaction, the consequences can be very destructive for the firm.

Organizational actions undertaken to deal with service failure are referred to as

service recovery (Gronroos, 1988; Smith et al., 1999). Organizations generally

undertake recovery actions when they become aware of failure has occurred

and then seek to design recovery processes to minimize the impact of the

negative encounter. The objective organizational action in a recovery situation

is to ensure that a consumer¶s expectations of the failure encounter are met or

exceeded, and as of in relation to expectations of normal service encounter with

no failure occurrence (La and Kandampully, 2004).

Service recovery is a step that should follow a mistake, it is the primary way a

firm can retain its customer and minimize the costs associated with customer

defection and negative word-of mouth after a service failure occurred.

³Service recovery is a thought-out, planned process for returning aggrieved




Page 14 of 21

customers to a state of satisfaction with the firm after a service or product has

failed to live up to expectations´ (p. 43, Zemke and Bell, 1990).

Michel (p. 21, 2001), takes this definition a step further by distinguishing

between complaint management and service recovery, he says, ³Since most

dissatisfied customers are reluctant to complain, service recovery attempts to

solve problems at the service encounter before customers complain or before

they leave the service encounter dissatisfied.´

³Service recovery involves those actions designed to resolve problem, alter

negative attitudes of dissatisfied customers and to ultimately retain these

customers´ (p. 38, Miller et al., 2000), and µit includes situations in which a

service failure occurs but no complaint is lodged by the customers´ (p. 359,

Smith et al., 1999), and ³to seek out and deal with service failures´ (p. 422,

Johnston, 1994), again, the ³seeking out´ distinguishes service recovery from

complaint management, as many customers do not complain.

A good service recovery design can significantly enhance a customer ¶s

perceptions of the quality of products or services already purchased, the

organization¶s competence, and the value of the organization ¶s other offerings

(Zemke and Bell, 1990). Such perceptions determine not only the satisfaction

and loyalty of the customer to the business, but also the overall profitability of

the business as well.

Prior research suggests that a successful recovery can lead to higher satisfied

customers (Johnston and Fern, 1999). It also mentions a speedy recovery

when things go wrong is important (p. 167, Andreasen and Bradford, 2000).

However, actual service recovery design and results vary among practitioners.

Studies have shown that as many as half of businesses¶ responses to problems

actually intensify, rather than mitigate, customers ¶ negative feelings towards the




Page 15 of 21

service provider (Hart et al., 1990).

Since the outcome of service recovery is intended to be positive and effective,

as defined as returning a dissatisfied customer to a state of satisfaction and to

improve service quality perceptions leading to positive behavior intentions that

include repeat purchases and loyalty (Berry and Parasuraman, 1991; Lewis

and Spyrakopoulos, 2001; Zemke and Schaaf, 1990, Boshoff, 1997), We must

carefully plan out the service recovery processes and policies.

Service recovery involves a series of steps and actions to be taken in order to

attract back and retain customers after a service failure occurrence. It must be

carefully well-planned and adjusted accordingly to each individual failure.

By summarizing much of the literature researched and focused on development

of service recovery (Andreasen, 2001; Bitner et al., 1990; Boshoff, 1997;

Boshoff and Leong, 1998; Colgate, 2001; DeWitt and Brady, 2003; Hess et al.,

2003; Hoffman et al., 1995; Johnston, 1998; Johnston and Fern, 1999; Kelley et

al., 1993; Miller et al., 2000; Smith and Bolton, 2002; Taylor, 2001; Van Ossel

and Stremersch, 1998; Weun et al., 2004), there are twelve key factors and

actions to create a workable, flexible and applicable service recovery that would

lead to success in recovering service failure:

1. Acknowledgement address and admit that a failure has occurred,

2. Empathy understand the failure from the customer s point of view,

3. Apology say sorry to customer,

4. Responsibility take responsibility of the failure,

5. Correction fix the failure,

6. Compensation provide refund and/or compensation to customer,




Page 16 of 21

7. Exceptional treatment special tailored action for compensation to customer,

8. Managerial intervention initiations taken by management level to pay extra

attention to customer,

9. Assurance provide assurance to customer that the failure will not occur again,

10. Explanation find out how the failure happened,

11. Employee training training and empowerment of employees to deal with

service failures and execute service recovery processes, and

12. Follow up post-recovery actions for customer.

In general, successful service recovery results with significant mutual benefits

to both the service providers and their customers, namely:

- Enhance customers perceptions of the quality of the service and the service

providers;

- Lead to positive word-of-mouth communication;

- Enhance customers satisfaction; and

- Build long-term customer relationship, loyalty and increase on profits (Bitner et

al., 1990; Hart et al., 1990; Spreng et al., 1995; Michel, 2001).

Service recovery, even though is only functional after service failure occurred,

with the adequate application, it will place your organization ahead of the

competition.




Page 17 of 21

Strategic Planning for Service Recovery and Application

Each case of service failure is to be viewed and evaluated individually

and, each case of service recovery is to be adjusted and executed

accordingly.

Theoretically, when the twelve factors and actions, i.e., acknowledgement,

empathy, apology, responsibility, correction, compensation, exceptional

treatment, managerial intervention, assurance, explanation, employee training

and follow up, in strategic planning of service recovery are applied, a successful

service recovery can be performed. However, each case of failure varies from

one another, and together with the variation of each individual customer and

service provided, each scenario of failure and service recovery should be using

different alternatives of the strategies to solve each case by weighing and

prioritizing all the twelve steps and actions taken.

It is necessary for an organization to create its own service recovery process

and policy, and it is important to develop a process that allows employees some

latitude in dealing with customer but also includes specific steps that must be

followed in executing service recovery.

According to recent study by Bhandari (2008), ³if an organization is to consider

service recovery as a form of service encounter activity, the organization is

required to have some pre-determined set of actions and management

activities for undertaking service recovery if it is to be successful by meeting

consumer expectations´. This means that service recovery is a long-run

process or policy in the organization since our marketing relationship with our

customers are on a long-term basis. He also points out; ³organizations focusing




Page 18 of 21

on one single recovery activities and single outcome measures will risk

overlooking other critical outcomes´, in other words, a service recovery strategy

that is considered successful in one outcome measure may be less successful

or can fail completely in terms of another outcome measure.

For instance, the service recovery process required for a big corporate s uch as

a major computer manufacturer might be significantly different from a small

business such as cold food in a neighborhood restaurant due to different levels

of the customer¶s expectation. Studies (Devaraj et al., 2001; Levesque and

McDougall, 2000; Maxham and Netemeyer, 2002; McCollough et al., 2000;

Miller et al, 2000) have gathered four crucial factors that contribute to such

differences:

1. Cost the more a primary service costs, the higher a customers expectation for

recovering a failure,

2. Product and brand name products or service provided by a reputable and

recognized name-brand generate greater expectations for recovery from

customer after a failure,

3. Criticality the more critical and important a service is to the customer, the

higher the customers expectations regarding service recovery, and

4. Inconvenience the more inconvenient a failure was and the more inconvenient

it is to resolve that failure, the greater the customers expectation for service

recovery and it is much more extra time-consuming.

Therefore, we should treat each service failure individually and recovery

service process should be objected to these surrounding factors.

While service recovery is generally focused on the attempts of organizations to

overcome customers¶ dissatisfaction (Blodgett et al., 1997; Mccollough et al.,




Page 19 of 21

2000), Hart et al. (1990), points out that service recovery attempts to overcome

service failures based on both employee actions as well as organizational

responses.

Dealing with complaining customers can be difficult and sometimes upsetting to

the employees, it can even be more stressful if organization has inadequate

policies and procedures. Poor service recovery processes can be the cause of

much stress for employees (Bowen and Johnston, 1999).

Frontline personnel¶s behavior when receiving complaint is important providing

a good service recovery. This implies that frontline personnel must be

empowered to do what they perceive as right or fair when dealing with

complaints. Because service failure provides a unique opportunity to regain and

retain customers¶ satisfaction, training of employee in this area is considerably

important.

This concept is stated by Mattila (2001), she says, ³Training the frontline

employees to deal with service failure is the key to any successful service

recovery strategy. Recognizing the importance of response speed on customer

reactions to service failures, many organizations have empowered their

customer-contact employees to handle customer complaints´.

This well explains the application of one of our twelve strategies for service

recovery, the employee training.

In addition, the other strategies including responsibility, managerial intervention,

assurance and follow up - play an important role on further ensuring ³the

service recovery paradox´ theory. Service recovery paradox refers to situations

which a customer¶s post-failure satisfaction exceeds pre -failure satisfaction

(McCollough and Bharadwaj, 1992). The recovery paradox theory argues that




Page 20 of 21

an effective service recovery can not only maintain customer satisfaction, it also

propels the satisfaction and relationship to a higher level, and this theory is also

endorsed by hart et al. (1990).

As we have mentioned before, when service failure occurs, all customers

expect justice and fairness, and when we carefully plan out our service

recovery with the twelve strategies adequately adapted, it will fulfill our

customers with the following:

- Adequate compensation has a positive effect on distributive justice, i.e., the

perceived fairness of outcome,

- Speed has a positive effect on procedural justice, i.e., the perceived fairness of

the process used,

- Both apology and initiation have positive effects on interactional justice, i.e., the

perceived fairness of how the customer is treated,

- Distributive, procedural and interactional justices all have positive effects on

customer satisfaction, and

- Customer satisfaction has a positive effect on customer loyalty,

And thus, we have a successfully service recovery.

Conclusion

Since customer satisfaction is the main concern of building, maintaining and

retaining a long-term marketing relationship with our customer, a close bond

with our customer is necessary. A close bond might limit the harmful impact of

service failure on customer loyalty. Yet we must strive to predict, identify and

eliminate all potential sources of failure before it happens, and when the failure

is inevitable, we have to minimize the damage and compensate for the failure.




Page 21 of 21

We must understand that service is also very important i n our business besides

price and quality of our products, thus a service -oriented recovery policy and

process has to be implied at the organization. We know that excellent service

recovery is not an option when compared error-free service satisfaction, but,

the higher the service recovery performance, the higher the post -recovery

satisfaction supports the importance of superior service recovery. Service

recovery is not just only playing an important role in relationship marketing, but

with the best strategic planning, best coverage and appropriate applications

and adaption, it will bring and keep marketing relationship in success.

Date post:	29-May-2018
Category:	Documents
Upload:	johnnie-ko
View:	218 times
Download:	0 times

Johnnie Ko- University of Greenwich -CIM Assignemnt (Nov-02)

Documents