Achieving Service Recovery and Obtaining Customer Feedback

Lovelock: Chapter 13

Service Recovery occurs when an organization or service provider is able to solve a customer problem, make restitution, and regain trust following a breakdown in service delivery.

Service Breakdowns happen whenever the product or service delivered fails to meet customer expectations.

Introduction

Product or service failed Promise not kept Deadline missed Service not adequate Provider lacks knowledge or skills Customer inconvenienced Customer gets runaround Unprofessional treatment

Service Breakdowns

Human resources Organization and structure Processes and procedures Product and service design and delivery Internal communications Technological support systems Standards

Causes of Breakdowns (Organizational Factors)

Communication skills Knowledge Attitude Technical skills

Causes of Breakdowns (Employee Factors)

Failure to use information correctly Failure to follow through

Causes of Breakdown (Customer Factor)

Service recovery has been defined by many authors as :

“the effort an organization expends to win back customers goodwill once it has been lost due to service failure” (Fisk, Grove et al 2000)

“refers to actions taken by an organization in response to some service failures” (Zeithaml & Bitner, 2003)

“any situation where something has gone wrong, irrespective of responsibility” (Palmer, 2001)

Defining Service Delivery

1970’s and 1980’s service recovery was the plan for dealing with telecommunications problems or recovering particular services.

Companies adopted systems that produced ‘zero defects’, to produce a high quality service and a cost effective production line approach.

In the late 1970s marketers began to recognize the importance of service recovery for different areas of business and specific service problems.

However the idea of zero defects in services is simply an unattainable goal.

Use of the word ‘recovery’ originated from British Airways ‘Putting the Customer First Campaign’ in the late 1990s

History of Service Recovery

The role of service recovery in the event of a service failure is recognized as “doing the service very right the second time” (Brown, Cowles et al. 1996).

In order to understand service recovery, it is necessary to understand how the customer experiences the service and the impact of the service encounter on customer satisfaction.

Effective service recovery can improve the image of the firm and reduce perceived risk to the customer.

Issues in Service Recovery

Customer satisfaction Develops into an attitude about a product, services or a firm, which

in turn guides consumer behavior, brand loyalty and WOM Satisfaction occurs at the point where experience matches

expectation. If the experience is not what’s expected, customers are likely to complain.

Costs of Service Recovery Costs to customer include monetary, psychological, emotional and

costs of inconvenience. Costs to firm include monetary, cost of lost customers, cost of

negative WOM and costs associated with setting up recovery strategy.

Issues in Service Recovery

Customer Response Following Service Failure

Service Failure

Do Nothing

Switch Provider Stay with Provider

Take Action

Complain to Provider

Complain to Family & Friends

Complain to Third Party

Switch Provider Stay with Provider

Propensity for customers not to complain Complaints often don’t identify the root of the problem Complaints often don’t reach management. Satisfying complaining customers can increase brand loyalty Increase in ease of access to firms can increase complaints Likelihood of complaining is directly related to the severity of the

problem Complainers tend to be the heaviest users of the service Dissatisfied customers spread negative WOM.

Customer Complaint Behavior

Why do customers complain? To obtain restitution or compensation To vent their anger To help to improve the service For altruistic reasons

Understanding Customer Responses to Service Failure

Customers who complain give the firms a chance to correct problems, restore relationships with the complainer, and improve future satisfaction.

Customer complaint iceberg

Customer Responses to Effective Service Recovery

When complaints are resolved, there is a much higher chance that the customers involved with remain loyal.

TARP research found that: For a major complaint, if the company lent a patient ear, but could

not solve the problems, even then the retention rate increased from 9% to 19%.

If the complaint was solved satisfactorily, this retention rate jumped to 54%.

When the problem was solved on the spot, the same rate skyrocketed to 82%.

Complaint handling - a profit center and not a cost center

Impact of Effective Service Recovery on Customer Loyalty

Service Recovery Paradox

Recovery must be considered as part of the overall strategy for identifying and responding to customers expectations, while at the same time empowering staff and providing a platform for maintaining long-term relationships with customers.

Recognizing that current customers are a valuable asset base, managers need to develop effective procedures for service recovery following unsatisfactory experiences.

Service Recovery and Strategy

Service Recovery Strategies

Learn fromRecovery Experiences

Treat C

ustomers

Fairly

Learn

from

Lo

st C

usto

mers

Welcome and

Encourage ComplaintsFail S

afe the S

ervice

Act Q

uickly

Service Recovery Strategies

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?)

Service Guarantees

A large number of firms offer customers a service guarantee – promising that if service delivery fails to meet predefined standards, the customer will be entitled to one or more forms of compensation, such as an easy-to-claim replacement, refund or credit.

Some firms put conditions on these guarantees, while others offer them unconditionally.

Service Guarantee

“Customers value reliability over all other dimensions” Statement explaining the service the customer may expect (the

promise) and what the company will do if it fails to deliver (the payout).

Promise of consistency compared to other services Cover customer costs Repeat business Assure customers subsequent service will be higher quality =>

change attitudes

Service Guarantee defined

Hart mentions that service guarantees should meet the following criteria: Unconditional Easy to understand and communicate Meaningful to the customer Easy to invoke Easy to collect Credible

Designing Service Guarantees

Learning from Customer Feedback

As Darwin had said:“it is not the strongest species that survive, nor the most intelligent, but the ones most responsive to changes”

We need to learn and change in order to survive in this cut-throat competitive world.

Learning from Customer Feedback

Specific objectives of effective customer feedback systems usually fall into the 3 main categories: Assessment and benchmarking of service quality and performance

How satisfied are our customers? Customer-driven learning and improvements

What makes our customers happy or unhappy? Creating a customer-oriented service culture

Focusing the organization on customer needs and customer satisfaction, and rallying the entire organization towards a service quality culture

Customer Feedback Systems

Total market surveys, Annual surveys Tells us how satisfied customers are, but not why they are happy or

unhappy

Transactional surveys More in-depth, and more detailed – gives us more actionable

feedback

Service feedback cards Customers fill them out after completion of a particular service

process

Using Customer Feedback Collection Tools

Mystery Shopping Determine whether front-line staff are displaying desired behaviors

Unsolicited customer feedback Detailed customer complaint and compliment letters, recorded

phone conversations, direct feedback from employees, etc.

Focus group discussions and service reviews FGDs and service reviews give great specific insights on potential

service improvements and ideas.

Using Customer Feedback Collection Tools

Think like a customer Pamper customers Respect customers Focus customers Exceed expectations

Prevention Strategies

Not listening Lack of respect Poor/inadequate communication Inadequate or outdated materials/ equipment Lack of training Work conflicts

Roadblocks to Service Recovery

Causes Behind Service Switching

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

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

Core Service Failure• Service Mistakes• Billing Errors• Service Catastrophe

Service Encounter Failures• Uncaring• Impolite• Unresponsive• Unknowledgeable

Response to Service Failure• Negative Response• No Response• Reluctant Response

Competition• Found Better Service

Ethical Problems• Cheat• Hard Sell• Unsafe• Conflict of Interest

Involuntary Switching• Customer moved• Provider closed

Service Switching Behavior

Companies realize that they cannot make everybody happy, every time.

They might decide to classify the customers, and concentrate on a particular group that is most beneficial for the company.

Customer Classification

Short-term customers Long-term customers

Profitable Butterflies True Friends

Unprofitable Strangers Barnacles

Service firms are unable to implement service recovery strategies if they are not informed of their shortcomings, therefore customers must be encouraged to complain.

Service recovery is the key to customer satisfaction and achieving this should be a primary goal for service organizations

Service recovery strategies play a crucial role in customer satisfaction

Service guarantees are an incentive and a vehicle for bringing customer complaints to the organization.

Conclusion