4517-4379 Lovelock PPT Chapter 13

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Text of 4517-4379 Lovelock PPT Chapter 13

Chapter 13:

Achieving Service Recovery and Obtaining Customer Feedback

Slide 2007 by Christopher Lovelock and Jochen Wirtz

Services Marketing 6/E

Chapter 13 - 1

Overview of Chapter 13 Customer Complaining Behavior Customer Responses to Effective Service Recovery Principles of Effective Service Recovery Systems Service Guarantees Discouraging Abuse and Opportunistic Behavior Learning from Customer Feedback

Slide 2007 by Christopher Lovelock and Jochen Wirtz

Services Marketing 6/E

Chapter 13 - 2

Customer Complaining Behavior

Slide 2007 by Christopher Lovelock and Jochen Wirtz

Services Marketing 6/E

Chapter 13 - 3

American Customer Satisfaction Index: Selected Industry Scores, 2006Score(Max = 100)

100 90 80 70 60 50 40 30 20 10 83 83 81 75 77 65 77 69

75

75

74

% Change 0 -3.5% 2.5% 2.5% -7.4% 1.4% 0.0% -1.3% -9.7% -4.1% 11.6% -10.4% 2006 vs. 2005

Industry:Source: www.theacsi.org, Accessed 9.11.2006

Slide 2007 by Christopher Lovelock and Jochen Wirtz

al s on r rs ute Pe m p co s tel ks Ho an .b m m ce Co an ur ns ei Lif s, an ,v rs Ca c. il, et ma ss pre Ex rcels pa s in k dr ft So

Services Marketing 6/E

g tin as s) dc ew oa l. n Br at (n od s fo nt st ura Fa sta Re ls i ta sp Ho s ne rli AiChapter 13 - 4

Customer Response Categories to Service Failures (Fig 13.1)Complain to the Complain to the service firm service firm Take some form Take some form of Public Action of Public Action Service Encounter Service Encounter is Dissatisfactory is Dissatisfactory Take some form Take some form of Private of Private Action Action Take No Action Take No Action Complain to aa Complain to third party third party Take legal action Take legal action to seek redress to seek redress Defect (switch Defect (switch provider) provider) Negative word-ofNegative word-ofmouth mouth

Any one or aacombination of Any one or combination of these responses is possible these responses is possibleSlide 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 13 - 5

Understanding Customer Responses to Service Failure Why do customers complain? What proportion of unhappy customers complain? Why dont unhappy customers complain? Who is most likely to complain? Where do customers complain? What do customers expect once they have made a complaint?

Slide 2007 by Christopher Lovelock and Jochen Wirtz

Services Marketing 6/E

Chapter 13 - 6

Customers Often View Complaining as Difficult and Unpleasant (Fig 13.2)

Slide 2007 by Christopher Lovelock and Jochen Wirtz

Services Marketing 6/E

Chapter 13 - 7

Three Dimensions of Perceived Fairness in Service Recovery Process (Fig 13.3)Complaint Handling and Service Recovery Process Justice Dimensions of the Service Recovery Process Procedural Justice Interactive Justice Outcome Justice

Customer Satisfaction with Service RecoverySource: Tax and Brown Slide 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 13 - 8

Customer Responses to Effective Service Recovery

Slide 2007 by Christopher Lovelock and Jochen Wirtz

Services Marketing 6/E

Chapter 13 - 9

How Complaint Resolution Affects Customer Retention RatesPercent of Unhappy Customers Retained

100 90 80 70 60 50 40 30 20 10 0

95% 82% 70% 46% 37% 19% 54%

9%Customer did not complain Complaint was not resolved Complaint was resolvedProblem cost $1$5

Complaint was resolved quickly

Problem cost > $100

Source: Claes Fornell, Birger Wernerfelt, A Model for Customer Complaint Management, Marketing Science, Vol. 7, No. 3 (Summer, 1988), pp. 287298 Slide 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 13 - 10

Importance of Service Recovery Plays a crucial role in achieving customer satisfaction Tests a firms commitment to satisfaction and service quality Employee training and motivation is highly important

Impacts customer loyalty and future profitability Complaint handling should be seen as a profit center, not a cost center

Slide 2007 by Christopher Lovelock and Jochen Wirtz

Services Marketing 6/E

Chapter 13 - 11

The Service Recovery Paradox Customers who experience a service failure that is satisfactorily resolved may be more likely to make future purchases than customers without problems (Note: not all research supports this paradox) If second service failure occurs, the paradox disappears customers expectations have been raised and they become disillusioned Severity and recoverability of failure (e.g., spoiled wedding photos) may limit firms ability to delight customer with recovery efforts Best strategy: Do it right the first timeSlide 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 13 - 12

Principles of Effective Service Recovery Systems

Slide 2007 by Christopher Lovelock and Jochen Wirtz

Services Marketing 6/E

Chapter 13 - 13

Components of an Effective Service Recovery System (Fig 13.4)Do the job right the first time

+

Effective Complaint Handling

=

Increased Satisfaction and Loyalty

Conduct research Identify Service Complaints Monitor complaints Develop Complaints as opportunity culture Develop effective system and training in complaints handling Conduct root cause analysis

Resolve Complaints Effectively

Learn from the Recovery Experience

Close the loop via feedbackSlide 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 13 - 14

Strategies to Reduce Customer Complaint Barriers (Table 13.1)Complaint Barriers for Dissatisfied Strategies to Reduce These Barriers CustomersInconvenience Hard to find right complaint procedure Effort involved in complaining Doubtful Pay Off Uncertain if action will be taken by firm to address problem Unpleasantness Fear of being treated rudely Hassle, embarrassment Have service recovery procedures in place, communicate this to customers Feature service improvements that resulted from customer feedback Thank customers for their feedback Train frontline employees Allow for anonymous feedbackServices Marketing 6/E Chapter 13 - 15

Put customer service hotline numbers, e-mail and postal addresses on all customer communications materials

Slide 2007 by Christopher Lovelock and Jochen Wirtz

How to Enable Effective Service Recovery Be proactiveon the spot, before customers complain Plan recovery procedures Teach recovery skills to relevant personnel Empower personnel to use judgment and skills to develop recovery solutions See Service Perspectives 13.2: Guidelines For Effective Problem Resolution

Slide 2007 by Christopher Lovelock and Jochen Wirtz

Services Marketing 6/E

Chapter 13 - 16

How Generous Should Compensation Be? Rules of thumb for managers to consider: What is positioning of our firm? How severe was the service failure? Who is the affected customer?

Slide 2007 by Christopher Lovelock and Jochen Wirtz

Services Marketing 6/E

Chapter 13 - 17

Service Guarantees

Slide 2007 by Christopher Lovelock and Jochen Wirtz

Services Marketing 6/E

Chapter 13 - 18

Service Guarantees Help Promote and Achieve Service Loyalty Force firms to focus on what customers want Set clear standards Highlight cost of service failures Require systems to get and act on customer feedback Reduce risks of purchase and build loyaltySlide 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 13 - 19

How to Design Service Guarantees Unconditional Easy to understand and communicate Meaningful to the customer Easy to invoke Easy to collect Credible

Slide 2007 by Christopher Lovelock and Jochen Wirtz

Services Marketing 6/E

Chapter 13 - 20

Types of Service GuaranteesTable 13.2

Single attribute-specific guarantee One key service attribute is covered

Multiattribute-specific guarantee A few important service attributes are covered

Full-satisfaction guarantee All service aspects covered with no exceptions

Combined guarantee All service aspects are covered Explicit minimum performance standards

on important attributesSlide 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 13 - 21

The Hampton Inn 100% Satisfaction Guarantee (Fig 13.5)

What are benefits of such a guarantee? Are there any downsides?

Slide 2007 by Christopher Lovelock and Jochen Wirtz

Services Marketing 6/E

Chapter 13 - 22

Discouraging Abuse and Opportunistic Behavior

Slide 2007 by Christopher Lovelock and Jochen Wirtz

Services Marketing 6/E

Chapter 13 - 23

Dealing with Customer Fraud Treating all customers with suspicion is likely to alienate them TARP found only 1 to 2 percent of customer base engages in premeditated fraudso why treat remaining 98 percent of honest customers as potential crooks?

Insights from research on guarantee cheating Amount of a guarantee payout had no effect on customer cheating Repeat-purchase intention reduced cheating intent Customers are reluctant to cheat if service quality is high (rather than just satisfactory)

Managerial implication Firms can benefit from offering 100 percent money-back guarantees Guarantees should be offered to regular customers as part of membership program Excellent service firms have less to worry about than average providersSlide 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapte