Customer Feedback f

8/6/2019 Customer Feedback f

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Slide 2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 13 - 1

Customer Feedback andService Recovery


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American Customer Satisfaction Index:Selected Industry Scores, 2002

Industry:

8579 80 79

7471 71

6670

76

6562

0

10

20

30

40

5060

70

80

90

100

3.7% 1.3% 0.0% 1.3% 2.8% 0.0% 0.0% 8.2% 2.9% -2.6% 4.8% 3.3%% Change2002 vs 2001

Score

(Max = 100)


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Key Questions for Managers to Ask aboutCustomer Complaining Behavior

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?


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Customer Response categories to service failures

Service Encounteris Dissatisfactory

Take some formof public action

Take some formof private action

Take no action

Complain to theservice firm

Complain to athird party

Take legal actionto seek redress

Defect (switchprovider)

Negative word-of-mouth

Any one or a combination ofthese responses is possible


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Understanding customer responses to servicefailures

To be able to deal effectively with dissatisfied & complaining customers,managers need to understand key aspects of complaining behavior, startingwith several questions:

1. Why do customers complain?

a. Obtain restitution or compensation: Often consumers complain torecover some economic loss by seeking a refund, compensation, &/orhave the service performed again.

b. Vent their anger: Some customers complain to rebuild self-esteem &/orto vent their anger & frustration. When service processes arebureaucratic & unreasonable or when employees are rude, deliberatelyintimidating, or apparently uncaring, the customers self-esteem, self-worth, or the sense of fairness can be negatively affected. They maybecome angry & emotional.


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Cont..

c. Help to improve the service: When customers are highly involved with aservice, they give feedback to try & contribute toward service improvements.These customers are motivated by the prospect of getting better service inthe future.

d. For altruistic reasons: These customers want to spare other customers

from experiencing the same problems, & they might feel bad if a problem isnot highlighted.

2. What proportion of unhappy customers complain?

Research shows that an average, only 5-10% of customers who have beenunhappy with a service actually complain.

However, although generally only a minority of dissatisfied customerscomplain, there is evidence that consumers across the world are becomingbetter informed, more self- confident, & more assertive about seekingsatisfactory outcomes for their complaints.


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Cont..

3. Why dont unhappy customers complain?

TARP, a customer satisfaction & measurement firm, has identified anumber of reasons why customers dont complain.

Some dont wish to take the time to write a letter, fill out a form, or make aphone call, especially if they dont see the service sufficiently important tomerit the effort.

Many customers see the payoff as uncertain & believe that no one wouldbe concerned about their problem or willing to resolve it.

In some situations, people simply do not know where to go or what to do

Additionally, many people may feel that complaining is unpleasant.


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Cont

4. Who is most likely to complain?

Research findings consistently show that people in higher socioeconomiclevels are more likely to complain than those in lower levels.

There better education, higher income, & greater social involvement givethem the confidence, knowledge & motivation to speak up when theyencounter problems.

5. Where do customers complain?

Studies show that majority of complaints are made at the place where theservice was received.


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Customer expectations about their complaints

When a service failure occurs, people expect to be adequatelycompensated in a fair manner.

However, recent studies have shown that many customers feel that theywere not treated fairly & did not receive adequate justice. When thishappens, customer reactions tend to be immediate, emotional & enduring.

It was found in a research, that as much as 85% of the variation in thesatisfaction with a service recovery was determined by the 3 dimensions offairness:

1. Procedural justice: It deals with the policies & rules that any customerwill have to go through in order to seek fairness. Here, customers expect thefirm to assume responsibility, which is the key to the start of a fair procedure,followed by a convenient & responsive recovery process.


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Cont..

2. Interactional justice:

It involves the firms employees who provide the service recovery & theirbehavior towards the customer.

Giving an explanation for the failure & making an effort to resolve theproblem are very important.

However, the recovery effort must be perceived as genuine, honest &polite.

3. Outcome justice:

It pertains to the compensation that a customer receives as a result of thelosses & inconvenience incurred because of the service failure.

It includes compensation for time, effort, spent during service process

recovery.


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Dimensions of Perceived Fairness in ServiceRecovery Process

Procedural

Justice

Interactive

Justice

Outcome

Justice

Complaint Handling & Service

Recovery Process

Justice Dimensions of the Service Recovery Process

Customer Satisfaction with the

Service RecoverySource: Tax and Brown


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Customer responses to effective service recovery

Service recovery is an umbrella term for systematic efforts by a firm tocorrect a problem following a service failure & retain a customers goodwill.

Service recovery efforts play a crucial role in achieving customer satisfaction.

The true test of a firms commitment to satisfaction & service quality is notin the advertising promises but in the way it responds when things go wrongfor the customer.

Effective service recovery requires thoughtful procedures for resolvingproblems & handling dissatisfied customers.


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Impact of Effective Service Recoveryon Retention

No

Problem

Problem

Unresolved

Customer Retention

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

84%

92%

46%

Source: IBM-Rochester study

Problem,but effectively

resolved


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Principles of effective service recovery systems

1. Make it easy for customers to give feedback:

Many companies have improved their complaint- collection procedures byadding special toll-free phone lines, links on the Web sites, prominentlydisplayed customer comment cards in their branches.

In the customer newsletter, some companies feature service improvementsthat were the direct result of customer feedback under the motto you toldus, & we responded


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Strategies to Reduce Customer ComplaintBarriers

Complaint Barriers for

Dissatisfied Customers

Strategies to Reduce These Barriers

Inconvenience

Difficult to find the right complaint

procedure.

Effort, e.g., writing a letter.

Make feedback easy and convenient by:

Printing Customer Service Hotline

numbers, e-mail and postal addresses on

all customer communications materials.

Doubtful Pay Off

Uncertain whether any action, and

what action will be taken by the

firm to address the issue the

customer is unhappy with.

Reassure customers that their feedback will

be taken seriously and will pay off by:

Having service recovery procedures in

place, and communicating this to

customers.

Featuring service improvements that

resulted from customer feedback.Unpleasantness

Complaining customers fear that

they may be treated rudely,

may have to hassle, or

may feel embarrassed to complain.

Make providing feedback a positive

experience:

Thank customers for their feedback.

Train the frontline not to hassle and make

customers feel comfortable.

Allow for anonymous feedback.


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Cont..

2. Enable effective service recovery:

Recovering from service failures take more than pious expressions ofdetermination to resolve any problems that may occur.

It requires commitment, planning & clear guidance.

Specifically, effective service recovery procedure should be:

a. Proactive: Service recovery needs to be initiated on the spot, ideallybefore customers have a chance to complain. Service personnel should

be sensitized to signs of dissatisfaction & ask whether customers mightbe experiencing a problem.

b. Planned: Contingency plans have to be developed for service failures,especially for those that can occur regularly.


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Cont.

c. Recovery skills must be taught: Customers easily feel insecure at the pointof service failure because things are not turning out as anticipated. Effectivetraining arms frontline staff with the confidence & competence to turn distressinto delight.

d. Recovery requires empowered employees: Service recovery efforts

should be flexible & employees should be empowered to use their judgment& communication skills to develop solutions that will satisfy complainingcustomers. Employees need to have the authority to make decisions &spend money in order to resolve service problems promptly & recover customer goodwill.


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3. How generous should compensation be?

How much compensation should a firm offer when there has been aservice failure? Or would an apology be sufficient instead?

The following rules of thumb can help to answer these questions:

a. What is the firms market positioning?

b. How severe was the service failure?

c. Who is the affected customer? Overly generous compensation is not only expensive but may be

negatively interpreted by customers.

It may raise questions about the soundness of the business & lead

customers to become suspicious.


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Cont.

4. Dealing with complaining customers;

Both managers & frontline employees must be prepared to deal with angrycustomers who are confrontational & sometimes behave in insulting waystoward service personnel.

The following guidelines provide specific guidelines for effective problemresolution, designed to calm upset customers & deliver a resolution.

Act quickly

Admit mistakes, but dont be defensive

Show that you understand the problem from each customers point ofview

Dont argue with customers


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Cont..

Acknowledge the customers feelings

Give customers the benefit of the doubt

Clarify the steps needed to solve the problem

Keep customers informed of progress

Consider compensation

Persevere to regain customer goodwill


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Components of an Effective Service RecoverySystem

Lea rn fr om t e

R ec ov er y E p e rie n ce

Lear n fr om t e

R ec ov er y E p e rie n ce

R es o v e C om p ain ts

E f fe c tiv e y

R eso v e C o mp a in ts

E f fe c tiv e y

enti fy S ervice

C o m p a in ts

enti fy S erviceC o m p a in ts

E f fe c tiv e C o m p a in t

a n in

E f fe c tiv e C o m p a in t

a n in

Conduct Root Cause

Analysis

Conduct Root Cause

Analysis

Develop Effective

System and Training in

Complaints Handling

Develop Effective

System and Training in

Complaints Handling

Conduct Research

Monitor Complaints

Develop Complaints

as pportunity

Culture

Conduct Research

Monitor Complaints

Develop Complaints

as pportunity

Culture

=+

Close the Loop via Feedback

Increased Satisfaction

and Loyalty

Increased Satisfaction

and LoyaltyDo the Job Right the

First Time

Do the Job Right the

First Time


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Service Guarantees

A growing number of companies offer customers a satisfaction guarantee,promising that if service delivery fails to meet predefined standards, thecustomer is entitled to one or more forms of compensation, such as easy-to-claim replacement, refund or credit.

From the customers perspective, the primary function of service guaranteesis to lower the perceived risks associated with purchase.


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The power of service guarantees

Guarantees are powerful tools for both promoting & achieving service qualityfor the following reasons:

1. Guarantees force firms to focus on what their customers want & expect ineach element of the service.

2. Guarantees set clear standards, telling customers & employees alike whatthe company stands for.

3. Guarantees require the development of systems for generating meaningfulcustomer feedback & acting on it.

4. Guarantees force service organization to understand why they fail &encourage them to identify & overcome potential fail points.

5. Guarantees help in reducing the risk of the purchase decision & buildinglong-term loyalty.


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How to design service guarantees

Some guarantees are simple & unconditional. Others appear to have beenwritten by lawyers & contain many restrictions.

Service guarantees should be designed to meet the following criteria:

1. Unconditional

2. Easy to understand & communicate

3. Meaningful to customers

4. Easy to invoke

5. Easy to collect

6. Credible


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Types of Service Guarantees

Single attribute-specific guarantee one key serviceattribute is covered

Multiattribute-specific guarantee a few important serviceattributes are covered

Full-satisfaction guarantee all service aspects coveredwith no exceptions

Combined guarantee like the full-satisfaction, addingexplicit minimum performance standards on important

attributes


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Is it always appropriate to introduce a serviceguarantee?

Managers should think carefully about their firms strength & weaknessesbefore deciding to introduce a service guarantee.

Companies that have a strong reputation for high-quality service may notneed a guarantee.

In contrast, a firm whose service is currently poor must first work to improvequality to level above that at which the guarantee might be invoked on a regularbasis by most of its customers.

In a market where consumers se little financial, personal or physiological riskassociated with purchasing & using a service, a guarantee adds little value butstill costs money to design, implement & manage.

Where little perceived difference in service quality among competing firmsexists, the first company to institute a guarantee may be able to obtain a first-mover advantage & create a valued differentiation for its services.


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Key objectives of effective customer feedbacksystems

Many strategists have concluded that in increasingly competitive markets, theultimate competitive advantage for a firm is to learn & change more rapidly thancompetition.

Specific objectives of effective customer feedback systems typically fall intothree main categories:

1. Assessment & benchmarking of service quality & performance:

The objective is to answer the question, How satisfied are the customers?

This objective includes learning about how well a firm performed incomparison to its main competitors?

How it performed in comparison to the previous year?


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Whether investments in certain service aspects have paid off in terms ofcustomer satisfaction?

Often, a key objective of comparison against other units (branches, teams,competitors) is to motivate managers & service staff to improve performance,especially when the results are linked to compensation.

2. Customer-driven learning & improvements: The objective is to answer:

Why our customers are unhappy?

Where & how can we improve?

This objective is about gaining an understanding of the things that othersuppliers do well & those that make customers happy.

3. Creating a customer-oriented service culture


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Customer feedback collection tools

Recognizing that different tools have different strengths & weaknesses,service marketers should select a mix of customer feedback collection toolsthat jointly deliver the needed information.

1. Total market surveys, annual surveys & transactional surveys:

Total market surveys & annual surveys measure satisfaction with allmajor customer service processes & products.

The level of measurement is usually at high level, with the objective ofobtaining a global index or indicator of overall service satisfaction for theentire firm.

Overall indices tell how satisfied customers are but not why they arehappy or unhappy.

There is a limit to the number of questions that can be asked about eachindividual process or product.


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Cont

In contrast, transactional surveys are typically conducted after customershave completed a specific transaction & query them about this process insome depth.

All three types are representative & reliable when designed properly.Representativeness & reliability are required for:

1. Accurate assessment of where the company, a process, branch orindividual stands relative to quality goals.

2. Evaluation of individuals, staff, teams, branches &/or processesespecially when incentive schemes are linked to such measures.


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Strengths and Weakness ofKey Customer FeedbackCollection Tools

Potentialfor ServiceRecovery

Collection Tools

Multi-level MeasurementAction-

able

Represen

-tative,

Reliable

First

Hand

earning

Cost

EffectiveServiceSatisfaction

Process

Satisfaction

Specific

Feedback

Total Market Survey (inclu.

competitors)

Annual Survey on overallsatisfaction

Transactional Survey(process specific)

Service Feedback Cards(process specific)

Mystery Shopping(service testers)

Unsolicited Feedback Recd(Online feedback system)

Focus Group Discussions

Service Reviews

Meets Requirements: Fully Moderate Little/Not at all


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Entry Points forUnsolicited Feedback

Employees serving customers face-to-face or by phone

Intermediaries acting for original supplier

Managers contacted by customers at head/regional office

Complaint cards mailed or placed in special box

Complaints passed to company by third-party recipients

consumer advocates

trade organizations legislative agencies

other customers


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Analysis, reporting & dissemination of customerfeedback

Choosing the relevant feedback tools & collecting customer feedback ismeaningless if company is unable to disseminate the information to therelevant parties to take action.

Hence, to drive continuous improvement & learning, a reporting systemneeds to deliver feedback & analysis to frontline staff, process owners, branch

or department managers & top management.

The feedback loop to the frontline should be immediate for complaints &complements as is practiced in a number of service businesses wherecomplaints, compliments & suggestions are discussed with the staff.

There are 3 types of service performance reports to provide informationnecessary for service management :

1. A monthly Service Performance update provides process owners withtimely feedback on customer comments. Here the feedback is provided to theprocess manager who can discuss it with service staff.


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Cont.

2. A quarterly service performance review provides process owners &branch or department managers with trends in process performance &service quality.

3. An annual service performance report gives top management arepresentative assessment of the status & long-term trends relating to

customer satisfaction with the firms services.

The reports should be short & reader friendly, focusing on key indicators.

Documents

Customer Feedback f