Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 13 - 1
Chapter 13: Achieving Service Recovery and Obtaining Customer Feedback
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 13 - 2
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 - 3
Customer Complaining Behavior
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 13 - 4
American Customer Satisfaction Index:Selected Industry Scores, 2006
Express mail,
parcels
Cars, vans,
etc.
Life insurance
Fast food
RestaurantsBroadcasting
(natl. news)
Industry:
Soft drinks
Comm
. banksHotels
Personal
computers
AirlinesHospitals
83 83 81 75 75 75 7765
74 7769
0102030405060708090
100
-3.5% 2.5% 2.5% -7.4% 1.4% 0.0% -1.3% -9.7% -4.1% 11.6% -10.4%% Change 2006 vs. 2005
Score (Max = 100)
Source: www.theacsi.org, Accessed 9.11.2006
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 13 - 5
Customer Response Categories to Service Failures (Fig 13.1)
Service Encounter is Dissatisfactory
Take some form of Public Action
Take some form of Private
Action
Take No Action
Complain to the service firm
Complain to a third party
Take legal action to seek redress
Defect (switch provider)
Negative word-of-mouth
Any one or a combination of these responses is possible
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 13 - 6
Understanding Customer Responses to Service Failure Why do customers complain?
What proportion of unhappy customers complain?
Why don’t 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 - 7
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 - 8
Three Dimensions of Perceived Fairness in Service Recovery Process (Fig 13.3)
Procedural Justice
InteractiveJustice
OutcomeJustice
Complaint Handling and Service Recovery Process
Justice Dimensions of the Service Recovery Process
Customer Satisfaction with Service Recovery
Source: Tax and Brown
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 13 - 9
Customer Responses to Effective Service Recovery
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 13 - 10
How Complaint Resolution AffectsCustomer Retention Rates
9%
37%
19%
46%54%
70%82%
95%
0102030405060708090
100
Customer did notcomplain
Complaint wasnot resolved
Complaintwas resolved
Complaint wasresolved quickly
Problem cost > $100 Problem cost $1–$5
Percent of UnhappyCustomers Retained
Source: Claes Fornell, Birger Wernerfelt, “A Model for Customer Complaint Management,” Marketing Science, Vol. 7, No. 3 (Summer, 1988), pp. 287–298
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 13 - 11
Importance of Service Recovery
Plays a crucial role in achieving customer satisfaction
Tests a firm’s 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 - 12
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 firm’s ability to delight customer with recovery efforts
Best strategy: Do it right the first time
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 13 - 13
Principles of Effective Service Recovery Systems
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 13 - 14
Components of an Effective Service Recovery System (Fig 13.4)
Do the job right the first time
Effective Complaint Handling
Identify Service Complaints
Resolve Complaints Effectively
Learn from the Recovery
Experience
Increased Satisfaction and
Loyalty
Conduct researchMonitor complaintsDevelop “Complaints as opportunity” culture
Develop effective system and training in complaints handling
Conduct root cause analysis
=+
Close the loop via feedback
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 13 - 15
Strategies to Reduce Customer Complaint Barriers (Table 13.1)
Complaint Barriers for Dissatisfied Customers Strategies to Reduce These
BarriersInconvenience Hard to find right complaint
procedure Effort involved in complaining
Put customer service hotline numbers, e-mail and postal addresses on all customer communications materials
Doubtful Pay Off Uncertain if action will be taken
by firm to address problem
Have service recovery procedures in place, communicate this to customers
Feature service improvements that resulted from customer feedback
Unpleasantness Fear of being treated rudely Hassle, embarrassment
Thank customers for their feedback
Train frontline employees Allow for anonymous feedback
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 13 - 16
How to Enable Effective Service Recovery
Be proactive—on 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 - 17
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 - 18
Service Guarantees
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 13 - 19
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 loyalty
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 13 - 20
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 - 21
Types of Service Guarantees Table 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 attributes
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 13 - 22
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 - 23
Discouraging Abuse and Opportunistic Behavior
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 13 - 24
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 fraud—so 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
providers
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 13 - 25
Learning from Customer Feedback
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 13 - 26
Key Objectives of Effective Customer Feedback Systems
Assessment and benchmarking of service quality and performance
Customer-driven learning and improvements
Creating a customer-oriented service culture
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 13 - 27
Customer Feedback Collection Tools
Total market surveys Post-transaction surveys Ongoing customer surveys Customer advisory panels Employee surveys/panels Focus groups Mystery shopping Complaint analysis Capture service operating
data
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 13 - 28
Key Customer Feedback Collection Tools:Strengths and Weakness (Table 13.3)
COLLECTION TOOLS FIRM PROCESSTRANSACTION
SPECIFIC ACTIONABLEREPRESENTATIVE
RELIABLE
POTENTIAL
FOR
SERVICE
RECOVERY
FIRST
HAND
LEARNINGCOST
EFFECTIVENESS
LEVEL OF MEASUREMENT
TOTAL MARKET SURVEY (INCLU. COMPETITORS)
ANNUAL SURVEY ON OVERALL SATISFACTION
TRANSACTIONAL SURVEY
SERVICE FEEDBACK CARDS
MYSTERY SHOPPING
UNSOLICITED FEEDBACK (e.g., COMPLAINTS)
FOCUS GROUP DISCUSSIONS
SERVICE REVIEWS
Source: Adapted from Jochen Wirtz and Monica Tomlin, “Institutionalizing Customer-Driven Learning Through Fully Integrated Customer Feedback Systems.” Managing Service Quality,10, no.4 (2000): p. 210.
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 13 - 29
Entry Points for Unsolicited Feedback
Frontline employees Intermediaries acting for original supplier Managers contacted by customers at head/regional
office Complaint cards deposited in special box or mailed Telephone or e-mail Complaints passed to company by third-party
recipients Consumer advocates Trade organizations Legislative agencies
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 13 - 30
Summary of Chapter 13: Service Recovery and Customer Feedback (1)
When customers are dissatisfied, they can Take some form of public action Take some form of private action Take no action
To understand customer responses to service failures, some questions to ask are: Why do customers complain? What proportion of unhappy customers complain? Why don’t unhappy customer 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 - 31
Summary of Chapter 13: Service Recovery and Customer Feedback (2)
Effective service recovery can lead to customer loyalty
The service recovery paradox does not always hold true—better to get it right the first time
Components of an effective recovery system include: Doing it right the first time Effective complaint handling Identifying service complaints Resolving complaints effectively Learning from the recovery experience
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 13 - 32
Summary of Chapter 13: Service Recovery and Customer Feedback (3)
Guiding principles for effective service recovery include: Make it easy for customers to give feedback Enable effective service recovery Focusing on how generous compensation should be Dealing with complaining customer
Issues to consider in having services guarantees are: Power of service guarantees How to design service guarantees Is full satisfaction the best a firm can guarantee? Is it always appropriate to introduce a service guarantee?
To discourage abuse and opportunistic behavior, we need to deal with customer fraud
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 13 - 33
Summary of Chapter 13: Service Recovery and Customer Feedback (4)
We can learn from customer feedback—key objectives: Assessment and benchmarking of service quality and performance Customer-driven learning and improvements Creating a customer-oriented service culture
A mix of customer feedback collection tools can help to deliver needed information to firms Total market surveys, annual survey, and transactional surveys Service feedback cards Mystery shopping Unsolicited customer feedback Focus group discussions and service reviews Capture unsolicited feedback
Feedback must be analyzed, reported, disseminated, and used