Download ppt - 4517-4379 Lovelock PPT Chapter 13

Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 13 - 1

Chapter 13: Achieving Service Recovery and Obtaining Customer Feedback


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


Customer Complaining Behavior


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

http://www.theacsi.org/


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


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?


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


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


Customer Responses to Effective Service Recovery


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


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


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


Principles of Effective Service Recovery Systems


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


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


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


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?


Service Guarantees


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


How to Design Service Guarantees

Unconditional

Easy to understand and communicate

Meaningful to the customer

Easy to invoke

Easy to collect

Credible


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


The Hampton Inn 100% Satisfaction Guarantee (Fig 13.5)

What are benefits of such a guarantee?

Are there any downsides?


Discouraging Abuse and Opportunistic Behavior


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


Learning from Customer Feedback


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


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


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.


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


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?



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



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



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