SERVICE SERVICE MARKETINGMARKETING

SERVICE RECOVERYSERVICE RECOVERY

Stanley S. Stanley S. RodrickRodrick

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In all service contexts – whether customer service, consumer service or business-to-business services – service failure is inevitable. Failure is expected even for the best firms with the best of intentions, even for those with world class service systems.

To fully understand and retain their customers, firms must know what customers expect when service failures occur and must implement effective strategies for service recovery.

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A Service Failure Service Failure is generally described as service performance that falls below a customer’s expectations in such a way that leads to customer dissatisfaction.

Service Recovery Service Recovery refers to the actions taken by an organization in response to a service failure.

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Failure occurs for all kinds of reasons:

the service may be unavailable when it is promised. it may be delivered late or too slowly the outcome may be incorrect or poorly executed the employees may be rude or uncaring

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Research has shown that resolving customer problems effectively has a strong impact on customer satisfaction, loyalty and bottom-line performance. That is, customer who experience service failures, but are ultimately satisfied based on recovery efforts by the firm, will be more loyal than those whose problems are not resolved.

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An effective service recovery strategy has multiple potential impacts.

it can increase customer satisfaction and loyalty and generate positive word of mouth communication.

a well designed, well documented service recovery strategy also provides information that can be used to improve service as a part of continuous improvement effort.

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Occasionally some businesses have customers who are initially dissatisfied with a service experience and then experience a high level of excellent service recovery, seemingly leading them to be even more satisfied and more likely to repurchase than if no problem had occurred at all; that is they appear to be more satisfied after they experience a service failure than they otherwise would have been.

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The Service Recovery ParadoxService Recovery Paradox is a famous paradox that relates to customer satisfaction with and without a product failure. It states that with a highly effective service recovery, a service or product failure offers a chance to achieve higher satisfaction ratings from customers than if the failure had never happened.

A little bit less academically, this means that a good recovery can turn angry and frustrated customers into loyal customers. In fact it can create even more goodwill than if things had gone smoothly in the first place.

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Service Failure

Dissatisfaction/Negative Emotion

Complaint ActionNo Complaint

Action

Complainto provider

NegativeWord of Mouth

Third-Party Action

Exit/Switch

StayExit/

SwitchStay

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If customers initiate actions following service failure, the action can be of various types. A dissatisfied customer can choose to complain on the spot to the service provider, giving the company the opportunity to respond immediately.

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Complaint to the service provider: This is good for the company, because the company can know about its service failure and can make service recovery; perhaps can reduce any chance for negative word of mouth.

Negative word of mouth can be extremely detrimental for the company because it can reinforce the customer’s feelings of negativism and spread the negative impression to others as well.

Complaint to third party: To different government and non government organization (press, business bureau, consumer society and so on)

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Passives: Passives: This group of customers is least likely to take any action. They are unlikely to say anything to the provider, less likely to spread negative word of mouth and unlikely to complain to a third party. They often doubt the effectiveness of complaining, thinking that the consequences will not merit the time and effort they will spend.

Voicers : Voicers : These customer actively complain to the service provider, but they are less likely to spread negative word of moth, to switch patronage or go to third parties with their complaints.

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Irates: Irates: These customers are more likely to engage in negative word of mouth to friends and relatives and to switch providers than others. They are about average in their propensity to complain to provider. They are unlikely to complain to third parties.

Activists: Activists: These consumers are characterized by above average propensity to complain on all dimensions;they will complain to the provider, they will tell others, and they are more likely than any other group to complain to third parties.

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A guarantee is a particular type of recovery tool. In a business context, a guarantee is a pledge or assurance that a product offered by a firm will perform as promised and if not then some of reparation will be undertaken by the firm.

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Characteristics of Effective Guarantees: Characteristics of Effective Guarantees: UnconditionalUnconditional - the guarantee should make the

promise unconditionally. MeaningfulMeaningful - it should guarantee elements of the

service that are important to the customer. The payout should cover fully the customer’s dissatisfaction.

Easy to Understand Easy to Understand - Customers need to understand what to expect; employees need to understand what to do.

Easy to Invoke Easy to Invoke - Easy to invoke and collect- there should be not be a lot of hoops or red tape in the way of accessing or collecting on the guarantee.

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A good guarantee forces the company to focus on its customers. An effective guarantee sets clear standards for the organization A good guarantee generates immediate and relevant feedback

from customers. When the guarantee is invoked there is an instant opportunity to

recover, thus satisfying the customer and helping to retain loyalty. Information generated through the guarantee can be tracked and

integrated into continuous improvement efforts. Studies of the impact of service guarantees suggest that

employee morale and loyalty can be enhanced as a result. For customers the guarantee reduces their sense of risk and

builds confidence in the organization.

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