service recovery

SERVICE RECOVERY

Service failures : Service performances that fall below customer expectations and they bring about negative feelings and responses from customers

Service recovery refers to the actions taken by an organizations in response to a service failure

Reasons ?

Left unfixed, failures can result in customers leaving, spreading bad word-of-mouth and even challenging the organization through consumer rights organizations

Service Recovery Defined

Don’t believe that a solution will be found Too much hassle Don’t want employee to lose the job Have not received any satisfactory response

to previous complaints Fear of retribution Don’t know who to complain to/how to

complain Didn’t get around to it They don’t like complaining

Slide © by Lovelock, Wirtz and Chew 2009

Essentials of Services Marketing Chapter 1 -

Customer Response Categories to Service Failures



Understanding Customer Responses to Service Failure

Why do customers complain?

Obtain compensation

Vent their anger

Help to improve the service

Altruistic reasons What proportion of unhappy customers complain? 5-10% 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? Procedural, interactional, and outcome justice

Dimensions of Perceived Fairness in Service Recovery Fairness in Service Recovery Processcess

Outcome Fairness◦ Customers expect outcomes or compensation, that match the level of

their dissatisfaction. ◦ Compensation in form of money, an apology, future free services,

reduced charges repairs or/ and replacements◦ Equity in exchange – they want to feel that the company has “paid” for

its mistakes. ◦ Equality-similar to other customers. Procedural FairnessCustomer expect fairness in terms of policies and timeliness of complaint process.

Interactional Fairness◦ Customers expect to be treated politely, with care and honesty ◦ This form of fairness can dominate the others

They Complain, What Do Customers Expect?

Services MarketingServices Marketing

Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e Chapter 13 –

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

95%

70%

46%

37%

82%

54%

19%

9%

Complaints Resolved Quickly

Complaints Resolved

Complaints Not Resolved

Minor complaints ($1-$5 losses) Major complaints (over $100 losses)

Unhappy Customers Who Don’t Complain

Unhappy Customers Who Do Complain

Percent of Customers Who Will Buy Again

Source: Adapted from data reported by the Technical Assistance Research Program.

Unhappy Customers’ Repurchase Intentions

These four categories of complainers types will be relatively consistent and each type can be found in all companies and industries:-Passive-These customers are least likely to take any action. Dissatisfied but don’t tell theorganization either because itis not in their personality tocomplain or because theybelieve that complaining willnot have any desired results.

Voicers- These customers actively complain to the service provider but they are less likely to spread negative word of mouth

Irates-These consumers are more likely to engage in negative word of mouth to friends and relatives and to switch providers than are others.

Activists-These consumers are characterized by above average propensity to complain on all dimensions.



Dealing with Complaining Customers and Recovering from Service Failure

Take complaints professionally and not personally

Be prepared to deal with angry customer who may behave in an insulting way to service personnel who may not be at fault

Take the perspective that customer complaints allow firm a chance to

Correct problems,

Restore relationships

Improve future satisfaction for all

Develop effective service recovery procedures

Service Recovery Service Recovery StrategiesStrategies

Fail-safe the

Service

Welcome and

Encourage Complaints

Act Quickly

TreatCustomers

Fairly Learn form Recovery

Experiences

Learn from Lost Customers

Service Recovery

Do it Right the First Time!!◦ Recovery is unnecessary, customers get what they expect, and the costs

of redoing the service and compensating of errors can be avoided

◦ Create a culture of “zero defections”

Welcome and Encourage Complaints◦ Complaints should be anticipated, encouraged and tracked

◦ A complaining customer should truly be viewed as a friend

◦ Ways to encourage and track complaints – satisfaction surveys, lost customers research, frontline discovering the sources of dissatisfaction

◦ Teach customers how to complain

◦ Use technology to simplify complaining process – Toll free numbers, e-mail

Act Quickly◦ This requires systems and procedures that allow quick action and

empowered employees

Treat Customers Fairly◦ Fairness in terms of outcome they receive, the process by which

recovery takes place, and the interpersonal treatment

Learn from Recovery Experience◦ Conduct root cause analysis to modify or eliminate processes

Learn from Lost Customers◦ Learn from customers who defect or decide to leave

◦ Its essential to prevent the same mistakes and losing more customers in future

Copyright © 2008 Pearson Education Canada Services Marketing, Canadian Edition Chapter 13- 18

Components of an Effective Service Recovery System

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 research

Monitor complaints

Develop “Complaints as opportunity” culture

Develop effective system and training in complaints handling

Conduct root cause analysis

=+

Close the loop via feedback

Source: For full source information, see Services Marketing textbook, page 386.


Strategies to Reduce Customer Complaint Barriers

Complaint Barriers for Dissatisfied Customers

Strategies to Reduce These Barriers

Inconvenience

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

A guarantee is a pledge or assurance that a product is offered by a firm will perform as promised and if not then some form of compensation will be undertaken by the firm.



How to Design Service Guarantees

Unconditional. No strings attached Easy to understand and communicate. customers and employees

know what to expect and what is expected of them Meaningful. ]aspect of service that is important to the customer] Easy to invoke. The customer should not have to “jump through

hoops” to invoke the guarantee as this causes further

dissatisfaction.



Types of Service Guarantees

“The guarantee counts most in services” It forces:

◦ Provision of error free service due to promise◦ Focus on knowing what the customer really

wants◦ Increases volume of customers and lifetime

value to firm Reduces risk therefore:

◦ Encourages purchase◦ Positive word of mouth◦ Customer loyalty◦ Reduced price sensitivity to service



Is it Always Suitable to Introduce a Guarantee?

It may not be appropriate to introduce guarantees when

Companies have a strong reputation for service excellence

Company does not have good quality level

Quality cannot be controlled because of external forces

Consumers see little financial, personal, or physiological risk associated with the purchase

“Customers value reliability over all other dimensions”

Statement explaining the service the customer may expect (the promise) and what the company will do if it fails to deliver (the payout).

Promise of consistency compared to other services

Cover customer costs Repeat business Assure customers subsequent service will

be higher quality => change attitudes

service recovery

Documents

lossesunhappy customers

complainpercent of customers

service recovery fairness

dont unhappy customers

service failuresslide

service failurewhy

service performances

service failurereasons