Handling Customer Complaints and Managing Service Recovery Chapter 5 Handling Customer Complaints and Managing Service Recovery

Chapter 5 Objectives To outline the courses of action open to a dissatisfied customer Explain the factors influencing complaint behaviour Identify the principles of an effective service-recovery system Explain the techniques for identifying the root cause of service failures

Customer Satisfaction Customer satisfaction is linked not only to fault free service, but also to what transpires when something does go wrong. First law of quality might be: “do it right the first time” - but service failure does occur.

Figure 5.1: Customer Satisfaction Formula Doing the Effective Increased job Right the first time complaint customer satisfaction & loyalty handling + =

Figure 5.2 How Customers Handle Dissatisfaction Seek redress directly from business firms Take some form of public action Take legal action to obtain redress Take some action private, or govt. agencies Dissatisfaction occurs Take some form of private action Warn friends about the product and/or seller Decide to stop buying product or brand or boycott seller Take no action 5

Customer Response to Service Failure Do nothing, but the service provider’s reputation is diminished Complain to the service firm Take action with a third party such as ACCC Defect and do not use the provider again

Complaints as Research Data Responsive organisations look at complaints in two ways: As a stream of market research information highlighting where improvements are needed Series of individual customer problems which need to be solved

Capturing Complaints Complaints may be made through: the service provider’s own employees intermediary organisations acting on behalf of the original supplier managers who normally work backstage but are contacted by a customer seeking higher authority suggestions or complaint cards mailed or placed in a special box complaints to third parties

Complaining Behaviour in South-East Asia Asian consumers may be less willing to send written complaints than others Asian consumers are less likely to complain about poor service Service failures are more likely to be tolerated Individuals may restrain their own self interest if it would disturb others

SOCAP-TARP 1995 Study 57% of respondents had experienced at least one problem with products/services in the past 12 months 73% with a serious problem took some action to have it corrected (this varied between 49% and 93% depending on the industry and nature of problem). Only 34% who took action were satisfied with the way the problem was resolved 89% of those who were not happy with their complaint outcome said they would not deal with the same firm again

SOCAP-TARP 1995 Study (cont’d) Complaining households made an average 3.4 contacts in an effort to have their most serious problem resolved Satisfaction declined the further up the hierarchy the customer had to go to get it resolved On average, a dissatisfied complainant tells nine other people, while a satisfied complainant tells half as many

Factors Influencing Complaining Behaviour Level of dissatisfaction i.e. does it seem worth it? Cost of complaining e.g. time and effort Benefits of complaining i.e. value of the outcome? Likelihood of resolution i.e. belief that the problem will/can be solved satisfactorily

Factors Influencing Complaining Behaviour Available resources for making a complaint Access to a means of registering a complaint Knowing who is to blame for the problem Demographics e.g. younger and better educated people are more likely to complain

Standards for Complaint Handling “ The overriding aim of any complaints handling process is to turn dissatisfied consumers into satisfied consumers. This is best done by speedy and effective remedies at the first point of contact.”

Figure 5.4 Impact of response time on satisfaction with action taken on most serious problems % Exceeded/satisfied expectations with action taken 70 60 50 40 30 20 10 56% All respondents 39% 35% 33% 34% 25% 21% Under 24 hrs 8% Within 48 hrs 8% Immedi- ately 18% 3 -14 days 29% 15-28 days 8% Over 28 days 29% Perceived response time

Figure 5.5 Impact of number of contacts made to get problem resolved on satisfaction % Exceeded/satisfied expectations with action taken 70 60 50 40 30 20 10 55% All respon- dents 37% 34% 27% 18% 1 27% 2 19% 3-4 30% 5+ 24% Number of contracts (Average: 3.4)

Impact of problem experience/complaining Figure 5.6 Impact of problem experience/complaining on Customer loyalty for all products/services % Exceeded/satisfied expectations with action taken 100 95 90 80 70 60 50 40 30 20 10 83 46 23 % 23 % 10 No problem Exceeded expectations Satisfied complainants Non- complainant Mollified Dissatisfied 17

Increased satisfaction Figure 5.7 Components of an effective service-recovery system Effective complaint handling = + Increased satisfaction & loyalty Do the job right the first time Identify service complaints Monitor complaints Develop ‘complaints as opportunity’ culture Resolve complaints effectively Develop effective systems & training in complaints handling Learn from the recovery experience Conduct root cause analysis Feedback 18

Service Recovery A crucial element in achieving a satisfied customer A true test of the organisation’s commitment to the customer Justice considerations have a large impact on how customers evaluate a provider’s recovery efforts

Figure 5.8 The role of justice in the complaint handling procedure Justice Considerations Procedure Interaction Outcome Complaint handling process Source: S.Tax and S.W. Brown, Handbook of Services Marketing and Management, © 2000, Reprinted by permission of Sage Publications Inc.

The Role of Justice in the Complaint Handling Procedure Procedural justice concerns the policies and rules that comprise the complaining process Interactional justice concerns the behaviour of the firm’s representatives during the complaint resolution process Outcome or distributive justice relates to how fairly consumer’s are compensated for their complaints

Principles of Effective Service Recovery Top management commitment ‘Complaints as opportunity’ culture Training and empowerment Ownership of complaint

Guidelines for Effective Complaint Resolution Act fast: time is of the essence to achieve full recovery Apologise but do not be defensive: it is important to impress on the consumer that the problem is an infrequent occurrence Show understanding for the customer’s viewpoint

Guidelines for Effective Complaint Resolution Do not argue with customers: gather facts to reach a mutually acceptable solution Acknowledge the customer’s feelings to help build rapport Give customers the benefit of the doubt Clarify the steps needed to solve the problem

Guidelines for Effective Complaint Resolution Keep customers informed of progress: uncertainty breeds anxiety Consider compensation: this may reduce further complaints and legal action Persevere to regain customer goodwill: outstanding recovery efforts can build loyalty and referrals

Learning From Experience Blueprinting: understand the processes behind service delivery to identify potentially weak links Control charts: displaying performance as measured by specific criteria over a period of time

Learning From Experience Fishbone diagram: a cause and effect analysis Pareto analysis: 80/20 rule