Think about the last time you received a less than satisfactory service-Did you complain? Why/Why not???

SERVICE RECOVERY & CUSTOMER FEEDBACK Chapter 13: Lovelock Chapter 8: Zeithaml SERVICE RECOVERY & CUSTOMER FEEDBACK

Reliability is Critical in Service but… In all service contexts, service failure is inevitable. Service failure occurs when service performance that falls below a customer’s expectations in such a way that leads to customer dissatisfaction. Service recovery refers to the actions taken by a firm in response to service failure.

Complaining Customers: The Tip of the Iceberg

Have you ever experienced any outstanding service recovery????

Service Recovery Paradox “A good recovery can turn angry, frustrated customers into loyal ones. ..can, in fact, create more goodwill than if things had gone smoothly in the first place.” (Hart et al.) HOWEVER: only a small percent of customers complain service recovery must be SUPERLATIVE only with responsiveness, redress, and empathy/courtesy only with tangible rewards service recovery is expensive

Service Recovery Paradox The service recovery paradox is more likely to occur when: the failure is not considered by the customer to be severe the customer has not experienced prior failures with the firm the cause of the failure is viewed as unstable by the customer the customer perceives that the company had little control over the cause of the failure Conditions must be just right in order for the recovery paradox to be present!

Customer Complaint Actions Following Service Failure

Why Do Customers Complain? Vent their anger Obtain compensation Help to improve the service Create an impression of being more intelligent and discerning

Why Don’t Customers Complain? Don’t know who to complain to Don’t think it will do any good-waste of time May doubt their own subjective evaluation May accept part of the blame May want to avoid confrontation May lack expertise Personal relevance of the problem

Type of Complainers Passives Voicers Irates Activists Least likely to take any action. Often doubt the effectiveness of complaining. Voicers Actively complain to the service provider. Less likely to spread negative word of mouth, to switch patronage or to go to third parties with their complaints. Irates Less likely to give the service provider a second chance. More likely to switch to a competitor. More likely to engage in negative word of mouth. Activists above average propensity to complain on all dimensions. In extreme cases can become terrorists.

What Drives Customers to Switch? Core Service Failure Service Mistakes Billing Errors Service Catastrophe Service Encounter Failures Uncaring Impolite Unresponsive Unknowledgeable Response to Service Failure Negative Response No Response Reluctant Response Pricing High Price Price Increases Unfair Pricing Deceptive Pricing Inconvenience Location/Hours Wait for Appointment Wait for Service Competition Found Better Service Service Failure/Recovery Value Proposition Service Switching Involuntary Switching Customer Moved Provider Closed Ethical Problems Cheat Hard Sell Unsafe Conflict of Interest Others Source: Adapted from Susan M. Keaveney, “Customer Switching Behavior in Service Industries: An Exploratory Study,” Journal of Marketing 59 (April 1995), pp. 71–82.

Causes Behind Service Switching

Components of an Effective Service Recovery System

Effective Service Recovery Service Recovery should be Proactive Planned Trained Empowered

Service Recovery Strategies

Guidelines for Effective Problem Resolution Act fast Admit mistakes but don’t be defensive Understand problem from customer’s viewpoint Don’t argue Acknowledge customer’s feelings Give benefit of doubt Clarify steps to solve problem Keep customers informed of progress Consider compensation Persevere to regain goodwill

Eight Most Common Remedies Customers Seek with Serious Problems Have the product repaired or service fixed Be reimbursed for the hassle of having experienced a problem Receive a free product or service in the future Explanation by the firm as to what happened Assurance that the problem will not be repeated A thank you for the customer’s business An apology from the firm An opportunity for the customer to vent his or her frustrations to the firm

Service Guarantees guarantee = an assurance of the fulfillment of a condition 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 form of reparation will be undertaken by the firm for tangible products, a guarantee is often done in the form of a warranty services are often not guaranteed cannot return the service service experience is intangible (so what do you guarantee?)

The Hampton Inn 100 Percent Satisfaction Guarantee

Characteristics of an Effective Service Guarantee Unconditional the guarantee should make its promise unconditionally – no strings attached Meaningful the firm should guarantee elements of the service that are important to the customer the payout should cover fully the customer’s dissatisfaction Easy to Understand and Communicate customers need to understand what to expect employees need to understand what to do Easy to Invoke and Collect the firm should eliminate hoops or red tape in the way of accessing or collecting on the guarantee

Types of Service Guarantees 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 – like the full-satisfaction, adding explicit minimum performance standards on important attributes

British Airways Guarantee

Why a Good Guarantee Works forces company to focus on customers sets clear standards generates feedback forces company to understand why it failed builds “marketing muscle”

Does everyone need a service guarantee? Reasons companies might NOT want to offer a service guarantee: existing service quality is poor guarantee does not fit the company’s image too many uncontrollable external variables fears of cheating or abuse by customers costs of the guarantee outweigh the benefits customers perceive little risk in the service customers perceive little variability in service quality among competitors

Building a Customer Feedback System Total market surveys Post-transaction surveys Employee surveys/panels Focus groups Mystery shopping Complaint analysis

You ordered steak but the meat was raw You ordered steak but the meat was raw. What would be an effective service recovery if you were dining out in: Time Out Steak House The Westin