TYPES OF SERVICE FAILURES Group 1 Failures Core service failures slow service unavailable service other core service failures

TYPES OF SERVICE FAILURES Group 2 Failures Responses to implicit/explicit requests special needs customer preferences customer error disruptive others

TYPES OF SERVICE FAILURES Group 3 Failures Unprompted/Unsolicited employee actions level of attention unusual action cultural norms gestalt adverse conditions

TYPES OF SERVICE FAILURES (new category) Group 4 Failures (Employee-reported incidents) Problematic customer behavior drunkenness verbal and physical abuse breaking company policies or laws uncooperative customers

Service Recovery The Impact of Service Failure and Recovery How Customers Respond to Service Failures Customers’ Recovery Expectations Switching versus Staying Following Service Recovery Service Recovery Strategies Service Guarantees

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

Unhappy Customers’ Repurchase Intentions

Customer Complaint Actions Following Service Failure

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, 1998) HOWEVER: only a small percent of customers complain only with responsiveness, redress, and empathy/courtesy only with tangible rewards even though service recovery can improve satisfaction, it has not been found to increase purchase intentions or perceptions of the brand 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!

Causes Behind Service Switching

Service Recovery Strategies

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

Customer Satisfaction with Timeliness of Firm Responses to Service Failures

SERVICE FAILURES & RECOVERY STRATEGIES: THE RESTAURANT INDUSTRY

SERVICE FAILURES: THE RESTAURANT INDUSTRY Group 1 failure categories (44.4%) Product defects (20.9%) food was described as cold, soggy, raw, burnt, spoiled, or containing inanimate objects such as hair, glass, bandages, bag ties, and cardboard. Slow/unavailable service (17.9%) waiting excessively, not being able to find assistance

SERVICE FAILURES: THE RESTAURANT INDUSTRY Facility problems (3.2%) cleanliness issues such as bad smells, dirty utensils, and animate objects (e.g., insects) found on the table or in the food Unclear policies (1.6%) policies that were perceived as unfair by the customer, such as coupon redemption, or forms of payment Out-of-stock conditions (.8%) inadequate supply of menu items

SERVICE FAILURES: THE RESTAURANT INDUSTRY Group 2 failure categories (18.4%) food not cooked to order (15.0%) requested food be prepared in a particular manner and restaurant failed to meet request seating problems (3.4%) seating nonsmokers in smoking section and vice versa lost or disregarded reservations requests for special tables that were denied seating among unruly and disruptive customers

SERVICE FAILURES: THE RESTAURANT INDUSTRY Group 3 failure categories (37.2%) inappropriate employee behavior (15.2%) rudeness, inappropriate verbal exchanges, and poor attitudes wrong Orders (12.6%) delivery of the incorrect food item, either to the table, or in the case of fast food, in packaging so that the mistake was not discovered until the customer had left the premises

SERVICE FAILURES: THE RESTAURANT INDUSTRY Group 3 failure categories (37.2%) lost orders (7.5%) situations in which the customer’s order was lost and never fulfilled mischarged (1.9%) being charged for items that were never sent, being charged incorrect prices for items that were ordered, and providing incorrect change

SERVICE FAILURES: THE RESTAURANT INDUSTRY Recovery Strategies (frequency, retention) Replacement (33.4%, 80.2%) Free Food (23.5%, 89.0%) Nothing (21.3%, 51.3%) Apology (7.8%, 71.4%) Correction (5.7%, 80.0%) Discount (4.3%, 87.5%) Manager Intervention (2.7%, 88.8%) Coupon (1.3%, 80.0)%

Characteristics of an Effective Service Recovery 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

Benefits of Service Recovery 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 retain loyalty. Information generated through the guarantee can be tracked and integrated into continuous improvement efforts. Employee morale and loyalty can be enhanced as a result of having a service guarantee in place. A service guarantee reduces customers’ sense of risk and builds confidence in the organization.

Why a Good recovery 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