8 Service Recovery The Impact of Service Failure and Recovery Chapter Service Recovery 8 The Impact of Service Failure and Recovery How Customers Respond to Service Failures Customers’ Recovery Expectations Service Recovery Strategies Service Guarantees

Chapter 8 - Service Recovery Service recovery: actions taken in response to a ___________________ What do you do when you receive poor service?

Unhappy Customers’ Repurchase Intentions (Figure 8.1) Unhappy Customers Who Don’t Complain 9% Unhappy Customers Who Do Complain 19% Complaints Not Resolved 54% Complaints Resolved 82% Complaints Resolved Quickly Percent of Customers Who Will Buy Again after a Major complaint (over $100 losses)

Figure 8.3 Customer Complaint Actions Following Service Failure

Recovery Paradox According to the recovery paradox, service failures should be encouraged Fallacy of Recovery Paradox Fixing mistakes is ______________ Service failure may be too much to be ________ by any recovery effort Best strategy: ___________________________

Response to Failures If the service failure is really important, if it has critical consequences for the customer, or if the customer has much ego involvement in the service experience, he is more likely to complain (p.219) http://www.hyperorg.com/misc/DoubleTreeShow_files/frame.html

Customers’ Recovery Expectations (p. 221-222) An apology An explanation as to what happened An assurance problem would not be repeated An opportunity for customer to vent his frustrations If firm does nothing about service failure, 86 percent of customers are dissatisfied. If firm provides apology, percentage of dissatisfied customers drops to 20 percent

When They Complain, What Do Customers Expect? _________ fairness: outcomes, or compensation should match the level of their dissatisfaction: “Their refusal to refund our money or make up for inconvenience and cold food was inexcusable”

When They Complain, What Do Customers Expect? __________ fairness: fairness in terms of policies, rules, and timeliness to the complaint process: Ex- “They should have assisted me with the problem instead of giving me a phone number to call”

When They Complain, What Do Customers Expect? ______________ fairness: the interpersonal treatment received during the complaint process “The receptionist was very rude; she made it seem like the doctor’s time was important but mine was not.”

Service Recovery Strategies Fail-Safe the Service – Do It Right the First Time Welcome and Encourage Complaints – complaints should be anticipated, encouraged, and tracked: Act Quickly – e.g., empower employees Provide Adequate Explanations – honest, sincere, and not manipulative

Service Recovery Strategies Treat Customers Fairly Cultivate Relationships with Customers Learn from Recovery Experiences: Learn from Lost Customers:

Service Guarantees services are often __________________ guarantee = an assurance of the fulfillment of a condition (Webster’s Dictionary) 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 __________________ cannot return the service service experience is ______________________

Exhibit 8.6 Characteristics of an Effective Service Guarantee Unconditional The guarantee should make its promise unconditionally - no strings attached. Meaningful It should guarantee elements of the service that are _________ to the customer. The payout should cover fully the customer's dissatisfaction. Easy to Understand and Communicate For customers - they need to understand what to expect. For employees - they need to understand what to do. Easy to Invoke and Collect There should not be a lot of ________________ in the way of accessing or collecting on the guarantee.

When to (not use) Service Guarantee Existing service quality in the service is poor Service quality is truly _______________ ______ of the guarantee outweigh the benefits Customers perceive little risk in the service Little perceived ___________ in service quality among competitors