Service Recovery

Consider this situation…… I am currently staying at a very nice hotel in South India and actually having a pleasant stay but I must relate to you my experience when I checked into the hotel, as it is a typical example of customer service management failure. I am currently in my third room since arriving! I arrived at the hotel check in after an early flight arrival and completed all the check- in formalities at reception and was assigned my room. I started to unpack before planning to take a much needed shower and a rest. Just as I had finished unpacking, I had a call from reception to say that unfortunately a mistake had been made in giving me the room. My room was actually the room next door and not the room that I was in!

contd…… After about 5 minutes two reception staff arrived at the room and said that they would like me to move next door and would like to show me the room. It was identical! But they were very polite so I agreed to move as I could see that this was causing them some cause for concern – especially after my suggestion that this was pointless ,the other guest could have the other room ,seemed not to resonate with them! Anyway, after settling down in the other room, I had a further knock at the door and was greeted by two other more senior staff members, who were obviously very agitated. They explained that a further mistake had been made and that my room was actually across the other side of the lobby, and that I would have to move again! By this time, I was more that bemused at what was turning out to be quite an entertaining afternoon, so all my belongings were moved again.

Service Failure Service failures are instances where a service is either not performed or is performed poorly Every – even the best – service organization will experience service failures

Failures occur when…….. The service is unavailable when promised It may be delivered late or too slowly The outcome may be incorrect or poorly executed Employees may be rude or uncaring

Service failures…… A restaurant meal served cold, waiting time high Delay in delivery of a package by courier Cancellation of appointment as doctor is unavailable Delay in departure of flight Not responding properly to customer queries

The Customer Complaint Iceberg Figure 10.2 (Source: based on TARP, 1979)

Unhappy Customers’ Repurchase Intentions Unhappy Customers Who Do Not Complain 9% Unhappy Customers Who Do Complain Complaints Not Resolved 19% Complaints Resolved 54% Complaints Resolved Quickly 82% Percent of customers who will buy again after a major complaint (over $100 in losses) Figure 8.1 Source: Adapted from data reported by the Technical Assistance Research Program. ã 2006 - Dwayne D. Gremler

The 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. 1990) HOWEVER: Only a small percent of customers complain Service recovery must be SUPERLATIVE 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 7-9

The 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! 7-10

The service recovery paradox Figure 10.1 (Source: Adapted from Schindlholzer, 2008)

Customer Complaint Actions Following Service Failure 7-12

Types of Complainers Passives: least likely to take any action, say anything to the provider, spread negative WOM, or complain to a third party; doubtful of the effectiveness of complaining Voicers: actively complain to the provider, but not likely to spread negative WOM; believe in the positive consequences of complaining - the service provider’s best friends! 7-13

Types of Complainers Irates: more likely to engage in negative WOM to friends and relatives and to switch providers; average in complaints to provider; unlikely to complain to third parties; more angry, less likely to give provider a second chance Activists: above average propensity to complain on all levels; more likely to complain to a third party; feel most alienated from the marketplace compared to other groups; in extreme cases can become “terrorists” 7-14

The Internet Spreads the Story of Poor Service Recovery 7-15

Service Recovery Strategies 7-16

Fixing the Customer When customers take the time to complain, they generally have high expectations. They expect the company to respond quickly and to be accountable. They expect to be compensated for their grief and for the hassle of being inconvenienced. They expect to be treated nicely in the process! 7-17

Respond Quickly 7-18

Provide Appropriate Communication 7-19

Treat Customers Fairly Outcome fairness Outcome (compensation) should match the customer’s level of dissatisfaction; equality with what other customers receive; choices Procedural fairness Fairness in terms of policies, rules, timeliness of the complaint process; clarity, speed, no hassles; also choices: “What can we do to compensate you…?” Interactional fairness Politeness, care, and honesty on the part of the company and its employees; rude behavior on the part of employees may be due to lack of training and empowerment 7-20

Fixing the Problem After “fixing the customer” the company should address the actual problem that created the poor service delivery in the first place. If the problem is likely to recur for other customers, then the service delivery process may need to be fixed, too. Strategies for fixing the problem include encouraging and tracking complaints, learning from recovery experiences and from lost customers, and making the service fail-safe. 7-21

Service Recovery Customers do not expect you to be perfect. They do expect you to fix things when they go wrong. Donald Porter Senior VP, British Airways

The Hampton Inn 100 Percent Satisfaction Guarantee

Service Guarantees 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 not guaranteed Cannot return the service Service experience is intangible (so what do you guarantee?) 7-24

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 Customers need to understand what to expect Employees need to understand what to do Easy to Invoke The firm should eliminate hoops or red tape in the way of accessing or collecting on the guarantee 7-25