Service Recovery Chapter 8

Why is Service Recovery so Important?

Why do some customers never complain?

Unhappy Customers’ Repurchase Intentions Unhappy Customers Who Don’t 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) Source: Adapted from data reported by the Technical Assistance Research Program.

Customer Complaint Actions Following Service Failure Figure 8.3

Types of Complainers Passives – doubt the effectiveness of complaining Voicers – actively complain, but may not spread negative word of mouth Irates – will engage in negative word of mouth communication Activists – tend to complain to providers, friends and to third parties

Classroom Discussion What do the following Quotes mean? “A complaint is a gift” “The customer who complains is your friend” What are some of your personal service recovery experiences?

Service Recovery Strategies Figure 8.7 Quickly Act Encourage and Track Complaints Provide Adequate Explanations Service Recovery Strategies Fail-safe the Service Treat Customers Fairly Cultivate Relationships with Customers Learn from Lost Customers Learn from Recovery Experiences

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?)

Characteristics of an Effective Service Guarantee Exhibit 8.5 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 Source: Christopher W.L. Hart, “The Power of Unconditional Guarantees,” Harvard Business Review, July-August, 1988, pp. 54-62.

Mini Case 1 – pages 515-516

Exercise 2 – pages 512-513