Complaint Handling and Service Recovery

Think of a time when, as a customer, you had a particularly satisfying (or dissatisfying) interaction with service provider. When did the incident happen? What specific circumstances led up to this situation? Exactly what did the employee (or firm) say or do? What resulted that made you feel the interaction was satisfying or (or dissatisfying)? What could or should have been done differently?

Complaints Customers have a low propensity to complain. Only about 4 % of customers with problems report those problems as complaints. It is not important whether or not a service failure actually occurred, but rather, if it was perceived by the customer to have occurred.

Impact of Service Failure The average customer who experiences a service failure tells nine or ten others about the failure.

Customer Response Following Service Failure Service Failure Do NothingTake Action Stay with Provider Switch Providers Complain to Provider Complain to Family & Friends Complain to Third Party Stay with Provider Switch Providers

Entry Points for Complaints Employees serving customers face-to-face or by phone Intermediaries acting for original supplier Managers contacted by customers at head/regional office Complaint cards mailed or placed in special box Complaints passed to company by third-party recipients –consumer advocates –trade organizations –legislative agencies –other customers

Components of an Effective Service Recovery System Do the Job Right the First Time Identify Service Complaints Resolve Complaints Effectively Learn from Recovery Effective Complaint Handling Increased Satisfaction and Loyalty -Conduct Research -Monitor Complaints -Develop Complaints as Opportunity Culture Develop Effective Systems and Training in Complaints Handling Conduct Root Cause Analysis Feedback

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

Causes Behind Service Switching Service Switching Behavior High Price Price Increases Unfair Pricing Deceptive Pricing Pricing Location/Hours Wait for Appointment Wait for Service Inconvenience Service Mistakes Billing Errors Service Catastrophe Core Service Failure Uncaring Impolite Unresponsive Unknowledgeable Service Encounter Failures Negative Response No Response Reluctant Response Response to Service Failure Found Better Service Competition Cheat Hard Sell Unsafe Conflict of Interest Ethical Problems Customer Moved Provider Closed Involuntary Switching Source: Sue Keaveney

Unhappy Customers’ Repurchase Intentions 82% 54% 19% 9% Complaints Resolved Quickly Complaints Resolved Complaints Not Resolved Unhappy Customers Who Don’t Complain Unhappy Customers Who Do Complain 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.

Service Guarantees guarantee = an assurance of the fulfillment of a condition (Webster’s Dictionary) for products, guarantee 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?)

Service Guarantees Help Promote and Achieve Service Loyalty Force firms to focus on what customers want Set clear standards Compensation highlights cost of service failures Require systems to get, act on, customer feedback Reduce risks of purchase and build loyalty Builds “marketing muscle”

Characteristics of an Effective Service Guarantee

Reasons companies do NOT offer guarantees: –too many uncontrollable external variables –fears of cheating by customers –costs of the guarantee are too high

Over-compensating concerns? Service providers should probably be more concerned about under-compensating complaining customers than over-compensating them. Track the customers who are given compensation for reported complaints.

Service Guarantees service guarantees work for companies who are already customer-focused effective guarantees can be BIG deals - they put the company at risk in the eyes of the customer customers should be involved in the design of service guarantees the guarantee should be so stunning that it comes as a surprise -- a WOW!! factor “it’s the icing on the cake, not the cake”

Recovery Service providers need to decide on policy for service recovery. Will all customers with a particular type of problem be given the same service recovery?

Recovery Do Don’t Acknowledge problem Apologize Take responsibility Explain causes Lay out options Compensate/ upgrade Ignore customer Blame customer Leave customer to “fend for him/herself” Downgrade Act as if nothing is wrong Pass the buck

Early Communication Early Recovery The service company must decide when and how to appropriately open communication with customers in the service process. Communication with the customer throughout the service delivery process can decrease the magnitude and expense of service failures Failure to communicate early in the service process can allow small customer concerns to grow into large problems. If complaints are resolved in a timely manner, 95% of the time the customer will return.

Ways to Increase Customer Communication Actively solicit feedback. Offer a channel of communication that is open to customers through the service process.

Retaining Customers When Things Go Wrong Track and anticipate recovery opportunities- The customer who complains is your friend? Take care of customer problems on the front line. Solve problems quickly. Empower the front line to solve problems. Learn from service recovery.

Effective Recovery Skills Hear the customer’s problems. Improvise Bend the rules from time-to-time Employees must have the authority, usually within certain defined limits, to solve the customer’s immediate problem.

When service customers have been disappointed on the first try, doing it right the second time is essential to maintaining customer loyalty

OOPS! Service Recovery

Discussion Develop guidelines for an effective complaint handling policy for a service organization in the industry you selected to study this session.

Summary of 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