1. Handling Customer Complaints and Managing Service Recovery
Chapter 5
Handling Customer Complaints and Managing Service Recovery

2. Chapter 5 Objectives
To outline the courses of action open to a dissatisfied customer
Explain the factors influencing complaint behaviour
Identify the principles of an effective service-recovery system
Explain the techniques for identifying the root cause of service failures

3. Customer Satisfaction
Customer satisfaction is linked not only to fault free service, but also to what transpires when something does go wrong.
First law of quality might be: “do it right the first time” - but service failure does occur.

4. Figure 5.1: Customer Satisfaction Formula
Doing the
Effective
Increased
job Right the first time
complaint
customer satisfaction & loyalty
handling + =

5. Figure 5.2 How Customers Handle Dissatisfaction
Seek redress directly from business firms
Take some form of public action
Take legal action to obtain redress
Take some action
private, or govt. agencies
Dissatisfaction occurs
Take some form of private action
Warn friends about the product and/or seller
Decide to stop buying product or brand or boycott seller
Take no action 5

6. Customer Response to Service Failure
Do nothing, but the service provider’s reputation is diminished
Complain to the service firm
Take action with a third party such as ACCC
Defect and do not use the provider again

7. Complaints as Research Data
Responsive organisations look at complaints in two ways:
As a stream of market research information highlighting where improvements are needed
Series of individual customer problems which need to be solved

8. Capturing Complaints Complaints may be made through:
the service provider’s own employees
intermediary organisations acting on behalf of the original supplier
managers who normally work backstage but are contacted by a customer seeking higher authority
suggestions or complaint cards mailed or placed in a special box
complaints to third parties

9. Complaining Behaviour in South-East Asia
Asian consumers may be less willing to send written complaints than others
Asian consumers are less likely to complain about poor service
Service failures are more likely to be tolerated
Individuals may restrain their own self interest if it would disturb others

10. SOCAP-TARP 1995 Study
57% of respondents had experienced at least one problem with products/services in the past 12 months
73% with a serious problem took some action to have it corrected (this varied between 49% and 93% depending on the industry and nature of problem).
Only 34% who took action were satisfied with the way the problem was resolved
89% of those who were not happy with their complaint outcome said they would not deal with the same firm again

11. SOCAP-TARP 1995 Study (cont’d)
Complaining households made an average 3.4 contacts in an effort to have their most serious problem resolved
Satisfaction declined the further up the hierarchy the customer had to go to get it resolved
On average, a dissatisfied complainant tells nine other people, while a satisfied complainant tells half as many

12. Factors Influencing Complaining Behaviour
Level of dissatisfaction i.e. does it seem worth it?
Cost of complaining e.g. time and effort
Benefits of complaining i.e. value of the outcome?
Likelihood of resolution i.e. belief that the problem will/can be solved satisfactorily

13. Factors Influencing Complaining Behaviour
Available resources for making a complaint
Access to a means of registering a complaint
Knowing who is to blame for the problem
Demographics e.g. younger and better educated people are more likely to complain

14. Standards for Complaint Handling
“ The overriding aim of any complaints handling process is to turn dissatisfied consumers into satisfied consumers. This is best done by speedy and effective remedies at the first point of contact.”

15. Figure 5.4 Impact of response time on satisfaction with action taken on most serious problems
% Exceeded/satisfied expectations with action taken 70 60 50 40 30 20 10
56%
All
respondents
39%
35%
33%
34%
25%
21%
Under 24 hrs 8%
Within 48 hrs 8%
Immedi- ately 18%
3 -14
days 29%
15-28
days 8%
Over 28
days 29%
Perceived response time

16. Figure 5.5
Impact of number of contacts made to get problem resolved on satisfaction
% Exceeded/satisfied expectations with action taken 70 60 50 40 30 20 10
55%
All respon- dents
37%
34%
27%
18% 1
27% 2
19%
3-4
30% 5+
24%
Number of contracts (Average: 3.4)

17. Impact of problem experience/complaining
Figure 5.6
Impact of problem experience/complaining
on Customer loyalty for all products/services
% Exceeded/satisfied expectations with action taken
100 95 90 80 70 60 50 40 30 20 10 83 46 23 % 23 % 10 No
problem
Exceeded expectations
Satisfied complainants
Non-
complainant
Mollified
Dissatisfied 17

18. Increased satisfaction
Figure 5.7 Components of an effective service-recovery system
Effective complaint handling = +
Increased satisfaction
& loyalty
Do the job right the first time
Identify service complaints
Monitor complaints Develop ‘complaints as opportunity’ culture
Resolve complaints effectively
Develop effective systems & training in complaints handling
Learn from the recovery experience
Conduct root cause analysis
Feedback 18

19. Service Recovery A crucial element in achieving a satisfied customer
A true test of the organisation’s commitment to the customer
Justice considerations have a large impact on how customers evaluate a provider’s recovery efforts

20. Figure 5.8 The role of justice in the complaint handling procedure
Justice Considerations
Procedure
Interaction
Outcome
Complaint handling process
Source: S.Tax and S.W. Brown, Handbook of Services Marketing and Management, © 2000, Reprinted by permission of Sage Publications Inc.

21. The Role of Justice in the Complaint Handling Procedure
Procedural justice concerns the policies and rules that comprise the complaining process
Interactional justice concerns the behaviour of the firm’s representatives during the complaint resolution process
Outcome or distributive justice relates to how fairly consumer’s are compensated for their complaints

22. Principles of Effective Service Recovery
Top management commitment
‘Complaints as opportunity’ culture
Training and empowerment
Ownership of complaint

23. Guidelines for Effective Complaint Resolution
Act fast: time is of the essence to achieve full recovery
Apologise but do not be defensive: it is important to impress on the consumer that the problem is an infrequent occurrence
Show understanding for the customer’s viewpoint

24. Guidelines for Effective Complaint Resolution
Do not argue with customers: gather facts to reach a mutually acceptable solution
Acknowledge the customer’s feelings to help build rapport
Give customers the benefit of the doubt
Clarify the steps needed to solve the problem

25. Guidelines for Effective Complaint Resolution
Keep customers informed of progress: uncertainty breeds anxiety
Consider compensation: this may reduce further complaints and legal action
Persevere to regain customer goodwill: outstanding recovery efforts can build loyalty and referrals

26. Learning From Experience
Blueprinting: understand the processes behind service delivery to identify potentially weak links
Control charts: displaying performance as measured by specific criteria over a period of time

27. Learning From Experience
Fishbone diagram: a cause and effect analysis
Pareto analysis: 80/20 rule