1. MKT 346: Marketing of Services Dr. Houston Chapter 13: Complaint Handling and Service Recovery

2. Why Do Customers Complain?  To obtain compensation  To release their anger  To help to improve the service  Because of concern for others

3. Customer Response Categories to Service Failures ( Fig. 13.3)

4. Customer Response Categories to Service Failure Customer Responses to Service Failure Public Action Private Action No Action

5. Three Dimensions of Perceived Fairness in Service Recovery Process ( Fig. 13.7)

6. Three Dimensions of Perceived Fairness in Service Recovery Process  Procedural justice  Interactional justice  Outcome justice

7. Dealing with Complaining Customers and Recovering from Service Failure  Take complaints professionally and not personally  Be prepared to deal with angry customers  See customer complaints as opportunities  Correct problems  Restore relationships  Improve future satisfaction for all  Develop effective service recovery procedures

8. 9% 37% 19% 46% 54% 70% 82% 95% 0 10 20 30 40 50 60 70 80 90 100 Customer did not complain Complaint was not resolved Complaint was resolved Complaint was resolved quickly Problem cost > $100Problem cost $1 - 5 % of Unhappy Customers Retained Source: Claes Fornell, Birger Wernerfelt, “A Model for Customer Complaint Management,” Marketing Science, Vol. 7, No. 3 (Summer, 1988), pp. 287-298 Impact of Effective Service Recovery on Customer Loyalty

9. Importance of Service Recovery  Plays a crucial role in achieving customer satisfaction  Tests a firm’s commitment to satisfaction and service quality  Employee training and motivation is important  Impacts customer loyalty and future profitability  Complaint handling is a profit center

10. The Service Recovery Paradox  Customers who experience a service failure that is satisfactorily resolved may be more likely to make future purchases than customers without problems  Paradox disappears with a second service failure  Severity and “recoverability” of failure (e.g., spoiled wedding photos) may limit firm’s ability to delight customer with recovery efforts  Best strategy--do it right the first time

11. Strategies to Reduce Customer Complaint Barriers ( Table 13.1)

12. How to Enable Effective Service Recovery  Be proactive and resolve failures on the spot  Plan recovery procedures for most common failures  Teach recovery skills to relevant personnel  Empower personnel to resolve service failure

13. The Power of Service Guarantees  Force firms to focus on what customers want  Set clear standards  Require systems to get & act on customer feedback  Force organizations to understand why they fail and to overcome potential fail points  Reduce risks of purchase and build loyalty

14. How to Design Service Guarantees  Unconditional  Easy to understand and communicate  Meaningful to the customer  Easy to invoke  Easy to collect  Credible

15. Types of Service Guarantees (Table 13.2)  Single attribute-specific guarantee  Multiattribute-specific guarantee  Full-satisfaction guarantee  Combined guarantee

16. Is it Always Suitable to Introduce a Guarantee?  It is not appropriate to introduce guarantees when:  Companies have a strong reputation for service excellence  Company does not have good quality level  Quality cannot be controlled because of external forces  Consumers see little financial, personal or physiological risk associated with the purchase

17.  A customer who behaves in a thoughtless or abusive fashion, causing problems for the firm, its employees, and other customers What is a Jaycustomer?

18.  Cheat  Thief  Rulebreaker  Belligerent Seven Types of Jaycustomers  Family Feuders  Vandals  Deadbeat

19. Seven Types of Jaycustomers: The Cheat and Thief Thinks of various way to cheat the firm Cheat No intention of paying-- sets out to steal or pay less Thief

20. Seven Types of Jaycustomers: The Rulebreaker and the Belligerent Customers who refuse to follow the rules Rulebreaker Customers who shout and make insults, threats, and curses Belligerent

21. Seven Types of Jaycustomers: Family Feuders and Vandals People who get into arguments with other customers (and family) Family Feuders People who vandalize property to get revenge Vandals

22. Seven Types of Jaycustomers: Deadbeats Customers who fail to pay Deadbeat

23. Dealing with Customer Fraud  If in doubt, believe the customer  Track customers with a database:  How often customers invoke service guarantees  Payments made for service failure  Customers rarely cheat if service quality is high  Regular customers are less likely to cheat

24. MKT 346 Key Concepts: Chapter 13  Customer response categories to service failures  Three dimensions of perceived fairness in service recovery process  Importance of service recovery  The service recovery paradox  Strategies to reduce customer complaint barriers  The power of service guarantees  Types of service guarantees  Seven types of jaycustomers