1. TYPES OF SERVICE FAILURES
Group 1 Failures
Core service failures
slow service
unavailable service
other core service failures

2. TYPES OF SERVICE FAILURES
Group 2 Failures
Responses to implicit/explicit requests
special needs
customer preferences
customer error
disruptive others

3. TYPES OF SERVICE FAILURES
Group 3 Failures
Unprompted/Unsolicited employee actions
level of attention
unusual action
cultural norms
gestalt
adverse conditions

4. TYPES OF SERVICE FAILURES (new category)
Group 4 Failures (Employee-reported incidents)
Problematic customer behavior
drunkenness
verbal and physical abuse
breaking company policies or laws
uncooperative customers

5. Service Recovery The Impact of Service Failure and Recovery
How Customers Respond to Service Failures
Customers’ Recovery Expectations
Switching versus Staying Following Service Recovery
Service Recovery Strategies
Service Guarantees

6. Reliability is Critical in Service but…
In all service contexts, service failure is inevitable.
Service failure occurs when service performance that falls below a customer’s expectations in such a way that leads to customer dissatisfaction.
Service recovery refers to the actions taken by a firm in response to service failure.

7. Complaining Customers: The Tip of the Iceberg

8. Unhappy Customers’ Repurchase Intentions

9. Customer Complaint Actions Following Service Failure

10. 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, 1998)
HOWEVER:
only a small percent of customers complain
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

11. 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!

12. Causes Behind Service Switching

13. Service Recovery Strategies

14. Eight Most Common Remedies Customers Seek with Serious Problems
Have the product repaired or service fixed
Be reimbursed for the hassle of having experienced a problem
Receive a free product or service in the future
Explanation by the firm as to what happened
Assurance that the problem will not be repeated
A thank you for the customer’s business
An apology from the firm
An opportunity for the customer to vent his or her frustrations to the firm

15. Customer Satisfaction with Timeliness of Firm Responses to Service Failures

16. SERVICE FAILURES & RECOVERY STRATEGIES: THE RESTAURANT INDUSTRY

17. SERVICE FAILURES: THE RESTAURANT INDUSTRY
Group 1 failure categories (44.4%)
Product defects (20.9%)
food was described as cold, soggy, raw, burnt, spoiled, or containing inanimate objects such as hair, glass, bandages, bag ties, and cardboard.
Slow/unavailable service (17.9%)
waiting excessively, not being able to find assistance

18. SERVICE FAILURES: THE RESTAURANT INDUSTRY
Facility problems (3.2%)
cleanliness issues such as bad smells, dirty utensils, and animate objects (e.g., insects) found on the table or in the food
Unclear policies (1.6%)
policies that were perceived as unfair by the customer, such as coupon redemption, or forms of payment
Out-of-stock conditions (.8%)
inadequate supply of menu items

19. SERVICE FAILURES: THE RESTAURANT INDUSTRY
Group 2 failure categories (18.4%)
food not cooked to order (15.0%)
requested food be prepared in a particular manner and restaurant failed to meet request
seating problems (3.4%)
seating nonsmokers in smoking section and vice versa
lost or disregarded reservations
requests for special tables that were denied
seating among unruly and disruptive customers

20. SERVICE FAILURES: THE RESTAURANT INDUSTRY
Group 3 failure categories (37.2%)
inappropriate employee behavior (15.2%)
rudeness, inappropriate verbal exchanges, and poor attitudes
wrong Orders (12.6%)
delivery of the incorrect food item, either to the table, or in the case of fast food, in packaging so that the mistake was not discovered until the customer had left the premises

21. SERVICE FAILURES: THE RESTAURANT INDUSTRY
Group 3 failure categories (37.2%)
lost orders (7.5%)
situations in which the customer’s order was lost and never fulfilled
mischarged (1.9%)
being charged for items that were never sent, being charged incorrect prices for items that were ordered, and providing incorrect change

22. SERVICE FAILURES: THE RESTAURANT INDUSTRY
Recovery Strategies (frequency, retention)
Replacement (33.4%, 80.2%)
Free Food (23.5%, 89.0%)
Nothing (21.3%, 51.3%)
Apology (7.8%, 71.4%)
Correction (5.7%, 80.0%)
Discount (4.3%, 87.5%)
Manager Intervention (2.7%, 88.8%)
Coupon (1.3%, 80.0)%

23. Characteristics of an Effective Service Recovery
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

24. Benefits of Service Recovery
A good guarantee forces the company to focus on its customers.
An effective guarantee sets clear standards for the organization.
A good guarantee generates immediate and relevant feedback from customers.
When the guarantee is invoked there is an instant opportunity to recover, thus satisfying the customer and helping retain loyalty.
Information generated through the guarantee can be tracked and integrated into continuous improvement efforts.
Employee morale and loyalty can be enhanced as a result of having a service guarantee in place.
A service guarantee reduces customers’ sense of risk and builds confidence in the organization.

25. Why a Good recovery Works
forces company to focus on customers
sets clear standards
generates feedback
forces company to understand why it failed
builds “marketing muscle”

26. Does everyone need a service guarantee?
Reasons companies might NOT want to offer a service guarantee:
existing service quality is poor
guarantee does not fit the company’s image
too many uncontrollable external variables
fears of cheating or abuse by customers
costs of the guarantee outweigh the benefits
customers perceive little risk in the service
customers perceive little variability in service quality among competitors