1. AMW342 SERVICES MARKETING
SCHOOL OF MANAGEMENT
SEMESTER /2013
AMW342 SERVICES MARKETING
ASSOCIATE PROFESSOR DR. AZIZAH OMAR
Lecture: Thursday
Venue: DK - R
Room: PhD/MA Office, Level 1
School of Management
Tel: ext.2889
Tutorial: Wednesday (2.00pm – Training Room, Ground Floor, School of Management
McGraw-Hill/Irwin
Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved.

2. 7 Service Recovery The Impact of Service Failure and Recovery
Chapter 7
Service Recovery
The Impact of Service Failure and Recovery
How Customers Respond to Service Failures
Service Recovery Strategies: Fixing the Customer
Service Recovery Strategies: Fixing the Problem
Service Guarantees
Switching versus Staying Following Service Recovery
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3. Objectives for Chapter 7: Service Recovery
Illustrate the importance of recovery from service failures in keeping customers and building loyalty.
Discuss the nature of consumer complaints and why people do and do not complain.
Provide evidence of what customers expect and the kind of responses they want when they do complain.
Present strategies for effective service recovery, including ways to “fix the customer” after a service failure and to “fix the problem.”
Discuss service guarantees—what they are, the benefits of guarantees, and when to use them—as a particular type of service recovery strategy.
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4. 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.
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5. Figure 7.1: Complaining Customers: The Tip of the Iceberg
Source: Data from TARP Worldwide Inc., 2007
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6. Unhappy Customers’ Repurchase Intentions
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7. Exhibit 7.1: The Internet Spreads the Story of Poor Service Recovery
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8. The Service Recovery Paradox
Is a customer who has experienced a service failure and exemplary service recovery more likely to be more satisfied – impressed even – with the service provider?
Should a firm “screw up” just a little so that it can “fix the problem” superbly?
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9. The 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 et al. 1990)
HOWEVER:
Only a small percent of customers complain
Service recovery must be SUPERLATIVE
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
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10. The 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!
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11. Customer Complaint Actions Following Service Failure
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12. Types of Complainers
Passives: least likely to take any action, say anything to the provider, spread negative WOM, or complain to a third party; doubtful of the effectiveness of complaining
Voicers: actively complain to the provider, but not likely to spread negative WOM; believe in the positive consequences of complaining - the service provider’s best friends!
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13. Types of Complainers
Irates: more likely to engage in negative WOM to friends and relatives and to switch providers; average in complaints to provider; unlikely to complain to third parties; more angry, less likely to give provider a second chance
Activists: above average propensity to complain on all levels; more likely to complain to a third party; feel most alienated from the marketplace compared to other groups; in extreme cases can become “terrorists”
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14. Service Recovery Strategies
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15. Fixing the Customer
When customers take the time to complain, they generally have high expectations.
They expect the company to respond quickly and to be accountable.
They expect to be compensated for their grief and for the hassle of being inconvenienced.
They expect to be treated nicely in the process!
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16. Respond Quickly
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17. Provide Appropriate Communication
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18. Treat Customers Fairly
Outcome fairness
Outcome (compensation) should match the customer’s level of dissatisfaction; equality with what other customers receive; choices
Procedural fairness
Fairness in terms of policies, rules, timeliness of the complaint process; clarity, speed, no hassles; also choices: “What can we do to compensate you…?”
Interactional fairness
Politeness, care, and honesty on the part of the company and its employees; rude behavior on the part of employees may be due to lack of training and empowerment
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19. Fixing the Problem
After “fixing the customer” the company should address the actual problem that created the poor service delivery in the first place.
If the problem is likely to recur for other customers, then the service delivery process may need to be fixed, too.
Strategies for fixing the problem include encouraging and tracking complaints, learning from recovery experiences and from lost customers, and making the service fail-safe.
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20. 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?)
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21. Characteristics of an Effective Service Guarantee
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
Customers need to understand what to expect
Employees need to understand what to do
Easy to Invoke
The firm should eliminate hoops or red tape in the way of accessing or collecting on the guarantee
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22. Benefits of Service Guarantees
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.
Information generated through the guarantee can be tracked and integrated into continuous improvement efforts.
A service guarantee reduces customers’ sense of risk and builds confidence in the organization.
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23. When to Use (or Not Use) a Guarantee
Reasons companies might NOT want to offer a service guarantee:
Existing service quality is poor
A guarantee does not fit the company’s image
Service quality is truly uncontrollable
Potential exists for customer abuse of the guarantee
Costs of the guarantee outweigh the benefits
Customers perceive little risk in the service
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24. Causes Behind Service Switching
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