1. Customer Feedback and Service Recovery
Chapter 6
Customer Feedback and Service Recovery

2. American Customer Satisfaction Index: Selected Industry Scores, 2002
100
(Max = 100) 90 85 79 80 79 80 74 76 71 71 70 70 66 65 62 60 50 40 30 20 10
% Change
3.7%
1.3%
0.0%
1.3%
2.8%
0.0%
0.0%
8.2%
2.9%
-2.6%
4.8%
3.3%
2002 vs 2001
Hotels
Airlines
Industry:
Soft drinks
Express mail,
parcels
Personal
computers
Hospitals
IRS (tax)
Fast food
Restaurants
Life insurance
Comm. banks
Broadcasting
(natl. news)
Cars, vans, etc.

3. Key Questions for Managers to Ask about Customer Complaining Behavior
Why do customers complain?
What proportion of unhappy customers complain?
Why don’t unhappy customers complain?
Who is most likely to complain?
Where do customers complain?

4. Courses of Action Open to a Dissatisfied Customer (Figure 13.1)
Service Encounter is Dissatisfactory
Take some form of public action
Take some form of private action
Take no action
Complain to the service firm
Complain to a third party
Take legal action to seek redress
Defect (switch provider)
Negative word-of-mouth
Any one or a combination of these responses is possible

5. Dimensions of Perceived Fairness in Service Recovery Process (Figure 13.2)
Procedural Justice
Interactive
Justice
Outcome
Complaint Handling & Service Recovery Process
Justice Dimensions of the Service Recovery Process
Customer Satisfaction with the
Service Recovery
Source: Tax and Brown

6. Proportion of Unhappy Customers Who Buy Again Depending on the Complaint Process9%
37%
19%
46%
54%
70%
82%
95% 10 20 30 40 50 60 70 80 90
100
Customer did not
complain
Complaint was
not resolved
Complaint
was resolved
resolved quickly
Problem cost > $100
Problem cost $1 - 5
Source: TARP study

7. Impact of Effective Service Recovery on Retention0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
84%
92%
46% No
Problem
Problem,
but effectively
resolved
Problem
Unresolved
Customer Retention
Source: IBM-Rochester study

8. Components of an Effective Service Recovery System (Figure 13.3)

9. Strategies to Reduce Customer Complaint Barriers (Table 13.1)
Complaint Barriers for Dissatisfied Customers
Strategies to Reduce These Barriers
Inconvenience
Difficult to find the right complaint procedure.
Effort, e.g., writing a letter.
Make feedback easy and convenient by:
Printing Customer Service Hotline numbers, and postal addresses on all customer communications materials.
Doubtful Pay Off
Uncertain whether any action, and what action will be taken by the firm to address the issue the customer is unhappy with.
Reassure customers that their feedback will be taken seriously and will pay off by:
Having service recovery procedures in place, and communicating this to customers.
Featuring service improvements that resulted from customer feedback.
Unpleasantness
Complaining customers fear that they may be treated rudely,
may have to hassle, or
may feel embarrassed to complain.
Make providing feedback a positive experience:
Thank customers for their feedback.
Train the frontline not to hassle and make customers feel comfortable.
Allow for anonymous feedback.

10. How to Enable Effective Service Recovery
Be proactive—on the spot, before customers complain
Plan recovery procedures
Teach recovery skills to relevant personnel
Empower personnel to use judgment and skills to develop recovery solutions

11. Guidelines for Effective Problem Resolution (Management Memo 13.1)
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

12. Service Guarantees Help Promote and Achieve Service Loyalty
Force firms to focus on what customers want
Set clear standards
Highlights cost of service failures
Require systems to get & act on, customer feedback
Reduce risks of purchase and build loyalty

13. Types of Service Guarantees
Single attribute-specific guarantee – one key service attribute is covered
Multiattribute-specific guarantee – a few important service attributes are covered
Full-satisfaction guarantee – all service aspects covered with no exceptions
Combined guarantee – like the full-satisfaction, adding explicit minimum performance standards on important attributes

14. The Hampton Inn 100% Satisfaction Guarantee (Figure 13.4)
What are the benefits of such a guarantee?
Are there any downsides?

15. Key Objectives of Effective Customer Feedback Systems
Assessment and benchmarking of service quality and performance
Customer-driven learning and improvements
Creating a customer-oriented service culture

16. Building a Customer Feedback System
Total market surveys
Post-transaction surveys
Ongoing customer surveys
Customer advisory panels
Employee surveys/panels
Focus groups
Mystery shopping
Complaint analysis
Capture of service operating data

17. Strengths and Weakness of Key Customer Feedback Collection Tools (Table 13.3)
Selection of a cocktail of effective customer feedback collection tools.
Potential for Service Recovery
Collection Tools
Multi-level Measurement
Action-able
Represen-tative, Reliable
First Hand Learning
Cost Effective
Service Satisfaction
Process Satisfaction
Specific Feedback
Total Market Survey (inclu. competitors)
Annual Survey on overall satisfaction
Transactional Survey (process specific)
Service Feedback Cards (process specific)
Mystery Shopping (service testers)
Unsolicited Feedback Recd
(Online feedback system)
Focus Group Discussions
Service Reviews
Meets Requirements: Fully Moderate Little/Not at all

18. Entry Points for Unsolicited Feedback
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