1. DO NOT COPY Chapter 11 Service failure and service recovery management

2. DO NOT COPY Learning Objective Explain what services failure is. Benefits of encouraging customer complaints. Handle service failures Design service recovery models.

3. DO NOT COPY Introduction Service failures are always occurring – but what matters more are the actions taken to recover from the failure, which have multi-dimensional impacts on the company. Indeed, service recovery is the acid test for customer orientation: if a company does not excel in this, then it can be assumed that it is not customer oriented.

4. DO NOT COPY Recovery is proactive, complaint handling reactive Companies need to understand that service recovery is not simply complaints management, but instead is much broader and more proactive. Ideally, service recovery will address service failures before any complaints are made. Only if missed the first opportunity to recover will the customers complain.

5. DO NOT COPY Provide the right type of justice From the customer’s point of view, good service recovery focuses on fairness and justice. This has three dimensions: Distributive justice – the outcome of a recovery situation (such as an apology, refund or product replacement) Procedural justice – how the recovery process works Inter action's justice – how customers are treated

6. DO NOT COPY Understand the scale of the problem Only by knowing the true scale of customer dissatisfaction can companies see and proactively prepare against – looming service failure crises. Once the company has a good idea of what kind of problems customers are experiencing, it can define and prioritize areas for improvement.

7. DO NOT COPY Recovery tactics Poor responses  Fail to recognize the seriousness of the problem  Fail to adequately accommodate the customer  Act as though nothing is wrong  Fail to explain why the problem occurred  Leave the customer to solve the problem on his or her own  Promise to do something and don’t follow through

8. DO NOT COPY Why do customers complain?  Correct the problem  Emotional release from frustration Regain some measure of control by spreading negative w-o-m Solicit sympathy Test for consensus Create an impression of being more intelligent and discerning

9. DO NOT COPY Why don’t customers complain?  Don’t know who to complain to  Don’t think it will do any good  May doubt their own subjective evaluation  May accept part of the blame  May want to avoid confrontation  May lack expertise

10. DO NOT COPY Know where you are failing Most customers understand that things can and will go wrong. Don’t panic: With most customers and in most situations, customers’ sense of trust and camaraderie increases after a problem is successfully resolved, compared to if you had never had the problem in the first place. Avoid assuming you know what solution a customer wants or ‘‘should’’ want. Ask. And if a customer makes a request that sounds extreme or absurd, don’t rush to dismiss it. Don’t strive for ‘‘fairness’’ or ‘‘justice.’’ Creating, or preserving, a customer’s warm feelings for a company isn’t about fairness or justice. It’s about being treated especially well. Learn from customer issues, but don’t use them as an opportunity to discipline or train your staff in front of your customer. Don’t imagine you’re doing something special for a customer by making things how they should have been in the first place. Time cannot be given back—it’s gone. And always, always, keep an eye on the lifetime value–directly and as a vocal supporter–of having a loyal, engaged customer

11. DO NOT COPY Important tips for customer service management Never Underestimate the Value of Retention Implement an Effective Customer Retention Program Avoid Misreading Your Customers Engage Customers through Social Media: Run Relevant Promotions

12. DO NOT COPY Service Failure Recovery Impacts Customer Satisfaction Levels Typically, when a service failure occurs, a customer will expect to be compensated for the inconvenience in the form of any combination of refunds, credits, discounts or Apologies The success of such recovery efforts is determined by the individual customer expectations and perceptions of the organization. Two key elements impact any effort to restore customer satisfaction: the strength of the customer relationship and the severity of the service failure.

13. DO NOT COPY Typical recovery strategies (distributive justice outcomes)  Compensatory strategies  Gratis  Discounts  Upgrades  free ancillary service  Refunds

14. DO NOT COPY Typical recovery strategies (distributive justice outcomes)  Corrections  Replacement strategies  Apology  Disregard