Mc GrawHillIrwin Copyright 2013 by The Mc GrawHill
Mc. Graw-Hill/Irwin Copyright © 2013 by The Mc. Graw-Hill Companies, Inc. All rights reserved.
Chapter Service Recovery 7 § 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 7 -2
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. 7 -3
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 -4
Figure 7. 1: Complaining Customers: The Tip of the Iceberg Source: Data from TARP Worldwide Inc. , 2007 7 -5
Unhappy Customers’ Repurchase Intentions 7 -6
Exhibit 7. 1: The Internet Spreads the Story of Poor Service Recovery 7 -7
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? 7 -8
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 7 -9
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! 7 -10
Customer Complaint Actions Following Service Failure 7 -11
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! 7 -12
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” 7 -13
Service Recovery Strategies 7 -14
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! 7 -15
Respond Quickly 7 -16
Provide Appropriate Communication 7 -17
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 7 -18
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. 7 -19
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? ) 7 -20
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 7 -21
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. 7 -22
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 7 -23
Causes Behind Service Switching 7 -24
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