Achieving Service Recovery and Obtaining Customer Feedback

Learning Objectives

•Uncover customer complaining behaviour•Design effective service recovery strategies•Determine the usefulness of service

guarantees•Outline front line staff response to abusive

and/or opportunistic customer behaviour•Create institutionalized systematic learning

from feedback

Customer Complaining Behaviour

Customer Response Categories to Service Failures

Service Encounter is Dissatisfactory

Service Encounter is Dissatisfactory

Take some form of Public Action

Take some form of Public Action

Take some form of Private Action

Take some form of Private Action

Take No Action

Take No Action

Complain to the service firm

Complain to the service firm

Complain to a third party

Complain to a third party

Take legal action to seek redress

Take legal action to seek redress

Defect (switch provider)

Defect (switch provider)

Negative word-of-mouth

Negative word-of-mouth

Any one or a combination of these responses is possible

Any one or a combination of these responses is possible

Understanding Customer Responses to Service Failure

• 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?• What do customers expect once they have made a

complaint?

Customers Often View Complaining as Difficult and Unpleasant (Fig 13.2)

Three Dimensions of Perceived Fairness in Service Recovery Process

Procedural Justice

Procedural Justice

Interactive

Justice

Interactive

JusticeOutcome

Justice

Outcome

Justice

Complaint Handling and Service Recovery Process

Complaint Handling and Service Recovery Process

Justice Dimensions of the Service Recovery Process

Customer Satisfaction with

Service Recovery

Customer Satisfaction with

Service Recovery

Customer Responses to Effective Service Recovery

Importance of Service Recovery

•Plays a crucial role in achieving customer satisfaction

•Tests a firm’s commitment to satisfaction and service quality▫Employee training and motivation is highly

important•Impacts customer loyalty and future

profitability▫Complaint handling should be seen as a profit

centre, not a cost centre

The Service Recovery Paradox

• Customers who experience a service failure that is satisfactorily resolved more likely to make future purchases than customers without problems (Note: not all research supports this paradox)

• If second service failure occurs, the paradox disappears—customers’ expectations have been raised and they become disillusioned

• Severity and “recoverability” of failure (e.g., spoiled wedding photos) may limit firm’s ability to delight customer with recovery efforts

• Best strategy: Do it right the first time

Principles of Effective Service Recovery Systems

Components of an Effective Service Recovery System

Do the job right the first time

Effective Complaint Handling

Identify Service Complaints

Resolve Complaints Effectively

Learn from the Recovery Experience

Increased Satisfaction and Loyalty

Conduct research

Monitor complaints

Develop “Complaints as opportunity” culture

Develop effective system and training in complaints handling

Conduct root cause analysis

=+

Close the loop via feedback

Strategies to Reduce Customer Complaint BarriersComplaint Barriers for Dissatisfied Customers

Strategies to Reduce These Barriers

Inconvenience

Hard to find right complaint procedure

Effort involved in complaining

Put customer service hotline numbers, e-mail and postal addresses on all customer communications materials

Doubtful Pay Off

Uncertain if action will be taken by firm to address problem

Have service recovery procedures in place, communicate this to customers

Feature service improvements that resulted from customer feedback

Unpleasantness

Fear of being treated rudely

Hassle, embarrassment

Thank customers for their feedback

Train frontline employees

Allow for anonymous feedback

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

How Generous Should Compensation Be?

•Rules of thumb for managers to consider:▫What is positioning of our firm?▫How severe was the service failure?▫Who is the affected customer?

Service Guarantees

Service Guarantees Help Promote and Achieve Service Loyalty

• Force firms to focus on what customers want• Set clear standards• Highlight cost of service failures• Require systems to get and act on customer

feedback• Reduce risks of purchase and build loyalty

How to Design Service Guarantees

•Unconditional•Easy to understand and communicate•Meaningful to the customer•Easy to invoke•Easy to collect•Credible

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▫All service aspects are covered ▫Explicit minimum performance standards on important attributes

Discouraging Abuse and Opportunistic Behaviour

Dealing with Customer Fraud

• Treating all customers with suspicion is likely to alienate them▫ TARP found only 1 to 2 percent of customer base engages in

premeditated fraud—so why treat remaining 98 percent of honest customers as potential crooks?

• Insights from research on guarantee cheating▫ Amount of a guarantee payout had no effect on customer cheating▫ Repeat-purchase intention reduced cheating intent▫ Customers are reluctant to cheat if service quality is high (rather

than just satisfactory)• Managerial implication

▫ Firms can benefit from offering 100 percent money-back guarantees

▫ Guarantees should be offered to regular customers as part of membership program

▫ Excellent service firms have less to worry about than average providers

Learning from Customer Feedback

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

Customer Feedback Collection Tools• Total market surveys• Post-transaction surveys• Ongoing customer surveys• Customer advisory panels• Employee surveys/panels• Focus groups• Mystery shopping• Complaint analysis• Capture service operating data

Key Customer Feedback Collection Tools:

Strengths and Weaknesses (Table 13.3)

COLLECTION TOOLS FIRM PROCESSTRANSACTION SPECIFIC ACTIONABLE

REPRESENTATIVE RELIABLE

POTENTIAL

FOR

SERVICE

RECOVERY

FIRST

HAND

LEARNING

COST

EFFECTIVENESS

LEVEL OF MEASUREMENT

TOTAL MARKET SURVEY (INCLU. COMPETITORS)ANNUAL SURVEY ON OVERALL SATISFACTION

TRANSACTIONAL SURVEY

SERVICE FEEDBACK CARDS

MYSTERY SHOPPING

UNSOLICITED FEEDBACK (e.g., COMPLAINTS)

FOCUS GROUP DISCUSSIONS

SERVICE REVIEWS

Source: Adapted from Jochen Wirtz and Monica Tomlin, “Institutionalizing Customer-Driven Learning Through Fully Integrated Customer Feedback Systems.” Managing Service Quality,10, no.4 (2000): p. 210.

Entry Points for Unsolicited Feedback•Frontline employees

•Intermediaries acting for original supplier

•Managers contacted by customers at head/regional office

•Complaint cards deposited in special box or mailed

•Telephone or e-mail

•Complaints passed to company by third-party recipients

•Disseminate the information to relevant parties to take action Immediately•Track over time

Summary

• Customer can complain by taking public action, private action or no action at all

• Components of an effective recovery system include:

▫ Doing it right the first time▫ Effective complaint handling▫ Identifying service complaints▫ Resolving complaints effectively▫ Learning from the recovery experience

• Service guarantees should be unconditional, easy for customers to understand and invoke

• Dealing with abusive and/or opportunistic customer behaviours is dealing with customer fraud, most customers are honest, but guarantees should be monitored

• Institutionalized systematic learning from feedback delivers valuable feedback to management