51888732 Services Marketing Lovelock Wirtz Chaterjee Ch 13

8/13/2019 51888732 Services Marketing Lovelock Wirtz Chaterjee Ch 13

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Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 13 - 1

Chapter 13:

Achieving Service Recoveryand

Obtaining Customer Feedback




Overview of Chapter 13

• Customer Responses to Effective Service Recovery • Principles of Effective Service Recovery Systems • Service Guarantees

• Discouraging Abuse and Opportunistic Behavior

• Learning from Customer Feedback




Customer Response Categories toService Failures (Fig 13.1)

Service Encounteris Dissatisfactory

Take some formof Public Action

Take some formof Private Action

Take No Action

Complain to theservice firm

Complain to a thirdparty

Take legal actionto seek redress

Defect (switchprovider)

Negative word-of-

mouth

Any one or a combination ofthese responses is possible


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Understanding Customer Responses toService Failure

• Why do customers complain?• Obtain compensation for economic loss• Vent their anger• Help improve the service . Ex Alumni Association• For altruistic reasons – Want to save prevent other customers from

undergoing the trauma of poor service• What proportion of unhappy customers complain? – 5-10%

• Why don’t unhappy customers complain? – time cost, uncertain outcome,complaint process is not known, fear of confrontation etc.

• Who is most likely to complain? – people in Higher socioeconomiccircumstances

• Where do customers complain? – To the service rep in immediate contactonly. Rarely to the HQ or through email. Customer service centers are also calledup.

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



Three Dimensions of Perceived Fairness inService Recovery Process (Fig 13.3)

ProceduralJustice

Interactive

JusticeOutcome

Justice

Complaint Handling and ServiceRecovery Process

Justice Dimensions of the Service Recovery Process

Customer Satisfaction withService Recovery

Source: Tax and Brown

Procedure customer has to go through

Employees trying to resolve the issue

Compensation that the customer receives



Customer Responses to EffectiveService Recovery



How Complaint Resolution AffectsCustomer Retention Rates

9%

37%

19%

46%54%

70%

82%

95%

0

10

20

30

40

5060

70

80

90100

Customer did notcomplain

Complaint wasnot resolved

Complaintwas resolved

Complaint wasresolved quickly

Problem cost > $100 Problem cost $1 –$5

Percent of Unhappy

Customers Retained

Source: Claes Fornell, Birger Wernerfelt, ―A Model for Customer Complaint Management,‖ Marketing

Science, Vol. 7, No. 3 (Summer, 1988), pp. 287 –298



The Service Recovery Paradox

• Customers who experience a service failure that issatisfactorily resolved may be more likely to make futurepurchases than customers without problems

• If second service failure occurs, the paradoxdisappears—customers’ expectations have been raisedand they become disillusioned

• Severity and ―recoverability‖ of failure (e.g., spoiled

wedding photos) may limit firm’s ability to delightcustomer with recovery efforts

• Best strategy: Do it right the first time



Principles of Effective ServiceRecovery Systems



Components of an EffectiveService Recovery System (Fig 13.4)

Do the job right thefirst time

Effective ComplaintHandling

Identify ServiceComplaints

Resolve ComplaintsEffectively

Learn from theRecovery Experience

IncreasedSatisfaction and

Loyalty

Conduct research

Monitor complaints Develop ―Complaints asopportunity‖ culture

Develop effective systemand training in

complaints handling

Conduct root cause analysis

=+

Close the loop via feedback



Strategies to Reduce CustomerComplaint Barriers (Table 13.1)

Complaint Barriers for DissatisfiedCustomers

Strategies to Reduce These Barriers

Inconvenience

• Hard to find right complaintprocedure

• Effort involved in complaining

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

Doubtful Pay Off • Uncertain if action will be taken by

firm to address problem

• Have service recovery procedures inplace, communicate this to customers

• Feature service improvements thatresulted from customer feedback

• Indicate the TAT for response

Unpleasantness

• Fear of being treated rudely

• Hassle, embarrassment

• Thank customers for their feedback• Train frontline employees

• Allow for anonymous feedback




How to EnableEffective Service Recovery

• Be proactive—on the spot, before customerscomplain

• Plan recovery procedures

• Teach recovery skills to relevant personnel • Empower personnel to use judgment and skills to

develop recovery solutions




How GenerousShould Compensation Be?

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

o Who is the affected customer?




Service Guarantees




Service Guarantees Help Promote andAchieve Service Loyalty

• Promising that if the service delivery fails to meet thepredefined standards, the customer will be compensatedfor it

• Force firms to focus on what customers want • Set clear standards, telling customer and the employees

alike what the company stands for • Force the companies to understand why they fail and

encourage them to identify them and overcome them • Require systems to get and act on customer feedback

• Reduce risks of purchaseand build loyalty




How to Design Service Guarantees

• Unconditional : No element of surprise to be there • Easy to understand and communicate • Meaningful to the customer • Easy to invoke : More dependent on the service

provider rather than the customer• Easy to collect• Credible




Types of Service GuaranteesTable 13.2

• Single attribute-specific guaranteeo One key service attribute is covered. Ex Dominos pizza. Time Guarantee

• Multiattribute-specific guaranteeo A few important service attributes are covered. Ex Mariott’s Guarantee. 1)

Friendly, efficient check in (2) Clean, comfortable room, where everythingworks (3) Friendly, efficient checkout

• Full-satisfaction guarantee o All service aspects covered with no exceptions.

• Combined guarantee o All service aspects are covered by the full satisfaction guarantee

o Explicit minimum performance standards on important attributes are

included.o Ex. Datapro Info syst : ― To deliver the report on time, to high quality std, and

to the contents outlined in this proposal. Should we fail to deliver accordingto this guarantee, or should you be dissatisfied with any aspect of our work,you can deduct any amount from the final payment which is deemed as fair‖




Discouraging Abuse andOpportunistic Behavior




Dealing with Customer Fraud

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

fraud—so why treat remaining 98 percent of honest customers as potentialcrooks?

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

satisfactory)

• Managerial implication o Firms can benefit from offering 100 percent money-back guarantees

o Guarantees should be offered to regular customers as part of membership

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




Learning from Customer Feedback

K Obj ti f




Key Objectives ofEffective Customer Feedback Systems

• Assessment and benchmarking of service quality andperformance• Objective : To Answer – How satisfied are our customers?• Performance of firm wrt competition, wrt previous yr performance,

investments have paid off?

• Customer-driven learning and improvements• Objective : To Answer – What makes our customer happy/unhappy?What are the strengths we need to maintain, and where and how do weneed to improve ?

• Creating a customer-oriented service culture



Travel to Final DestinationCh 14

Improving Service Quality and

Productivity

Documents

51888732 Services Marketing Lovelock Wirtz Chaterjee Ch 13