CHAPTER 13

Service Recovery

Why is service recovery so important?

Discussion Question

Why do some customer never complain? Do you complain as a

customer?

Discussion Question

Reasons for Complaining

Obtain compensation Refund Service performed again Other form of compensation – future services

Release their angerHelp to improve the serviceOut of concern for others

Warning others of service failures

Customer Response Categories to Service Failures

Unhappy Customers’ Repurchase Intentions

82%

54%

19%

9%

Complaints Resolved Quickly

Complaints Resolved

Complaints Not Resolved

Unhappy Customers Who Don’t Complain

Unhappy Customers Who Do Complain

Percent of customers who will buy again after a major complaint (over $100 in losses)

Source: Adapted from data reported by the Technical Assistance Research Program.

1. What are the issues that Mr. Metz should note and be concerned with?

2. How credible is the evidence provided by the letter?

3. How would you ‘repair ’ this situation?

Case 19: The Complaint Letter

Service Insights 13.2, page 406

Guidelines for Front-line Employees and Handling Customer Complaints

Expectations of Complaint Behaviour

Procedural justice Customers expect the firm to take responsibility.

Flexible recovery process that may include customer inputs.

Interactional justice Employees of the firm provide the service recovery

(requires empowerment). Should be seen as genuine and honest.

Outcome justice Compensation that the customer receives as a result

of the service failure. Compensation for not only service failure, but for time, effort and energy spent during the process of service recovery.

Classroom Discussion

What do the following Quotes mean? “A complaint is a gift” “The customer who complains is your friend” What are some of your personal service recovery

experiences?

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?)

The Power of Service Guarantees

• Force firms to focus on what customers want

• Set clear standards, that both employees and customers can and should understand

• Require systems to get & act on customer feedback

• Force organizations to understand why they fail and to overcome potential fail points

• Reduce risks of purchase decision for customers and build loyalty

Characteristics of an Effective Service Guarantee

Unconditional the guarantee should make its promise unconditionally –

no strings attachedMeaningful

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 and Communicate customers need to understand what to expect employees need to understand what to do

Easy to Invoke and Collect the firm should eliminate hoops or red tape in the way of

accessing or collecting on the guarantee

Source: Christopher W.L. Hart, “The Power of Unconditional Guarantees,” Harvard Business Review, July-August, 1988, pp. 54-62.

Types of Service Guarantees

Single attribute-specific guarantee One key service attribute is covered – e.g., lunch guarantee

from

Multi-attribute-specific guarantee A few important service attributes are covered

Full-satisfaction guarantee All service aspects covered with no exceptions – e.g., full

refund if not satisfiedCombined guarantee

All service aspects are covered Explicit minimum performance standards on important

attributes