Services Marketing Session 11

Customer Feedback and Service Recovery

By Dr. Mei-Na Liao

www.bradford.ac.uk/management

Learning Objectives
By the end of this lecture you should be able to: To understand consumer complaining behaviour and the value of customer feedback To understand the principle of effective service recovery systems To discuss the power of services guarantees To introduce the concepts of customer care and services recovery

Courses of Action Open to a Dissatisfied Customer (Figure 13.1)

Complain to the service firm Take some form of public action Take some form of private action Complain to a third party Take legal action to seek redress Defect (switch provider) Negative word-ofmouth

Service Encounter is Dissatisfactory

Take no action

Any one or a combination of these responses is possible

Key Questions for Managers to Ask about Customer Complaining Behavior

Why do customers complain? What proportion of unhappy customers complain?

Why dont unhappy customers complain?

Who is most likely to complain? Where do customers complain?

Dimensions of Perceived Fairness in Service Recovery Process

Complaint Handling & Service Recovery Process Justice Dimensions of the Service Recovery Process Procedural Justice Interactive Justice Outcome Justice

Customer Satisfaction with the Service Recovery

Source: Tax and Brown

100 90 80 70 60 50 40 30 20 10 0

Proportion of Unhappy Customers Who Buy Again Depending on the Complaint Process 95%
82% 70% 54% 46% 37%

19%
9%
Customer did not complain Complaint was not resolved Complaint was resolved
Problem cost $1 - 5
Source: TARP study

Complaint was resolved quickly

Problem cost > $100

Strategies to Reduce Customer Complaint Barriers

Complaint Barriers for Dissatisfied Customers Inconvenience Difficult to find the right complaint procedure. Effort, e.g., writing a letter. Doubtful Pay Off Uncertain whether any action, and what action will be taken by the firm to address the issue the customer is unhappy with. Strategies to Reduce These Barriers

Make feedback easy and convenient by: Printing Customer Service Hotline numbers, e-mail and postal addresses on all customer communications materials. Reassure customers that their feedback will be taken seriously and will pay off by: Having service recovery procedures in place, and communicating this to customers. Featuring service improvements that resulted from customer feedback. Make providing feedback a positive experience: Thank customers for their feedback. Train the frontline not to hassle and make customers feel comfortable.

Unpleasantness Complaining customers fear that they may be treated rudely, may have to hassle, or may feel embarrassed to

Impact of Effective Service Recovery on Retention

No Problem
Problem, but effectively resolved

84%

92%

Problem Unresolved
0% 10% 20% 30% 40%

46%
60%

50%

70%

80%

90% 100%

Customer Retention
Source: IBM-Rochester study

Service recovery is turning a service failure into an opportunity you wish you never had
Michael Hargrove, 2005

Components of an Effective Service Recovery System

Do the Job Right the Do the Job Right the First Time First Time

Effective Complaint Effective Complaint Handling Handling

Increased Satisfaction Increased Satisfaction and Loyalty and Loyalty Conduct Research Conduct Research Monitor Complaints Monitor Complaints Develop Complaints Develop Complaints as Opportunity as Opportunity Culture Culture Develop Effective Develop Effective System and Training in System and Training in Complaints Handling Complaints Handling Conduct Root Cause Conduct Root Cause Analysis Analysis

Identify Service Identify Service Complaints Complaints

Resolve Complaints Resolve Complaints Effectively Effectively

Learn from the Learn from the Recovery Experience Recovery Experience

Close the Loop via Feedback

How to Enable Effective Service Recovery

Be proactiveon 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

Guidelines for Effective Complaint handling

Act fast Admit mistakes but dont be defensive Understand problem from customers viewpoint Dont argue Acknowledge customers feelings Give benefit of doubt
Clarify steps to solve problem Keep customers informed of progress

Consider compensation Persevere to regain goodwill Check the service delivery system and pursue eminence

Service Guarantees Help Promote and Achieve Service Quality

Force firms to focus on what customers want
Set clear standards

Highlights cost of service failures

Require systems to get & act on, customer feedback Reduce risks of purchase and build loyalty

Service Guarantees should be:

Unconditional Whatever is promised in the guarantee should be without conditions. Easy to understand and communicate Easy to invoke Easy to collect Credible the guarantee should be believable

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 like the fullsatisfaction, adding explicit minimum performance standards on important attributes

When guarantee is not suitable

Companies already have good reputation. A firm whose service is currently poor, must first work to improve the quality to a level above what is guaranteed. Service firm whose service is uncontrollable- due to external factor. When guarantee adds little value to customer.

The Problem of Customer Misbehavior Identifying and Managing Jaycustomers

Not all complaining customers are right or reasonable in their behaviour.

What is a jaycustomer?
A customer who behaves in a thoughtless or abusive fashion, causing problems for the firm itself, employees, other customers Why do jaycustomers matter? Causing lost Can disrupt processes Affect service quality May spoil experience of other customers Can you give some examples of jaycustomers?

Seven Types of Jaycustomer

The Cheat-exploring service recovery policies and cheating on service guarantee. Thief seeks to avoid paying for service Rule breaker ignores rules of social behaviour and/or procedures for safe, efficient use of service Belligerent angrily abuses service personnel (and sometimes other customers) physically and/or emotionally Family Feuders fight with other customers in their party Vandal deliberately damages physical facilities, furnishings, and equipment Deadbeat fails to pay bills on time

What should a firm do about them? Try to avoid attracting potential jaycustomers Institute preventive measures Control abusive behavior quickly Take legal action against abusers Carry out investigation against cheat- keeping record of complaints BUT firm must act in ways that dont alienate other customers

Guidelines
Organisations responsibility to spot service failure Should be easy for the customer to complain Keep customers informed about progress Actively take measures to correct failures Compensate immediately Try to manage emotional reactions Apologising is important but usually not enough Employee empowerment

Revision questions
Discuss why many unhappy customers dont complain and how firms may do to encourage these customers to come forward. Discuss why service guarantees are powerful tools for promoting and achieving service quality and how should they be designed.