SERVICE RECOVERY

Introduction
Service failure: when service
performance falls below a customers
expectations to cause customer
dissatisfaction.
Service recovery: actions taken by
a firm in response to service failure.

Causes for Failure

Why Customers Switch Service

Providers?
-

High/Unfair/Deceptive Pricing
Inconvenience (of location, appointment, excessive wait)
Core service failure (service mistakes, billing errors)
Service encounter failure
Poor response to service failure
Competition (customer discovers better alternatives)
Ethical problems (cheat, hard sell, unsafe)

Introduction
ServiceRecovery
Refers to the actions by an organization in
response to a service failure
Service Recovery means that a service
breakdown has occurred and the problem
has been corrected to the customers
satisfaction
Goal: Help retain customers as loyal

Service Recovery
Customers
do
not expect you
to be perfect.
They do expect
you to fix things
when they go
wrong.

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.
HOWEVER:
only a small percent of customers complain
service recovery is expensive

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 customer perceives that the company had little control
over the cause of the failure

Service Recovery Concepts

Service Recovery best done in
service sequence and not done later.
Service Recovery best done by the
groups involved in the Service Failure
Cost of Service Recovery may be
lower than cost to replace customer

How To of Service
Recovery
Apologize
Listen, Empathize,
Ask open
questions
Fix the problem
quickly and fairly
Keep your
promises
Follow-Up

Customer Complaint Actions Following Service

Failure

Types of Complainers

PASSIVES
- Keep quiet
- Do not complain
- Do not spread negative word of
mouth
- Feel if they complaint nothing will
happen.

14

VOICERS

Vociferous
Actively complain
Less likely to spread negative word of mouth
Give company a second chance
By complaining companies improve
These customers to be viewed as the service
providers friend.

15

IRATES

More vociferous
High negative word of mouth
Speak to friends and relatives
Do not give provider a second chance
Switch to competition.

They are angry with the service provider although they

do believe that complaining to the service provider can
have a social benefits.

16

ACTIVISTS
These consumers are characterized by above average propensity
to complain on all dimensions.
Complain everywhere
- Friends
- Relatives
- Third parties
They will complain to the provider, they will tell others and they
are more likely than any other group to complain to third parties.
Consumers can become terrorists

17

Why Do Customers
Complain?
Correct the problem
Emotional release from frustration
Regain some measure of control by
spreading negative word-of-mouth
Solicit sympathy
Create an impression of being more
intelligent and discerning

Why Dont Customers Complain?

Dont know who to complain to
Dont think it will do any good
May doubt their own subjective
evaluation
May accept part of the blame
May want to avoid confrontation
May lack expertise

Courses of Action Open to a

Dissatisfied Customer
Complain
Complainto
tothe
the
service
servicefirm
firm
Take
Takesome
someform
form
of
public
of publicaction
action
Service
ServiceEncounter
Encounterisis
Dissatisfactory
Dissatisfactory

Take
Takesome
someform
formof
of
private
action
private action

Take
Takeno
noaction
action

Complain
Complainto
toaathird
third
party
party
Take
Takelegal
legalaction
action
to
seek
redress
to seek redress
Defect
Defect(switch
(switch
provider)
provider)
Negative
Negativeword-ofword-ofmouth
mouth

Any
Anyone
oneor
oraacombination
combinationof
of
these
responses
these responsesisispossible
possible

SERVICE RECOVERY
When customers complain
What do they expect?
Fair treatment
1. Outcome Fairness
2. Procedural Fairness
3. Interaction fairness

21

OUTCOME FAIRNESS
- Outcome or compensation
- Match their dissatisfaction
- What can it be
- Monetary compensation
- Apology
- Future free service
- Reduced charges
- Replacements

Company pay for mistakes

22

Procedural Fairness

Customer expect fairness in terms of

- Policies
- Rules
- Timeliness of the complaint
process
- Easy access to complaint process
- Quick handling
23

Interaction Fairness
- Customers expect to be treated politely, with
care and honesty
- Company employees treat customers with
fairness

Singapore Airlines
- Customer baggage misplaced
- Employee gives money to customer
immediately
- Promises to keep him informed about tracking
of lost baggage
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SERVICE RECOVERY STRATEGIES

Various strategies are:

Do it right the first time
Welcome and encourage
complaints
Act quickly
Treat customers fairly
Learn from recovery experiences
Learn from lost customers
Return to Doing it Right

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Components of an Effective
Service Recovery System

Creating A Service Recovery

Environment
Be A Role Model
Ask Staff For
Suggestions
Solicit Customer
Feedback

Reward Good
Customer Service
Behavior
Encourage Staff To
Use Their Initiative
Do Not Talk
Negatively About
Customers

Five Reasons Recovery is Critically

Important
It keeps the customer loyal
It builds company profitability
It
decriminalizes
problem
identification
It improves service quality awareness
and teamwork
It identifies complaints by type &
severity

Three Major Outcomes of an Effective Service

Recovery System

It identifies service
problems
It resolves
problems
effectively
The organization
learns from the
recovery
experience

Service Guarantees
Guarantee = an assurance of the fulfillment of a
condition
In a business context, it 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

Characteristics of an Effective
Service Guarantee
Unconditional

the guarantee should make its promise unconditionally

Meaningful

the firm should guarantee elements of the service that are

important to the customer
the payout should cover fully the customers dissatisfaction

Easy to Understand and Communicate

customers need to understand what to expect

employees need to understand what to do

Benefits of Service Guarantees

Force the company to focus on its customers.

Set clear standards for the organization.
Generate immediate and relevant feedback from
customers.
When invoked, they provide an instant opportunity to
recover, thus satisfying the customer and helping retain
loyalty.
Information generated through the guarantees can be
tracked and integrated into continuous improvement
efforts.
Employee morale and loyalty can be enhanced as a result
of having a service guarantees in place.
Service guarantees reduce customers sense of risk and
build confidence in the organization.
Force company to understand why it failed
Build marketing muscle

Reasons companies might NOT want

to offer a service guarantee:

existing service quality is poor

guarantee does not fit the companys image
too many uncontrollable external variables
fears of cheating or abuse by customers
costs of the guarantee outweigh the benefits

Service Standards
Standards are based on the most
important customer expectations and
reflect the customers view of these
expectations.
Customer Defined Standards:Sources-Customer Expectations ,
Customer Experience Observations

Final Word on Service

Recovery
Resolve the CAUSE of the Service
Failure
This will improve the quality of the
service
This will reduce the time and costs
spent in service recovery.