Chapter 13:

Achieving Service Recovery and Obtaining Customer Feedback

Slide 2007 by Christopher Lovelock and Jochen Wirtz

Services Marketing 6/E

Chapter 13 - 1

Overview of Chapter 13
Customer Complaining Behavior

Customer Responses to Effective Service Recovery

Principles of Effective Service Recovery Systems

Service Guarantees
Discouraging Abuse and Opportunistic Behavior

Learning from Customer Feedback

Slide 2007 by Christopher Lovelock and Jochen Wirtz

Services Marketing 6/E

Chapter 13 - 2

Customer Response Categories to Service Failures (Fig 13.1)

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

Service Encounter is Dissatisfactory

Take some form of Private Action

Take No Action

Any one or a combination of these responses is possible

Slide 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 13 - 3

Understanding Customer Responses to Service Failure

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

Slide 2007 by Christopher Lovelock and Jochen Wirtz

Services Marketing 6/E

Chapter 13 - 4

Three Dimensions of Perceived Fairness in Service Recovery Process (Fig 13.3)

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

Customer Satisfaction with

Service Recovery
Source: Tax and Brown Slide 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 13 - 5

Importance of Service Recovery

Plays a crucial role in achieving customer satisfaction Tests a firms 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 center, not a cost center

Slide 2007 by Christopher Lovelock and Jochen Wirtz

Services Marketing 6/E

Chapter 13 - 6

The Service Recovery Paradox

Customers who experience a service failure that is satisfactorily resolved may be 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 firms ability to delight customer with recovery efforts Best strategy: Do it right the first time
Slide 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 13 - 7

Components of an Effective Service Recovery System (Fig 13.4)

Do the job right the first time Effective Complaint Handling Increased Satisfaction and Loyalty

Conduct research
Identify Service Complaints Monitor complaints Develop Complaints as opportunity culture Develop effective system and training in complaints handling Conduct root cause analysis

Resolve Complaints Effectively

Learn from the Recovery Experience

Close the loop via feedback

Slide 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 13 - 8

Strategies to Reduce Customer Complaint Barriers (Table 13.1)

Complaint Barriers for Dissatisfied Customers
Inconvenience
Hard to find right complaint procedure Effort involved in complaining Doubtful Pay Off Uncertain if action will be taken by firm to address problem

Strategies to Reduce These Barriers

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

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
Slide 2007 by Christopher Lovelock and Jochen Wirtz

Thank customers for their feedback

Train frontline employees Allow for anonymous feedback
Services Marketing 6/E Chapter 13 - 9

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

See Service Perspectives 13.2: Guidelines For Effective Problem Resolution

Slide 2007 by Christopher Lovelock and Jochen Wirtz

Services Marketing 6/E

Chapter 13 - 10

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?

Slide 2007 by Christopher Lovelock and Jochen Wirtz

Services Marketing 6/E

Chapter 13 - 11

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
Slide 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 13 - 12

How to Design Service Guarantees

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

Credible

Slide 2007 by Christopher Lovelock and Jochen Wirtz

Services Marketing 6/E

Chapter 13 - 13

The Hampton Inn 100% Satisfaction Guarantee

(Fig 13.5)

What are benefits of such a guarantee? Are there any downsides?

Slide 2007 by Christopher Lovelock and Jochen Wirtz

Services Marketing 6/E

Chapter 13 - 14

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 fraudso 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

Slide 2007 by Christopher Lovelock and Jochen Wirtz

Services Marketing 6/E

Chapter 13 - 15

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

Slide 2007 by Christopher Lovelock and Jochen Wirtz

Services Marketing 6/E

Chapter 13 - 16

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
Slide 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 13 - 17

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
Consumer advocates Trade organizations Legislative agencies

Slide 2007 by Christopher Lovelock and Jochen Wirtz

Services Marketing 6/E

Chapter 13 - 18