Strategizing for Service Recovery

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Chapter
seven

• Strategizing for Service Recovery

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Bless not only the road but also the bumps on the
road. They are all part of the higher
journey.- Julia Cameron
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TARP Data Technical Assistance Research Programs

• The average customer with an unresolved complaint
  will tell 9 to 10 people.
• 13 of customers with an unresolved complaint
  will tell more than 20 people.
• As many as 90 of complainers will return to your
  business if their complaint is resolved.
• For every complaint received, the average company
  has 26 unhappy customers who never complain.

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Switching Behavior

• When a purchase exceeded 100, 54 of customers
  said they would remain loyal to the company or
  brand if the service failure were properly
  resolved.
• Only 19 of customers said they would repeat the
  purchase if the service failure were not resolved
  to their satisfaction.
• For less expensive problems (under 5), three out
  of every four customers said they would remain
  loyal if the service failure were properly
  resolved.

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Customer Relationship

• The more serious the failure, the more likely the
  customer is to switch to another company, no
  matter what recovery effort the company makes.
• A strong employee-customer relationship can have
  a mediating effect on satisfaction and thus on
  the intention to stay or defect.

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Characteristics of Service Failures

• A customers tolerance depends on the situation
• A customers reaction depends on the customers
  perception of how critical the service is to him
  or her.

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Failures Do Happen

• No matter how rigorous the procedures and
  employee training or how advanced the technology,
  zero defects is an unattainable goal.
• Plan for your failures and learn from them.

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Service Recovery

• Is the actions the company takes in response to
  service failure
• Should be a management philosophy that holds
  customer satisfaction as a primary concern

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Figure 7.1 The Service Recovery Process
Source Tax, S. S., Brown, S. W. (1998).
Recovering and learning from service failure.
Sloan Management Review, (Fall), 75-88.
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Getting It Right the First Time

• Engage in the act of leadership
• Put service quality at the center of
  organizational activities
• Maintain strong focus on the customers
• Assure that quality improvement is everybodys
  responsibility

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Getting It Right the First Time

• Make continuous improvement an integral part of
  the organizations philosophy
• Focus on new service development and service
  design
• Have quality improvement drive productivity and
  profitability

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Getting It Right the First Time

• Benchmark compare ones organization with
  others
• Always implement service guarantees
• Use complaint management to monitor customer
  dissatisfaction

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Getting It Right the First Time

• Actively use employee commitment and customer
  involvement.
• Systematically measure quality for customers,
  employees, and owners.
• Reward quality improvement based on facts.

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The Recovery Paradox

• A service recovery that exceeded expectations
  results in higher customer satisfaction than the
  satisfaction level of customers who never report
  a failure.

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Service Recovery

• A negative service experience can be turned into
  a positive one if the problem is corrected in a
  timely, friendly, empathetic, and generous
  manner.
• Offensive strategies
• Defensive strategies

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Managerial Actions to Enhance Service Recovery
Performance

• Set and communicate clear goals
• Empower the front line to solve immediate
  problems
• Reward employees for service excellence

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Ways to Strengthen Internal Customer Service
Orientation

• Employees should never complain
• within earshot of customers
• to customers about other employees
• Employees should strive to build bridges between
  departments.
• Let employees become customers for a day.
• Use post mortems so everyone can learn from the
  experience.

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Keys to Service Recovery

• Acknowledge the problem or failure
• Explain the reasons for the failure wherever
  possible
• Empathize with a sincere expression of feeling
  for the customers inconvenience
• Apologize where appropriate

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Keys to Service Recovery

• Solve the problem as quickly as possible
• Compensate the customer appropriately
• Provide extra value
• Follow up with a phone call, letter, or other
  communication

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To Build an Effective and Proactive Recovery
System

• Measure costs of effective service recovery
• Break customer silence
• Anticipate needs for recovery
• Act fast
• Train employees
• Empower the front line
• Close the customer feedback loop

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Table 7.1 Actions to Satisfy Customers
Source Hart, C. W. L., Heskett, J. L., Sasser,
Jr. W. E, (1990). The profitable art of service
recovery. Harvard Business Review, 68
(July-August), 148-156.
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Figure 7.2 Satisfying and Delighting Customers
Source Johnston, R., Fern, A. (1999). Service
recovery strategies for single and double
scenarios. The Service Industry Journal, 19 (2).
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Figure 7.3EmpowermentService Recovery
Relationship
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Service Recovery Strategy

• Organizations must
• Plan for and create a solid service recovery
  strategy
• Make decisions about tactics to use in
  implementing the strategy

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Service Recovery Impact

• Successful service recovery
• Positively affects customer satisfaction
• Positively affects customer loyalty
• Therefore, enhances the organizations
  profitability

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Key Concepts

• Service recovery
• The recovery paradox
• Switching behaviors
• Risk management
• Service recovery strategy