Achieving Service Recovery& Obtaining Customer Feedback

Customer Complaining Behavior

Think about the last time you experienced a less-than satisfactory service experience. Did you complain? Why or why not?

Customer Response Categories to Service Failures

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

Understanding Customer Responses to Service Failure

Why do customers complain? Obtain compensation Vent their anger Help to improve the service Altruistic reasons What proportion of unhappy customers complain? 5 10% only complain

Understanding Customer Responses to Service Failure

Why dont unhappy customers complain?
Customers Often View Complaining as Difficult and Unpleasant Role Perception social norms

Who is most likely to complain?

Higher economic standing , better education more confidence, knowledge and motivation

Understanding Customer Responses to Service Failure

Where do customers complain? Place where the service is received What do customers expect once they have made a complaint? Procedural justice fair rules and policies. Interactional justice employees of the firm and their behavior Outcome justice compensation that customer receives

Three Dimensions of Perceived Fairness in Service Recovery Process

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

Customer Response to Effective Service Recovery

When was the last time you were truly satisfied with an organizations response to your complaint. Describe in detail what happened and what made you satisfied.
How did it affect your loyalty to the firm?

How Complaint Resolution Affects Customer Retention Rates

Percent of Unhappy Customers Retained

100 90 80 70 60 50 40 30 20 10 0

95%
82% 70% 54% 46% 37% 19% 9%
Customer did not complain Complaint was not resolved Complaint was resolved
Problem cost $1$5

Complaint was resolved quickly

Problem cost > $100

Source: Claes Fornell, Birger Wernerfelt, A Model for Customer Complaint Management, Marketing Science, Vol. 7, No. 3 (Summer, 1988), pp. 287298

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

 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

The Service Recovery Paradox

Principles of Effective Service Recovery Systems

Components of an Effective Service Recovery System

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

Strategies to Reduce Customer Complaint Barriers

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 Unpleasantness Fear of being treated rudely

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 Thank customers for their feedback Train frontline employees

Hassle, embarrassment

Allow for anonymous 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

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?

Service Guarantee

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

How to Design Service Guarantees

Unconditional - everything is unconditional and there should be no surprise Easy to understand and communicate clearly aware Meaningful to the customer equivalent and adequate for the failure Easy to invoke less on the customer, more to the provider Easy to collect Credible

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
All service aspects are covered Explicit minimum performance standards on important attributes

Discouraging Abuse and Opportunistic Behavior

 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?

Dealing with Customer Fraud

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)

Dealing with Customer Fraud

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

Learning From Customer Feedback

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

Customer Feedback Collection Tools

Total market surveys and Annual Surveys all major processes and products Post-transaction surveys after completing a specific transaction (complete) Service Feedback Cards feedback card after completion of a major process and invited to return by mail or other means. Mystery Shopping Focus groups and Service Review

Customer Feedback Collection Tools

Unsolicited Customer 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

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

Key Customer Feedback Collection Tools:

Strengths and Weakness
LEVEL OF MEASUREMENT TRANSACTION SPECIFIC PROCESS

(Table 13.3)
FIRST HAND LEARNING COST EFFECTIVENESS

POTENTIAL
FOR SERVICE REPRESENTATIVE RELIABLE ACTIONABLE RECOVERY

COLLECTION TOOLS TOTAL MARKET SURVEY (INCLU. COMPETITORS)

FIRM

ANNUAL SURVEY ON OVERALL SATISFACTION

TRANSACTIONAL SURVEY

SERVICE FEEDBACK CARDS MYSTERY SHOPPING UNSOLICITED FEEDBACK (e.g., COMPLAINTS) FOCUS GROUP DISCUSSIONS SERVICE REVIEWS Source: Adapted from Jochen Wirtz and Monica Tomlin, Institutionalizing Customer -Driven Learning Through Fully Integrated Customer Feedback Systems. Managing Service Quality,10, no.4 (2000): p. 210.

ONLINE ASSIGNMENT
Select a high-contact service firm with a retail outlet. Visit the outlet and pretend to be a customer. Observe the behavior of the service staff toward other customers for a while. After that, choose an instance, (e.g., when there are very few customers, or when there are many customers), and make several requests to the sale staff. Observe how they respond to you. You may also choose to behave like an unreasonable customer to see how the staff respond to you. Did they accede to your request cheerfully or grudgingly? Were they interested in going out of their way to help you? How did other people, like their colleagues or other customers react during the whole encounter?

THANK YOU