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SERVICE RECOVERY

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Chapter8-2

Service Recovery
The Impact of Service Failure and Recovery

How Customers Respond to Service Failures Customers Recovery Expectations Switching versus Staying Following Service Recovery

Service Recovery Strategies


Service Guarantees
McGraw-Hill/Irwin 2009 The McGraw-Hill Companies, All Rights Reserved

Objectives for Chapter 8: Service Recovery


Illustrate the importance of recovery from service failures in keeping customers and building loyalty. Discuss the nature of consumer complaints and why people do and do not complain.

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Provide evidence of what customers expect and the kind of responses they want when they do complain.
Present strategies for effective service recovery, together with examples of what does and does not work. Discuss service guaranteeswhat they are, the benefits of guarantees, and when to use themas a particular type of service recovery strategy.
McGraw-Hill/Irwin 2009 The McGraw-Hill Companies, All Rights Reserved

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Reliability is Critical in Service but


In all service contexts, service failure is inevitable/tdk dpt dielakkan Service failure occurs when service performance that falls below a customers expectations in such a way that leads to customer dissatisfaction.

Service recovery refers to the actions taken by a firm in response to service failure.
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Complaining Customers: The Tip of the Iceberg

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Figure 8.1
McGraw-Hill/Irwin Source: TARP Worldwide Inc., 2007. 2009 The McGraw-Hill Companies, All Rights Reserved

Unhappy Customers Repurchase Intentions

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60%

51% 43%

% Definitely Will Repurchase

50% 40% 30%

19% 20% 8% 10% 0%

21%

Custom ers Satisfied Mollified Dissatisfied NonWith No Com plainants Com plainants Com plainants Com plainants Problem

Figure 8.2
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Dissatisfied Consumers Behavior


The Retail Customer Dissatisfaction Study 2006 by the Verde Group found:
48% of respondents reported that they avoided a store because of someone elses negative experience for those who encountered problems, 33% said they would definitely not or probably not return

The exponential power of storytelling:


as people tell the story, the negativity is embellished/dibumbui and grows
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8-8

Customer Rage/marah Study Conducted by

In collaboration with

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2009 The McGraw-Hill Companies, All Rights Reserved

8-9

How Customers Expressed Their Displeasure ?

Expressions of displeasure Shared the story with my friends/other people Complained to the org. that caused the problem1 Decided I'd never do business/come back again Threatened to talk with/contact management Yelled or raised my voice Threatened to report the org. that caused the problem to a gov't regulatory agency Threatened legal action Threatened to contact the media Cursed/used profanity

Respondents Problem 85% 84% 59% 55% 24% 16% 7% 6% 6%

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8-10

What Customers Wanted to Get ?

Wanted to get Product repaired/service fixed Explanation of why problem occurred Assurance problem wouldn't be repeated Apology Chance to vent Money back Free product or service in the future Financial compensation for my lost time, inconvenience or injury Revenge -- make them pay for the hassle and inconvenience Other
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Respondents Problem 85% 78% 78% 59% 58% 49% 30% 23% 11% 9%

Nonmonetary remedies

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8-11

What Complainants Got ?

56% of complainants felt they got

NOTHING

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Ping-Ponging (Number of Contacts Needed to Resolve Complaint)

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100%

Mean number of contacts Complainants = 4.3


80%
% complainants

60%

40% 18% 20% 18% 19% 11% 7% 6% 21%

0% One Two Three Four Five Six Seven or more

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Length of Time to Resolve Complaints

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100%

80%
% complainants

60% 46% 40% 15% 20% 4% 0%


Immed. Less than 1 day, but not immed. 1-7 days 8-14 days 15-28 days 28 + days Still not resolved

19% 5% 3%

7%

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2009 The McGraw-Hill Companies, All Rights Reserved

8-14

Fairness Themes in Service Recovery

Exhibit 8.3
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Customer Complaint Actions Following Service Failure

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Figure 8.4
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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. (Hart et al.) HOWEVER:
only a small percent of customers complain service recovery must be SUPERLATIVE
only with responsiveness, redress, and empathy/courtesy only with tangible rewards

even though service recovery can improve satisfaction, it has not been found to increase purchase intentions or perceptions of the brand service recovery is expensive
McGraw-Hill/Irwin 2009 The McGraw-Hill Companies, All Rights Reserved

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Service Recovery Paradox/lawan


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 cause of the failure is viewed as unstable by the customer the customer perceives that the company had little control over the cause of the failure

Conditions must be just right in order for the recovery paradox to be present!
McGraw-Hill/Irwin 2009 The McGraw-Hill Companies, All Rights Reserved

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Causes Behind Service Switching


Pricing
High price Price increases Unfair pricing Deceptive pricing

Response to Service Failure


Negative response No response Reluctant response

Inconvenience
Location/hours Wait for appointment Wait for service

Competition

Core Service Failure


Service mistakes Billing errors Service catastrophe

Service Switching Behavior

Found better service

Ethical Problems
Cheat Hard sell Unsafe Conflict of interest

Service Encounter Failure


Uncaring Impolite Unresponsive Unknowledgeable

Involuntary Switching
Customer moved Provider closed

Figure 8.5
McGraw-Hill/Irwin
Source: Sue Keaveney, Customer Switching Behavior in Service Industries: An Exploratory Study, Journal of Marketing 59 (April, 1995), pp. 71-82.

2009 The McGraw-Hill Companies, All Rights Reserved

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Service Recovery Strategies


Act Quickly Fail-safe the Service

Service Recovery Strategies

Treat Customers Fairly

Learn from Recovery Experiences

Figure 8.6
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Eight Most Common Remedies/perbaiki Customers Seek with Serious Problems


Have the product repaired or service fixed Be reimbursed for the hassle of having experienced a problem Receive a free product or service in the future Explanation by the firm as to what happened Assurance that the problem will not be repeated A thank you for the customers business An apology from the firm An opportunity for the customer to vent his or her frustrations to the firm
McGraw-Hill/Irwin

8-20

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Customer Satisfaction with Timeliness of Firm Responses to Service Failures

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Figure 8.7
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Service Guarantees
guarantee = an assurance of the fulfillment of a condition (Websters Dictionary) in a business context, a guarantee 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 for tangible products, a guarantee is often done in the form of a warranty/garansi/jaminan services are often not guaranteed
cannot return the service service experience is intangible (so what do you guarantee?)
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The Hampton Inn 100 Percent Satisfaction Guarantee

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Figure 8.3
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Characteristics of an Effective Service Guarantee


Unconditional Meaningful

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the guarantee should make its promise unconditionally no strings attached


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

Easy to Invoke/diminta and Collect


the firm should eliminate hoops or red tape in the way of accessing or collecting on the guarantee

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8-25

Benefits of Service Guarantees


A good guarantee forces the company to focus on its customers.

An effective guarantee sets clear standards for the organization.


A good guarantee generates immediate and relevant feedback from customers.

When the guarantee is invoked there is an instant opportunity to recover, thus satisfying the customer and helping retain loyalty.
Information generated through the guarantee can be tracked and integrated into continuous improvement efforts. Employee morale and loyalty can be enhanced as a result of having a service guarantee in place. A service guarantee reduces customers sense of risk and builds confidence in the organization.
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British Airways Guarantee

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8-27

Why a Good Guarantee Works ?


forces company to focus on customers sets clear standards

generates feedback
forces company to understand why it failed builds marketing muscle
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8-28

Does everyone need a service guarantee? 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 customers perceive little risk in the service customers perceive little variability in service quality among competitors
McGraw-Hill/Irwin 2009 The McGraw-Hill Companies, All Rights Reserved

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Service Guarantees
service guarantees work for companies who are already customer-focused effective guarantees can be BIG deals they put the company at risk in the eyes of the customer customers should be involved in the design of service guarantees the guarantee should be so stunning that it comes as a surprise a WOW!! factor its the icing on the cake, not the cake
McGraw-Hill/Irwin 2009 The McGraw-Hill Companies, All Rights Reserved

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