Chapter

Service Recovery 7

§ The Impact of Service Failure and Recovery

§ How Customers Respond to Service Failures

§ Service Recovery Strategies: Fixing the Customer

§ Service Recovery Strategies: Fixing the Problem

§ Service Guarantees

§ Switching versus Staying Following Service Recovery

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Objectives for Chapter 7:
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.

§ Provide evidence of what customers expect and the kind of responses

they want when they do complain.

§ Present strategies for effective service recovery, including ways to “fix

the customer” after a service failure and to “fix the problem.”

§ Discuss service guarantees—what they are, the benefits of guarantees,

and when to use them—as a particular type of service recovery
strategy.
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Reliability is Critical in Service but…

§ In all service contexts, service failure is inevitable.

§ Service failure occurs when service performance that

falls below a customer’s 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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Figure 7.1: Complaining Customers:
The Tip of the Iceberg

Source: Data from TARP Worldwide Inc., 2007

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Unhappy Customers’ Repurchase Intentions

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Exhibit 7.1: The Internet Spreads the Story
of Poor Service Recovery

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The Service Recovery Paradox

§ Is a customer who has experienced a service

failure and exemplary service recovery more
likely to be more satisfied – impressed even –
with the service provider?

§ Should a firm “screw up” just a little so that it

can “fix the problem” superbly?

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The 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. 1990)
§ 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

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The Service Recovery Paradox
§ 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!

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Customer Complaint Actions Following Service
Failure

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Types of Complainers

§ Passives: least likely to take any action, say anything to

the provider, spread negative WOM, or complain to a
third party; doubtful of the effectiveness of
complaining
§ Voicers: actively complain to the provider, but not
likely to spread negative WOM; believe in the positive
consequences of complaining - the service provider’s
best friends!

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Types of Complainers

§ Irates: more likely to engage in negative WOM to

friends and relatives and to switch providers; average
in complaints to provider; unlikely to complain to third
parties; more angry, less likely to give provider a
second chance
§ Activists: above average propensity to complain on all
levels; more likely to complain to a third party; feel
most alienated from the marketplace compared to
other groups; in extreme cases can become “terrorists”

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Service Recovery Strategies

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Fixing the Customer

§ When customers take the time to complain,

they generally have high expectations.
§ They expect the company to respond quickly and to
be accountable.
§ They expect to be compensated for their grief and
for the hassle of being inconvenienced.
§ They expect to be treated nicely in the process!

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Respond Quickly

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Provide Appropriate Communication

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Treat Customers Fairly
§ Outcome fairness
§ Outcome (compensation) should match the customer’s level of
dissatisfaction; equality with what other customers receive; choices
§ Procedural fairness
§ Fairness in terms of policies, rules, timeliness of the complaint
process; clarity, speed, no hassles; also choices: “What can we do to
compensate you…?”
§ Interactional fairness
§ Politeness, care, and honesty on the part of the company and its
employees; rude behavior on the part of employees may be due to
lack of training and empowerment

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Fixing the Problem

§ After “fixing the customer” the company should

address the actual problem that created the poor
service delivery in the first place.
§ If the problem is likely to recur for other customers,
then the service delivery process may need to be fixed,
too.
§ Strategies for fixing the problem include encouraging
and tracking complaints, learning from recovery
experiences and from lost customers, and making the
service fail-safe.

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Service Guarantees
§ Guarantee = an assurance of the fulfillment of a condition
(Webster’s 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

§ Services are often not guaranteed

§ Cannot return the service
§ Service experience is intangible (so what do you guarantee?)
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Characteristics of an Effective
Service Guarantee
§ Unconditional
§ The guarantee should make its promise unconditionally – no strings
attached
§ Meaningful
§ The firm should guarantee elements of the service that are important to
the customer
§ The payout should cover fully the customer’s dissatisfaction
§ Easy to Understand
§ Customers need to understand what to expect
§ Employees need to understand what to do
§ Easy to Invoke
§ The firm should eliminate hoops or red tape in the way of accessing or
collecting on the guarantee

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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.
§ Information generated through the guarantee can be tracked
and integrated into continuous improvement efforts.
§ A service guarantee reduces customers’ sense of risk and builds
confidence in the organization.

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When to Use (or Not Use) a Guarantee

§ Reasons companies might NOT want to offer a

service guarantee:
§ Existing service quality is poor
§ A guarantee does not fit the company’s image
§ Service quality is truly uncontrollable
§ Potential exists for customer abuse of the guarantee
§ Costs of the guarantee outweigh the benefits
§ Customers perceive little risk in the service

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Causes Behind Service Switching

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