SERVICE RECOVERY

Service Recovery Defined

Service failures : Service performances that fall below customer expectations and they bring about negative feelings and responses from customers
Service recovery refers to the actions taken by an organizations in response to a service failure

Reasons ?
Left unfixed, failures can result in customers leaving, spreading bad word-of-mouth and even challenging the organization through consumer rights organizations

Customer Response Categories to Service Failures (Fig. 13.3)

Slide by Lovelock, Wirtz and Chew

Essentials of Services Marketing

Chapter 1 - Page 3

Service Recovery Effects

Has a strong impact on customers satisfaction, loyalty, wordof-mouth communication

Customers who experience service failures but who are ultimately satisfied based on recovery efforts by the firm, tend to be more loyal than those whose problems are not resolved

Recovery Paradox rare instances when an initially dissatisfied customer experiences an excellent service recovery. Eg: hotel front desk person upgrades his guest to a better room at the original price on non availability of room

Unhappy Customers Repurchase Intentions

Unhappy Customers Who Dont Complain

9% 37%
Unhappy Customers Who Do Complain Complaints Not Resolved

19% 46% 54% 70% 82%

Complaints Resolved

Complaints Resolved Quickly

95%
Percent of Customers Who Will Buy Again

Minor complaints ($1-$5 losses)

Major complaints (over $100 losses)

Source: Adapted from data reported by the Technical Assistance Research Program.

These four categories of complainers types will be relatively consistent and each type can be found in all companies and industries:Passive-These customers are least likely to take any action. Voicers- These customers actively complain to the service provider but they are less likely to spread negative word of mouth Irates-These consumers are more likely to engage in negative word of mouth to friends and relatives and to switch providers than are others. Activists-These consumers are characterized by above average propensity to complain on all dimensions.

Dimensions of Perceived Fairness in Service Recovery Fairness in Service Recovery Processcess

When They Complain, What Do Customers Expect?

Outcome Fairness
Customers expect outcomes or compensation, that match the level of their dissatisfaction. Compensation in form of money, an apology, future free services, reduced charges repairs or/ and replacements Equity in exchange they want to feel that the company has paid for its mistakes. Equality-similar to other customers.

Procedural Fairness
Customer expect fairness in terms of policies and timliness of complaint process.

Interactional Fairness
Customers expect to be treated politely, with car and honesty This form of fairness can dominate the others

Dealing with Complaining Customers and Recovering from Service Failure Take complaints professionally and not personally Be prepared to deal with angry customer who may behave in an insulting way to service personnel who may not be at fault Take the perspective that customer complaints allow firm a chance to
Correct problems, Restore relationships

Improve future satisfaction for all

Develop effective service recovery procedures

Slide by Lovelock, Wirtz and Chew Essentials of Services Marketing Chapter 1 - Page 9

Service Recovery Strategies

Welcome and Encourage Complaint s

Fail-safe the Service

Act Quickly

Treat Customers Fairly

Service Recovery
Learn form Recovery Experiences

Learn from Lost Customers

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 disappearscustomers 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 by Lovelock, Wirtz and Chew

Essentials of Services Marketing

Chapter 1 - Page 11

Do it Right the First Time!!

Recovery is unnecessary, customers get what they expect, and the costs of redoing the service and compensating of errors can be avoided Create a culture of zero defections

Welcome and Encourage Complaints

Complaints should be anticipated, encouraged and tracked

A complaining customer should truly be viewed as a friend

Ways to encourage and track complaints satisfaction surveys, lost customers research, frontline discovering the sources of dissatisfaction Teach customers how to complain Use technology to simplify complaining process Toll free numbers, email

Act Quickly
This requires systems and procedures that allow quick action and empowered employees

Treat Customers Fairly

Fairness in terms of outcome they receive, the process by which recovery takes place, and the interpersonal treatment

Learn from Recovery Experience

Conduct root cause analysis to modify or eliminate processes

Learn from Lost Customers

Learn from customers who defect or decide to leave Its essential to prevent the same mistakes and losing more customers in future

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 Failures

Uncaring Impolite Unresponsive Unknowledgeable

Involuntary Switching
Customer Moved Provider Closed

Source: Sue Keaveney, Customer Switching Behavior in Service Industries: An Exploratory Study, Journal of Marketing, April, 1995, pp. 71-82.

A guarantee is a pledge or assurance that a product is offered by a firm will perform as promised and if not then some form of compensation will be undertaken by the firm. Unconditional: Specific Purpose Guarantee Implicit Guarantee

A good guarantee as suggested by many authors is: Unconditional. No strings attached Easy to understand and communicate. customers and employees know what to expect and what is expected of them Meaningful. ]aspect of service that is important to the customer] Easy to invoke. The customer should not have to jump through hoops to invoke the guarantee as this causes further dissatisfaction.

The guarantee counts most in services

It forces:
Provision of error free service due to promise Focus on knowing what the customer really wants Increases volume of customers and lifetime value to firm Encourages purchase Positive word of mouth Customer loyalty Reduced price sensitivity to service

Reduces risk therefore:

Customers value reliability over all other

dimensions Statement explaining the service the customer may expect (the promise) and what the company will do if it fails to deliver (the payout).

Promise of consistency compared to other services Cover customer costs Repeat business Assure customers subsequent service will be higher quality => change attitudes