Service Recovery

SERVICES CLASS-10
Service Recovery
 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

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 to improve the situation for the
customer.
Complaining Customers: The Tip of the Iceberg
 Service Recovery Effects

 Resolving customer problems effectively has a strong impact on customer satisfaction, loyalty, WoM,
bottom line performance
 Well designed service recovery strategy also provides information that can be used for improving the
existing service
 Customer who are dissatisfied are far more less likely to repurchase
 Poor recovery creates “Double Deviation”
 Research tells a satisfied customer on an average tells 9 people but dissatisfied customer tells 22 people!!
 Repeated service failures without an effective recovery strategy in place can aggravate even the best
employee
The Internet Spreads the Story of Poor
Service Recovery
The Service Recovery Paradox

 Isa 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?

 What are the problems with such an approach?

How customer respond to service failures

 Why people do/do not complain?

 High involvement vs low involvement services

 Proactive complainers –Voice responses

 Proactive Spreader of hues and cries
 Might seek intermediary action by a third neutral party
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!

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”
Service Recovery Strategies
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!
Important Steps While Fixing The
Customer
Respond quickly Provide appropriate communication Remedies that customers seek

1. To be treated with dignity

2. An assurance that problem would not be
repeated
3. Service should be fixed
4. An explanation ”Why?”
5. Response in day to day language and not
automated
6. An Apology
7. Money back
8. Free service next time
• Politeness, care, and honesty on the part of the company
and its employees; rude behavior on the part of
fairness
employees may be due to lack of training and
Interactional
empowerment
• Fairness in terms of policies, rules, timeliness of the
complaint process; clarity, speed, no hassles; also
Procedural fairness
choices: “What can we do to compensate you…?”
• Outcome (compensation) should match the customer’s
level of dissatisfaction; equality with what other
Outcome fairness
customers receive; choices
Treat Customers Fairly
Fixing the Problem

 After “fixing the customer” the company should address the

actual problem that created the poor service delivery in the
first place.
 Ifthe 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
 making the service fail-safe
Service Guarantees

 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?)
• The firm should eliminate hoops or red tape in the way of accessing or collecting on
the guarantee
Easy to Invoke
• Customers need to understand what to expect Easy to Understand
• Employees need to understand what to do
• The firm should guarantee elements of the service that are important to the customer Meaningful
• The payout should cover fully the customer’s dissatisfaction
• The guarantee should make its promise free of “if, and or but” conditions or
and Exclusions
exclusions associated with many legal documents. Limited Restrictions
Service Guarantee
Characteristics of an Effective
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.
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
Causes Behind Service Switching
United Airlines Case

 What happened in the United flight 3411?

 What service expectations do customers have of airlines such as United? How did
these expectations develop over time?
 Importance of customer satisfaction and CRM in Airlines. Classify the areas
where CRM plays an important role in Aviation industry
 How can united prevent such incidents from happening in future?
 What steps can United take to correct its tarnished image