Chapter 13

Customer Feedback and

Service Recovery

Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 13 - 1
 American Customer Satisfaction Index:
Selected Industry Scores, 2002
Score 100
(Max = 100)
90 85
79 80 79
80 74 76
71 71 70
70 66 65 62
60
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40
30
20
10

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2002 vs 2001
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Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 13 - 2
 Key Questions for Managers to Ask about
Customer Complaining Behavior

 Why do customers complain?

 What proportion of unhappy customers complain?
 Why don’t unhappy customers complain?
 Who is most likely to complain?
 Where do customers complain?

Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 13 - 3
 Courses of Action Open to a Dissatisfied
Customer (Figure 13.1)

Complain
Complainto tothe
the
service firm
service firm
Take
Takesome
someform Complain
form Complainto toaa
of public action third
of public action thirdparty
party
Take
Takelegal
legalaction
action
Service Take
Takesome
someform
ServiceEncounter
Encounter of private
form
action
to seek redress
to seek redress
isisDissatisfactory
Dissatisfactory of private action
Defect
Defect(switch
(switch
provider)
provider)
Take
Takeno
noaction
action
Negative
Negativeword-of-
word-of-
mouth
mouth

Any
Anyone
oneororaacombination
combinationof
of
these responses is possible
these responses is possible

Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 13 - 4
 Dimensions of Perceived Fairness in Service
Recovery Process (Figure 13.2)

Complaint
ComplaintHandling
Handling&&Service
Service
Recovery Process
Recovery Process

Justice Dimensions of the Service Recovery Process

Procedural
Procedural Interactive
Interactive Outcome
Outcome
Justice
Justice Justice
Justice Justice
Justice

Customer
CustomerSatisfaction
Satisfactionwith
withthe
the
Service
ServiceRecovery
Recovery
Source: Tax and Brown

Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 13 - 5
 Proportion of Unhappy Customers Who Buy
Again Depending on the Complaint Process

100 95%
90 82%
80 70%
70
60 54%
46%
50
37%
40
30 19%
20 9%
10
0
Customer did not Complaint was Complaint Complaint was
complain not resolved was resolved resolved quickly

Problem cost > $100 Problem cost $1 - 5

Source: TARP study

Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 13 - 6
 Impact of Effective Service Recovery
on Retention

No
Problem
84%

Problem,
but effectively 92%
resolved

Problem
46%
Unresolved

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Customer Retention
Source: IBM-Rochester study

Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 13 - 7
 Components of an Effective Service Recovery
System (Figure 13.3)

Do
Dothe
theJob
JobRight
First
Rightthe
Time
First Time
the
+
Effective
EffectiveComplaint
Complaint
Handling
Handling = Increased
IncreasedSatisfaction
and
Satisfaction
Loyalty
and Loyalty

Conduct
 ConductResearch
Research
Identify
IdentifyService
Service Monitor
 MonitorComplaints
Complaints
Complaints
Complaints Develop
 Develop“Complaints
“Complaints
as Opportunity”
as Opportunity”
Culture
Culture

Resolve
ResolveComplaints
Complaints
Effectively Develop
 DevelopEffective
Effective
Effectively System
System andTraining
and Trainingin
in
Complaints Handling
Complaints Handling

Learn
Learnfrom
fromthe
the Conduct
 ConductRoot
RootCause
Cause
Recovery Experience
Recovery Experience Analysis
Analysis

Close the Loop via Feedback

Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 13 - 8
 Strategies to Reduce Customer Complaint
Barriers (Table 13.1)
Complaint Barriers for
Dissatisfied Customers
Inconvenience
 Difficult to find the right complaint
procedure.
 Effort, e.g., writing a letter.
Doubtful Pay Off
 Uncertain whether any action, and
what action will be taken by the
firm to address the issue the
customer is unhappy with.
Unpleasantness
 Complaining customers fear that
they may be treated rudely,
 may have to hassle, or
 may feel embarrassed to complain.
Slide ©2004 by Christopher Lovelock and Jochen Wirtz
Strategies to Reduce These Barriers
Make feedback easy and convenient by:
 Printing Customer Service Hotline numbers,
e-mail and postal addresses on all
customer communications materials.
Reassure customers that their feedback will be
taken seriously and will pay off by:
 Having service recovery procedures in
place, and communicating this to
customers.
 Featuring service improvements that
resulted from customer feedback.
Make providing feedback a positive
experience:
 Thank customers for their feedback.
 Train the frontline not to hassle and make
customers feel comfortable.
 Allow for anonymous feedback.
Services Marketing 5/E 13 - 9
 How to Enable Effective Service Recovery

 Be proactive—on 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

Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 13 - 10
 Guidelines for Effective
Problem Resolution (Management Memo 13.1)

Act fast Give benefit of doubt

Admit mistakes but don’t Clarify steps to solve
be defensive problem
Understand problem from Keep customers informed
customer’s viewpoint of progress
Don’t argue Consider compensation
Acknowledge customer’s Persevere to regain
feelings goodwill

Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 13 - 11
 Service Guarantees Help Promote and Achieve
Service Loyalty

Force firms to focus on

what customers want
Set clear standards
Highlights cost of service
failures
Require systems to get &
act on, customer feedback
Reduce risks of purchase
and build loyalty

Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 13 - 12
 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 – like the full-satisfaction, adding
explicit minimum performance standards on important
attributes

Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 13 - 13
 The Hampton Inn 100% Satisfaction Guarantee
(Figure 13.4)

 What are the benefits of

such a guarantee?

 Are there any downsides?

Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 13 - 14
 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

Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 13 - 15
 Building a Customer Feedback System

 Total market surveys

 Post-transaction surveys
 Ongoing customer surveys
 Customer advisory panels
 Employee surveys/panels
 Focus groups
 Mystery shopping
 Complaint analysis
 Capture of service
operating data

Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 13 - 16
 Strengths and Weakness of Key Customer Feedback
Collection Tools (Table 13.3)

Selection of a cocktail of effective customer feedback

collection tools.
Multi-level Measurement Represen Potential First
Action- Cost
Collection Tools -tative, for Service Hand
Service Process Specific able Effective
Satisfaction Satisfaction Feedback Reliable Recovery Learning

Total Market Survey (inclu.

competitors)
Annual Survey on overall
satisfaction
Transactional Survey
(process specific)
Service Feedback Cards
(process specific)
Mystery Shopping
(service testers)
Unsolicited Feedback Recd
(Online feedback system)

Focus Group Discussions

Service Reviews

Meets Requirements: Fully Moderate Little/Not at all

Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 13 - 17
 Entry Points for Unsolicited Feedback

 Employees serving customers face-to-face or by phone

 Intermediaries acting for original supplier
 Managers contacted by customers at head/regional office
 Complaint cards mailed or placed in special box
 Complaints passed to company by third-party recipients
 consumer advocates
 trade organizations
 legislative agencies
 other customers

Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 13 - 18