Week 11:

Service Failures and Recovery Strategies

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Customer Complaint Actions Following
Service Failure

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 Figure 8.4

Causes Behind Service Switching

Pricing
• High price
• Price increases Response to Service
• Unfair pricing Failure
• Negative response
• Deceptive pricing • No response
• Reluctant response
Inconvenience
• Location/hours Competition
• Wait for appointment
• Wait for service Service • Found better service

Switching Ethical Problems

Core Service Failure
• Service mistakes Behavior •
•
Cheat
Hard sell
• Billing errors • Unsafe
• Service catastrophe • Conflict of interest

Service Encounter Failure Involuntary Switching

• Uncaring
• Impolite • Customer moved
• Unresponsive • Provider closed
• Unknowledgeable

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

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Reasons for service failures:-

 Marketers assess the marketing climate

inadequately.

 The wrong group is targeted.

 A weak positioning strategy is used.

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 A less-than-optimal "configuration" of product
or service attributes and benefits is selected.

 A questionable pricing strategy is

implemented.

 The advertising campaign generates an

insufficient level of new product/new service
awareness.

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 Cannibalization depresses corporate profits.

 Over-optimism about the marketing plan

leads to a forecast that cannot be sustained
in the real world.

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 The marketing plan for the new product or
service is not well implemented in the real
world.

 The marketer believes that the service and

its marketing plan has died and cannot be
revived, when, in fact there is the potential for
resurrection.

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Service recovery

 Negotiation
 Communication
 Advertising
 Incentives
 Relationship Marketing approaches
 Other motivation techniques

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 Customer Complaint Behavior
 Why do customers  Why don’t customers
complain?
 Correct the problem
 Emotional release from
frustration
 Regain some measure of
control by spreading
negative w-o-m
 Solicit sympathy
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complain?
 Don’t know who to complain
to
 Don’t think it will do any good
 May doubt their own
subjective evaluation
 May accept part of the blame
 May want to avoid
confrontation
 May lack expertise
Service Recovery Paradox
 Service Recovery Paradox scenario:
 states that with a highly effective service

recovery, a service failure offers a

chance to achieve higher satisfaction
from customers than if the failure had
never happened. This means that a
good recovery can turn angry and
frustrated customers into loyal
customers.

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 Service Recovery Strategies

Figure 8.5 LMS

Service Guarantees

 service guarantees work for companies who are

already
 effective guarantees can be BIG deals - they

 customers should be involved in the of service

guarantees
 the guarantee should be so stunning that it comes as
a surprise -- a factor

Eight Most Common Remedies
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 customer’s business
 An apology from the firm
 An opportunity for the customer to vent his or her
frustrations to the firm

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 Recovery

Don’t
 Ignore customer
 Blame customer
 Leave customer to fend
for himself
 Downgrade
 Act as if nothing is
wrong
 ‘pass the buck’
Do
 Acknowledge problem
 Explain causes
 Apologise
 Compensate/upgrade
 Lay out options
 Take responsibility

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 Adaptability

Don’t Do
 Promise and fail to  Recognise the
keep them seriousness
 Show unwillingness to  Acknowledge
try
 Embarrass the
 Anticipate
customer  Accommodate
 Laugh at the customer  Adjust
 Avoid responsibility  Explain rules/policies

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 Spontaneity

Don’t Do
 Exhibit impatience  Take time
 Yell/laugh/swear  Be attentive
 Steal from customers  Anticipate needs
 Discriminate  Listen
 Ignore  Provide information
 Show empathy

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 Coping

Don’t Do
 Take customer’s  Listen
dissatisfaction  Try to accommodate
personally  Explain
 Let customer’s  Let go of the customer
dissatisfaction affect
others

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 Types of complainers

 Passives
 Voicers
 Irates
 Activists

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 Customer complaints
 It pays to resolve customer complaints
 On an average only 5 % dissatisfied customers
complain. Others simply go over to the competitor
 A satisfied consumer speaks to an average of 3
people on his her experience
 A dissatisfied consumer gripes to on an average 11
persons about his/her unpleasant experience

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 Companies that focus on resolving
customer complaints
 Pay attention to quality and training of manpower
recruited
 Have clear benchmarks on service quality and
communicate to employees
 Take remedial steps to improve customer
satisfaction and prevent repeats of customer
dissatisfaction
 Have a data base on customer complaints that is
periodically analysed and policies adjusted

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 Satisfied employees will produce
satisfied customers
 Morale
 Motivation
 Mood

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 Managing Service Productivity
 Giving quality service is an expensive business
 Not every consumer is willing to pay extra for
service quality
 Service providers would have to find their optimum
service quality/cost ratios
 Can technology substitute part of the labour
content?
 Can customers substitute part of the labour content?
 Making services obsolete by product innovations

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