Chapter

Service Recovery 8

• The Impact of Service Failure and

Recovery
• How Customers Respond to Service
Failures
• Customers’ Recovery Expectations
• Service Recovery Strategies
• Service Guarantees
 Chapter 8 - Service Recovery

Service recovery: actions taken in response to

a ___________________

What do you do when you receive poor

service?
 Unhappy Customers’
Repurchase Intentions (Figure 8.1)
Unhappy Customers Who Don’t Complain
9%

Unhappy Customers Who Do Complain

Complaints Not Resolved

19%

Complaints Resolved
54%

Complaints Resolved Quickly

82%

Percent of Customers Who Will Buy Again after a

Major complaint (over $100 losses)
 Figure 8.3
Customer Complaint Actions Following Service Failure
 Recovery Paradox
According to the recovery paradox, service
failures should be encouraged

Fallacy of Recovery Paradox

• Fixing mistakes is ______________
• Service failure may be too much to be ________ by
any recovery effort
• Best strategy: ___________________________
 Response to Failures
• If the service failure is really important, if it has
critical consequences for the customer, or if the
customer has much ego involvement in the service
experience, he is more likely to complain (p.219)

• http://
www.hyperorg.com/misc/DoubleTreeShow
_files/frame.html
Customers’ Recovery Expectations (p.
221-222)
An apology
An explanation as to what happened
An assurance problem would not be repeated
An opportunity for customer to vent his frustrations

If firm does nothing about service failure, 86 percent of

customers are dissatisfied. If firm provides apology,
percentage of dissatisfied customers drops to 20 percent
 When They Complain, What Do
Customers Expect?
_________ fairness: outcomes, or compensation
should match the level of their dissatisfaction:

“Their refusal to refund our money or make up for

inconvenience and cold food was inexcusable”
 When They Complain, What Do
Customers Expect?
__________ fairness: fairness in terms of
policies, rules, and timeliness to the
complaint process: Ex-

“They should have assisted me with the

problem instead of giving me a phone
number to call”
 When They Complain, What Do
Customers Expect?
______________ fairness: the interpersonal
treatment received during the complaint
process

“The receptionist was very rude; she made

it seem like the doctor’s time was important
but mine was not.”
 Service Recovery Strategies

• Fail-Safe the Service – Do It Right the First Time

• Welcome and Encourage Complaints – complaints

should be anticipated, encouraged, and tracked:

• Act Quickly – e.g., empower employees

• Provide Adequate Explanations – honest, sincere,
and not manipulative
 Service Recovery Strategies

• Treat Customers Fairly

• Cultivate Relationships with Customers
• Learn from Recovery Experiences:

• Learn from Lost Customers:

 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 __________________

– cannot return the service
– service experience is ______________________
 Exhibit 8.6
Characteristics of an Effective Service Guarantee

• Unconditional
• The guarantee should make its promise unconditionally - no strings
attached.
• Meaningful
• It should guarantee elements of the service that are _________ to the
customer.
• The payout should cover fully the customer's dissatisfaction.
• Easy to Understand and Communicate
• For customers - they need to understand what to expect.
• For employees - they need to understand what to do.
• Easy to Invoke and Collect
• There should not be a lot of ________________ in the way of accessing or
collecting on the guarantee.
When to (not use) Service Guarantee

– Existing service quality in the service is poor

– Service quality is truly _______________
– ______ of the guarantee outweigh the benefits
– Customers perceive little risk in the service
– Little perceived ___________ in service quality
among competitors