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Jatin Vaid

SERVICE RECOVERY
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Service Failure

 A service performance that falls below a

customer’s expectations in such a way that
leads to customer dissatisfaction.
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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.
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Reasons for Service Failures

The service failures bring about negative

feelings and responses from customers.
1. The service may be unavailable when
promised.
2. It may be delivered too late, or slowly.
3. The outcome may be incorrect or poorly
executed.
4. Employees may be rude or uncaring.
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Results of Service Failure

1. Customers leave
2. Telling other customers about their
negative experiences
3. Challenging the organization through
customer rights organizations or legal
action.
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Complaining Customers:
The Tip of the Iceberg
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Unhappy Customers’ Repurchase

Intentions
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Dissatisfied Consumers’ Behavior

 The Retail Customer Dissatisfaction Study 2006 by

the Verde Group found:
 48% of respondents reported that they avoided a store
because of someone else’s negative experience
 for those who encountered problems, 33% said they
would “definitely not” or “probably not” return

 The exponential power of storytelling:

 as people tell the story, the negativity is embellished and
grows
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How Customers Expressed Their Displeasure

Respondents -
Expressions of displeasure Problem
Shared the story with my friends/other people 85%
Complained to the org. that caused the problem1 84%
Decided I'd never do business/come back again 59%
Threatened to talk with/contact management 55%
Yelled or raised my voice 24%
Threatened to report the org. that caused the
16%
problem to a gov't regulatory agency
Threatened legal action 7%
Threatened to contact the media 6%
Cursed/used profanity 6%
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What Customers Wanted to Get

Respondents -
Wanted to get Problem
Product repaired/service fixed 85%
Explanation of why problem occurred 78%
Non-
Assurance problem wouldn't be repeated 78% monetary
Apology 59% remedies
Chance to vent 58%
Money back 49%
Free product or service in the future 30%
Financial compensation for my lost time,
23%
inconvenience or injury
Revenge -- make them pay for the hassle
11%
and inconvenience
Other 9%
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What Complainants Got:

 56% of complainants felt they got

NOTHING
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Length of Time to Resolve

Complaints

100%

80%
% complainants

60%
46%

40%

15% 19%
20% 7%
4% 5% 3%

0%
Immed. Less than 1 1-7 days 8-14 days 15-28 days 28 + days Still not
day, but not resolved
immed.
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Why do not customers complain?

1. They see complaining as a waste of time

2. Do not believe anything positive will happen
3. They do not know how to complain
4. They do not understand the process of
complaining.
5. They may engage in “emotion focus coping” –
self blame, denial
6. For less expensive, frequently purchased
services
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Types of Customer Complaint Actions

1. Complain on the spot to service provider. It

gives the Co. an opportunity to respond
immediately. It’s the best-case scenario for the
Co.
2. Complain later by phone, writing or internet.
(voice responses or seek redress)
3. Spread –ve word of mouth to friends, relatives
and coworkers.
4. Complaining via internet – consumer opinion
forums, blogs, designing websites.
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Customer recovery expectations

1. Understanding and accountability – have prdt repaired;
be reimbursed for hassles; receive a free service in
future; explanation; assurance; thank you; an apology,
and a n opportunity to vent out frustration
2. Fair treatment – justice and fairness in handling
complaints
 Outcome fairness – compensation to match their level of
dissatisfaction
 Procedural fairness – fairness in terms of policies, rules
and timeliness of complaint process.
 Interactional fairness - customers expect to be treated
politely, with care and honesty.
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Fairness Themes in Service Recovery

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Customer Complaint Actions Following

Service Failure
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Service Recovery Paradox

 “A good recovery can turn angry, frustrated
customers into loyal ones. ..can, in fact, create
more goodwill than if things had gone smoothly in
the first place.” (Hart et al.)
 HOWEVER:
 only a small percent of customers complain
 service recovery must be SUPERLATIVE
 only with responsiveness, redress, and empathy/courtesy
 only with tangible rewards
 even though service recovery can improve satisfaction, it
has not been found to increase purchase intentions or
perceptions of the brand
 service recovery is expensive
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Service Recovery Paradox

 The service recovery paradox is more likely to
occur when:
 the failure is not considered by the customer to be
severe
 the customer has not experienced prior failures with the
firm
 the cause of the failure is viewed as unstable by the
customer
 the customer perceives that the company had little
control over the cause of the failure

 Conditions must be just right in order for the

recovery paradox to be present!
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Causes Behind Service Switching

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Types of Complainers

1. Passives: These are least likely to take any

action or spread negative word of mouth. They
doubt the effectiveness of complaining.
2. Voicers: They actively complain to the service
provider, but less likely to spread negative word
of mouth or switch patronage. They give Co. a
second chance.
3. Irates: engage in negative word of mouth
4. Activists:
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Service Recovery Strategies

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Strategies:

1. Do it right the first time

2. Encourage and track complaints
3. Act quickly
4. Provide adequate explanations
5. Treat customers fairly
6. Cultivate relationships
7. Learn from recovery experiences
8. Learn from lost customers
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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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Customer Satisfaction with Timeliness of

Firm Responses to Service Failures
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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 not guaranteed

 cannot return the service
 service experience is intangible (so what do you guarantee?)
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The Hampton Inn 100 Percent

Satisfaction Guarantee
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Characteristics of an Effective
Service Guarantee
 Unconditional
 the guarantee should make its promise unconditionally – no strings
attached
 Meaningful
 the firm should guarantee elements of the service that are important
to the customer
 the payout should cover fully the customer’s dissatisfaction
 Easy to Understand and Communicate
 customers need to understand what to expect
 employees need to understand what to do
 Easy to Invoke and Collect
 the firm should eliminate hoops or red tape in the way of accessing
or collecting on the guarantee
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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, thus satisfying the customer and helping retain loyalty.
 Information generated through the guarantee can be tracked and
integrated into continuous improvement efforts.
 Employee morale and loyalty can be enhanced as a result of having a
service guarantee in place.
 A service guarantee reduces customers’ sense of risk and builds
confidence in the organization.
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British Airways Guarantee

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Why a Good Guarantee Works

 forces company to focus on customers

 sets clear standards

 generates feedback

 forces company to understand why it failed

 builds “marketing muscle”

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Does everyone need a service guarantee?

 Reasons companies might NOT want to

offer a service guarantee:
 existing service quality is poor
 guarantee does not fit the company’s image
 too many uncontrollable external variables
 fears of cheating or abuse by customers
 costs of the guarantee outweigh the benefits
 customers perceive little risk in the service
 customers perceive little variability in service
quality among competitors
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Service Guarantees

 service guarantees work for companies who are

already customer-focused
 effective guarantees can be BIG deals – they put
the company at risk in the eyes of the customer
 customers should be involved in the design of
service guarantees
 the guarantee should be so stunning that it comes
as a surprise – a WOW!! factor
 “it’s the icing on the cake, not the cake”