8ChapterChapter

Service Recovery

• 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)

82%

54%

19%

9%

Complaints Resolved Quickly

Complaints Resolved

Complaints Not Resolved

Unhappy Customers Who Don’t Complain

Unhappy Customers Who Do Complain

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