Achieving Service Recovery

and Obtaining Customer

Feedback

Learning Objectives

Uncover customer complaining behaviour

Design effective service recovery strategies
Determine the usefulness of service guarantees
Outline front line staff response to abusive and/or
opportunistic customer behaviour
Create institutionalized systematic learning from
feedback

Customer Complaining
Behaviour

Customer Response Categories to

Service Failures

Complain
Complainto
tothe
the
service
firm
service firm

Service
Service
Encounter
Encounterisis
Dissatisfactory
Dissatisfactory

Take
Takesome
some
form
of
form ofPublic
Public
Action
Action
Take
Takesome
some
form
of
form of
Private
PrivateAction
Action
Take
TakeNo
No
Action
Action

Complain
Complainto
toaa
third
thirdparty
party
Take
Takelegal
legalaction
action
to
seek
redress
to seek redress
Defect
Defect(switch
(switch
provider)
provider)
Negative
Negativewordwordof-mouth
of-mouth

Any
Anyone
oneor
oraacombination
combination
of
these
responses
of these responsesisis
possible
possible

Understanding Customer Responses to

Service Failure

Why do customers complain?

What proportion of unhappy customers complain?
Why dont unhappy customers complain?
Who is most likely to complain?
Where do customers complain?
What do customers expect once they have made a complaint?

Customers Often View Complaining as

Difficult and Unpleasant (Fig 13.2)

Three Dimensions of Perceived Fairness in Service

Recovery Process
Complaint
ComplaintHandling
Handlingand
andService
Service
Recovery
Process
Recovery Process
Justice Dimensions of the Service Recovery
Process
Procedural
Procedural
Justice
Justice

Interactive
Interactive
Justice
Justice

Customer
CustomerSatisfaction
Satisfactionwith
with
Service
ServiceRecovery
Recovery

Outcome
Outcome
Justice
Justice

Customer Responses to
Effective Service Recovery

Importance of Service Recovery

Plays a crucial role in achieving customer
satisfaction
Tests a firms commitment to satisfaction and
service quality
Employee training and motivation is highly
important

Impacts customer loyalty and future profitability

Complaint handling should be seen as a profit centre,
not a cost centre

The Service Recovery Paradox

Customers who experience a service failure that is
satisfactorily resolved more likely to make future purchases
than customers without problems (Note: not all research
supports this paradox)
If second service failure occurs, the paradox disappears
customers expectations have been raised and they become
disillusioned
Severity and recoverability of failure (e.g., spoiled wedding
photos) may limit firms ability to delight customer with
recovery efforts
Best strategy: Do it right the first time

Principles of Effective
Service Recovery Systems

Components of an Effective
Service Recovery System
Do the job right the
first time

Effective Complaint
Handling

Increased
Satisfaction and
Loyalty

Conduct research
Identify Service
Complaints

Resolve Complaints
Effectively

Learn from the

Recovery Experience

Close the loop via feedback

Monitor complaints
Develop Complaints as
opportunity culture

Develop effective system

and training in
complaints handling
Conduct root cause analysis

Strategies to Reduce Customer

Complaint Barriers
Complaint Barriers for
Dissatisfied Customers

Strategies to Reduce These Barriers

Inconvenience
Hard to find right complaint
procedure
Effort involved in complaining

Put customer service hotline

numbers,
e-mail and postal
addresses on all customer
communications materials

Doubtful Pay Off

Uncertain if action will be taken
by firm to address problem

Have service recovery procedures in

place, communicate this to
customers
Feature service improvements that
resulted from customer feedback

Unpleasantness
Fear of being treated rudely
Hassle, embarrassment

Thank customers for their feedback

Train frontline employees
Allow for anonymous feedback

How to Enable
Effective Service Recovery
Be proactiveon 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

How Generous
Should Compensation Be?
Rules of thumb for managers to consider:
What is positioning of our firm?
How severe was the service failure?
Who is the affected customer?

Service Guarantees

Service Guarantees Help Promote and

Achieve Service Loyalty

Force firms to focus on what customers want

Set clear standards
Highlight cost of service failures
Require systems to get and act on customer feedback
Reduce risks of purchase and build loyalty

How to Design Service Guarantees

Unconditional
Easy to understand and communicate
Meaningful to the customer
Easy to invoke
Easy to collect
Credible

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
All service aspects are covered
Explicit minimum performance standards
on important attributes

Discouraging Abuse and

Opportunistic Behaviour

Dealing with Customer Fraud

Treating all customers with suspicion is likely to alienate them

TARP found only 1 to 2 percent of customer base engages in premeditated

fraudso why treat remaining 98 percent of honest customers as potential
crooks?

Insights from research on guarantee cheating

Amount of a guarantee payout had no effect on customer cheating

Repeat-purchase intention reduced cheating intent
Customers are reluctant to cheat if service quality is high (rather than
just satisfactory)

Managerial implication

Firms can benefit from offering 100 percent money-back guarantees

Guarantees should be offered to regular customers as part of
membership program
Excellent service firms have less to worry about than average providers

Learning from Customer

Feedback

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

Customer Feedback Collection Tools

Total market surveys

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

Key Customer Feedback Collection Tools:

Strengths and Weaknesses
LEVEL OF MEASUREMENT

COLLECTION TOOLS

FIRM

(Table 13.3)
POTENTIAL
FOR

SERVICE
REPRESENTATIVE
TRANSACTION
RECOVERY
ACTIONABLE
RELIABLE
PROCESSSPECIFIC

FIRST
HAND

COST

LEARNING

EFFECTIVENESS

TOTAL MARKET SURVEY

(INCLU. COMPETITORS)
ANNUAL SURVEY ON
OVERALL SATISFACTION
TRANSACTIONAL
SURVEY
SERVICE FEEDBACK
CARDS
MYSTERY SHOPPING
UNSOLICITED
FEEDBACK (e.g.,
COMPLAINTS)
FOCUS GROUP
DISCUSSIONS
SERVICE REVIEWS
Source: Adapted from Jochen Wirtz and Monica Tomlin, Institutionalizing Customer-Driven Learning Through Fully Integrated Customer Feedback Systems.
Managing Service Quality,10, no.4 (2000): p. 210.

Entry Points for Unsolicited Feedback

Frontline employees
Intermediaries acting for original supplier
Managers contacted by customers at
head/regional office
Complaint cards deposited in special box or
mailed
Telephone or e-mail
Complaints passed to company by third-party
recipients
Disseminate the information to
relevant parties to take action
Immediately
Track over time

Summary
Customer can complain by taking public action, private action or no action at all
Components of an effective recovery system include:

Doing it right the first time

Effective complaint handling
Identifying service complaints
Resolving complaints effectively
Learning from the recovery experience

Service guarantees should be unconditional, easy for customers to understand and

invoke
Dealing with abusive and/or opportunistic customer behaviours is dealing with
customer fraud, most customers are honest, but guarantees should be monitored
Institutionalized systematic learning from feedback delivers valuable feedback to
management