ChapterService Recovery The Impact of Service

Chapter

Service Recovery
• The Impact of Service Failure and
Recovery
• How Customers Respond to Service
Failures
• Customers’ Recovery Expectations
• Service Recovery Strategies
• Service Guarantees

8

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

Complaints Resolved

Complaints Resolved Quickly

19%

54%

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.

Customers’ Recovery Expectations
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