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Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 13 - 1
Chapter 13: Achieving Service Recovery and Obtaining Customer Feedback
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 13 - 2
Overview of Chapter 13
1. Customer Complaining Behavior
2. Customer Responses to Effective Service Recovery
3. Principles of Effective Service Recovery Systems*
4. Service Guarantees
5. Discouraging Abuse and Opportunistic Behavior
6. Learning from Customer Feedback
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 13 - 3
1. Customer Complaining Behavior
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 13 - 4
American Customer Satisfaction Index:Selected Industry Scores, 2006
Express m
ail,
parcels
Cars, va
ns,
etc.
Life insurance
Fast food
Restaurants
Broad
casting
(natl. n
ews)
Industry:
Soft d
rinks
Com
m. b
anks
Hotels
Perso
nal
com
puters
Airlines
Hosp
itals83 83 81
75 75 75 77
6574 77
69
0
10
20
30
40
50
60
70
80
90
100
-3.5% 2.5% 2.5% -7.4% 1.4% 0.0% -1.3% -9.7% -4.1% 11.6% -10.4%% Change 2006 vs. 2005
Score (Max = 100)
Source: www.theacsi.org, Accessed 9.11.2006
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 13 - 5
Customer Response Categories to Service Failures (Fig 13.1)
Service Encounter is Dissatisfactory
Service Encounter is Dissatisfactory
Take some form of Public Action
Take some form of Public Action
Take some form of Private
Action
Take some form of Private
Action
Take No ActionTake No Action
Complain to the service firm
Complain to the service firm
Complain to a third party
Complain to a third party
Take legal action to seek redress
Take legal action to seek redress
Defect (switch provider)
Defect (switch provider)
Negative word-of-mouth
Negative word-of-mouth
Any one or a combination of these responses is possible
Any one or a combination of these responses is possible
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 13 - 6
Understanding Customer Responses to Service Failure
Why do customers complain?
What proportion of unhappy customers complain?
Why don’t unhappy customers complain?*
Who is most likely to complain?
Where do customers complain?*
What do customers expect once they have made a complaint? (Figure 13.3)
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 13 - 7
Customers Often View Complaining as Difficult and Unpleasant (Fig 13.2)
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 13 - 8
Three Dimensions of Perceived Fairness in Service Recovery Process (Fig 13.3)
Procedural Justice
Procedural Justice
Interactive
Justice
Interactive
JusticeOutcome
Justice
Outcome
Justice
Complaint Handling and Service Recovery Process
Complaint Handling and Service Recovery Process
Justice Dimensions of the Service Recovery Process
Customer Satisfaction with
Service Recovery
Customer Satisfaction with
Service RecoverySource: Tax and Brown
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 13 - 9
2. Customer Responses to Effective Service Recovery
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 13 - 10
Importance of Service Recovery
Plays a crucial role in achieving customer satisfaction
Tests a firm’s 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 center, not a cost center
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 13 - 11
How Complaint Resolution AffectsCustomer Retention Rates
9%
37%
19%
46%54%
70%
82%
95%
0102030405060708090
100
Customer did notcomplain
Complaint wasnot resolved
Complaintwas resolved
Complaint wasresolved quickly
Problem cost > $100 Problem cost $1–$5
Percent of UnhappyCustomers Retained
Source: Claes Fornell, Birger Wernerfelt, “A Model for Customer Complaint Management,” Marketing Science, Vol. 7, No. 3 (Summer, 1988), pp. 287–298
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 13 - 12
The Service Recovery Paradox
Customers who experience a service failure that is satisfactorily resolved may be 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 firm’s ability to delight customer with recovery efforts
Best strategy: Do it right the first time
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 13 - 13
3. Principles of Effective Service Recovery Systems
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 13 - 14
Components of an Effective Service Recovery System (Fig 13.4)
Do the job right the first time
Effective Complaint Handling
Identify Service Complaints
Resolve Complaints Effectively
Learn from the Recovery
Experience
Increased Satisfaction and
Loyalty
Conduct research
Monitor complaints
Develop “Complaints as opportunity” culture
Develop effective system and training in complaints handling
Conduct root cause analysis
=+
Close the loop via feedback
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 13 - 15
Strategies to Reduce Customer Complaint Barriers (Table 13.1)
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
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 13 - 16
How to Enable Effective Service Recovery
Be proactive—on the spot, before customers complain (ex: Ritz Carlton)
Plan recovery procedures
Teach recovery skills to relevant personnel
Empower personnel to use judgment and skills to develop recovery solutions
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 13 - 17
4. Service Guarantees
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 13 - 18
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
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 13 - 19
The Hampton Inn 100% Satisfaction Guarantee (Fig 13.5)
What are benefits of such a guarantee?
Are there any downsides?
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 13 - 20
Types of Service Guarantees Table 13.2
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
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 13 - 21
How to Design Service Guarantees
Unconditional
Easy to understand and communicate
Meaningful to the customer
Easy to invoke
Easy to collect
Credible
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 13 - 22
5. Discouraging Abuse and Opportunistic Behavior
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 13 - 23
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 fraud—so 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
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 13 - 24
6. Learning from Customer Feedback
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 13 - 25
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
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 13 - 26
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
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 13 - 27
Key Customer Feedback Collection Tools:Strengths and Weakness (Table 13.3)
COLLECTION TOOLS FIRM PROCESSTRANSACTION
SPECIFIC ACTIONABLEREPRESENTATIVE
RELIABLE
POTENTIAL
FOR
SERVICE
RECOVERY
FIRST
HAND
LEARNING
COST
EFFECTIVENESS
LEVEL OF MEASUREMENT
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.
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 13 - 28
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
Consumer advocates Trade organizations Legislative agencies