Complaint Handling and Service Recovery

Think of a time when, as a customer, you had a particularly satisfying (or dissatisfying) interaction with service provider.

• When did the incident happen?• What specific circumstances led up to this

situation?• Exactly what did the employee (or firm) say or do?• What resulted that made you feel the interaction

was satisfying or (or dissatisfying)?• What could or should have been done differently?

Complaints• Customers have a low

propensity to complain. • Only about 4 % of

customers with problems report those problems as complaints.

• It is not important whether or not a service failure actually occurred, but rather, if it was perceived by the customer to have occurred.

Impact of Service Failure

The average customer who experiences a service failure tells nine or ten others about the failure.

Customer Response Following Service Failure

Service Failure

Do NothingTake Action

Stay with ProviderSwitch Providers

Complain to Provider

Complain to Family & Friends

Complain to Third Party

Stay with ProviderSwitch Providers

Entry Points for Complaints• Employees serving customers face-to-face or by phone

• Intermediaries acting for original supplier

• Managers contacted by customers at head/regional office

• Complaint cards mailed or placed in special box

• Complaints passed to company by third-party recipients

– consumer advocates– trade organizations– legislative agencies– other customers

Components of an Effective Service Recovery System

Do the Job Rightthe First Time

Identify ServiceComplaints

Resolve ComplaintsEffectively

Learn fromRecovery

Effective ComplaintHandling

Increased Satisfactionand Loyalty

-Conduct Research-Monitor Complaints-Develop Complaints as Opportunity Culture

Develop EffectiveSystems and Trainingin Complaints Handling

Conduct Root CauseAnalysis

Feedback

Learn from R

ecovery E

xperiences

Act

Qui

ckly

Treat Customers Fairly

Fail-safethe Service

Cultivate Relationships

with Customers

Encourage and Track

Complaints

Provide

Ade

quate

Explan

ation

s

Learn

from Lo

st

Custom

ers

ServiceRecoveryStrategies

Service Recovery Strategies

Causes Behind Service Switching

Service Switching Behavior

• High Price• Price Increases• Unfair Pricing• Deceptive Pricing

Pricing

• Location/Hours• Wait for Appointment• Wait for Service

Inconvenience

• Service Mistakes• Billing Errors• Service Catastrophe

Core Service Failure

• Uncaring• Impolite• Unresponsive• Unknowledgeable

Service Encounter Failures

• Negative Response• No Response• Reluctant Response

Response to Service Failure

• Found Better ServiceCompetition

• Cheat• Hard Sell• Unsafe• Conflict of Interest

Ethical Problems

• Customer Moved• Provider Closed

Involuntary SwitchingSource: Sue Keaveney

Unhappy Customers’ Repurchase Intentions

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 in losses)

Source: Adapted from data reported by the Technical Assistance Research Program.

Service Guarantees• guarantee = an assurance of the fulfillment of

a condition (Webster’s Dictionary)

• for products, guarantee 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?)

Service Guarantees Help Promote and Achieve Service Loyalty

• Force firms to focus on what customers want

• Set clear standards• Compensation highlights

cost of service failures• Require systems to get, act

on, customer feedback• Reduce risks of purchase

and build loyalty• Builds “marketing muscle”

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 important 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 hoops or red tape in the way of

accessing or collecting on the guarantee.

Reasons companies do NOT offer guarantees:

Reasons companies do NOT offer guarantees:– too many uncontrollable external variables– fears of cheating by customers– costs of the guarantee are too high

Over-compensating concerns?

• Service providers should probably be more concerned about under-compensating complaining customers than over-compensating them.

• Track the customers who are given compensation for reported complaints.

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”

Recovery• Service providers need

to decide on policy for service recovery.

• Will all customers with a particular type of problem be given the same service recovery?

RecoveryDo Don’t

• Acknowledge problem• Apologize• Take responsibility• Explain causes • Lay out options • Compensate/

upgrade

• Ignore customer• Blame customer• Leave customer

to “fend for him/herself”

• Downgrade• Act as if nothing

is wrong• Pass the buck

Early Communication Early Recovery

• The service company must decide when and how to appropriately open communication with customers in the service process.

• Communication with the customer throughout the service delivery process can decrease the magnitude and expense of service failures

• Failure to communicate early in the service process can allow small customer concerns to grow into large problems.

• If complaints are resolved in a timely manner, 95% of the time the customer will return.

Ways to Increase

Customer Communication• Actively solicit

feedback.• Offer a channel of

communication that is open to customers through the service process.

Retaining CustomersWhen Things Go Wrong

• Track and anticipate recovery opportunities- The customer who complains is your friend?

• Take care of customer problems on the front line.

• Solve problems quickly.• Empower the front line to solve

problems.• Learn from service recovery.

Effective Recovery Skills

• Hear the customer’s problems.• Improvise• Bend the rules from time-to-time• Employees must have the

authority, usually within certain defined limits, to solve the customer’s immediate problem.

When service customers have been disappointed on

the first try,doing it right the second time is

essential to maintaining customer

loyalty

OOPS!

Service Recovery

Discussion Develop guidelines for an effective

complaint handling policy for a service organization in the industry you selected to study this session.

Summary of Guidelines for Effective Problem Resolution

• Act fast• Admit mistakes but

don’t be defensive• Understand problem

from customer’s viewpoint

• Don’t argue• Acknowledge

customer’s feelings

• Give benefit of doubt• Clarify steps to solve

problem• Keep customers

informed of progress• Consider

compensation• Persevere to regain

goodwill