Service Recovery

Service Recovery

It refers to the actions taken by an organization in response to a service failure.

Reasons of failure: Service may be unavailable when promised It may be delivered later or too slowly Outcome may be incorrect or poorly executed Employees may be rude or uncaring

The Impact of Service Failure and Recovery Resolving customer problems effectively has

a strong impact on: Customer satisfaction Loyalty Word of mouth communication Bottom line performance

How Customers Respond to Service Failures

Types of Complainers

Passives- Don’t Complain Voicers- complain but don’t do negative

things Irates- Angry, Negative WOM, likely to switch Activists- beyond complaining

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.

Customers’ Recovery Expectations

Understanding & accountability on the part of the service provider

Fair treatment

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 service

Competition

• Cheat• Hard sell• Unsafe• Conflict of interest

Ethical Problems

• Customer moved• Provider closed

Involuntary Switching

Source: Sue Keaveney, “Customer Switching Behavior in Service Industries: An Exploratory Study,” Journal of Marketing, April, 1995, pp. 71-82.

Service Recovery Strategies

Do it right the first time- make the service fail safe

Encourage & track complaints Act quickly Provide adequate explanations Treat customers fairly Cultivate relationship with customers Learn from recovery experiences Learn from lost customers

Service Guarantees

Guarantee: an assurance of the fulfillment of a condition

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 not guaranteed cannot return the service service experience is intangible

Benefits of service guarantees

It forces the company to focus on its customers

Sets clear standards for the organization Generates immediate and relevant feedback

from the customers Instant opportunity for service recovery Helps in continuous improvement effort Enhance employees morale & loyalty Reduces the sense of risk

Characteristics of an EffectiveService Guarantee

Unconditional the guarantee should make its promise unconditionally – no

strings attached Meaningful

the firm 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

customers need to understand what to expect employees need to understand what to do

Easy to Invoke and Collect the firm should eliminate hoops or red tape in the way of

accessing or collecting on the guarantee