Service Recovery
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Transcript of Service Recovery
Service
Failure
Crisis at Taj
The Siege At Taj Heritage
At least seven gunmen enter the lobby of the Taj Mahal Palace hotel, where about 450 people were staying, and begin firing. 60 hours of siege.Left 195 people dead and hundreds injured. Large fire reported.Took Indian security forces nearly three days to eliminate the last of the attackers.
SERVICE FLAWSIntelligence Failures.Gaps in Coastal Surveillance.Incomplete Execution of Response Protocols.Response Timing Problems.Inadequate Counterterrorism Training and Equipment for the Local Police.
SERVICE FLAWSLimitations of Municipal Fire and Emergency Services.Flawed Hostage-Rescue Plan.Poor Strategic Communications and Information Management by the Govt.
Service Failure
• Service failure: Service performance that fails to meet customer expectations
Customer Response Categories to Service Failures
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
Types of complainers
• Passives• Voicers• Irates• Activists
Singh ‘ A typology of customer complaint styles’
Kiruba Incident
• ClearTrip.com took my money and DID NOT book my ticket to Malaysia. Had a harrowing experience at airport.
• http://www.kiruba.com/2009/06/cleartrip-episode-my-experience.html
• http://blog.cleartrip.com/2009/06/16/the-kiruba-incident/
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?
Three Dimensions of Perceived Fairness in Service Recovery Process
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
Employees of taj during THE SERVICE crisis
Staff- Waiters, Executives, Chefs.Providing food and other necessary things to the guests as needed by them.Established a helpline in Wellington Mews in the midst of the crisis.Security staff.
The telephone operators.Karamveer Singh Kang, Taj's general manager.Hotel management.Ratan tata - Chairman of the Tata group.
Service recovery
Immeditely created the Taj Public Welfare Trust.Assisting people affected by the attack.Not laid off a single employee.Promised to rebuild and restore every inch of the hotel to its original glory.
Ratan Tata, surveyed the heritage building.The Indian National Trust for Art and Cultural Heritage (INTACH). Planned to reopen the Hotel in phases.Opening the Hotel as soon as possible.
ReopeningRe-opened the doors of its 268-room Tower Wing on Sunday 21 December 2008.Guest services have been upgraded.Use of the Taj Club, with free breakfast and tea, coffee and cocktails. Free use the hotel's personal butler service.
SECURITYInvestment of large sums of money on security systems and procedures. Created a security team headed by a retired Major General from the army. Retained the services of a top international security service company.Around 75 people have been trained overseas. Equipped them to be the first line of defence in the event of an attack.
Trained security people in plain clothes at the lobby and other key points.Security ring outside the hotel. Mock attacks to assess the preparedness of our people, system and procedures.
Maitaining hotel image
The hotel’s biggest loss was the death of 10 staff members and 21 guests.November - spent in quiet reflection and remembrance. Private multi-faith prayers.
Nov. 26, 2009
Mr Tata unveiled the new permanent memorial at the lobby. The memorial has the names of the thirty one victims.Gathering of private staff and employees which was also attended by family members of the martyrs.
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.
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
The Recovery Paradox
• Q: Since effective service recovery often leads to increased loyalty, should firms intentionally “screw up” and then recover in an effort to garner increased loyalty?
• A: Uh, probably not. Problems w/this approach include:– Many customers don’t complain.– It’s expensive to fix mistakes. One study reveals that only the
very highest levels of service recovery result in increased satisfaction & loyalty.
– Since Reliability is the most critical of the 5 Dimensions, does it make sense to make deliberate mistakes?
– Only some customers may respond positively to recovery.
Components of an Effective Service Recovery System
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 researchMonitor complaintsDevelop “Complaints as opportunity” culture
Develop effective system and training in complaints handling
Conduct root cause analysis
=+
Close the loop via feedback
Learn from
R
ecovery
Experie
nces
Act
Qui
ckly
Treat Customers
Fairly
Fail-safethe Service
Cultivate
Relationships with
Customers
Encourage and Track
Complaints
Provid
e Ade
quat
e
Explan
ation
s
Lear
n fro
m L
ost
Custo
mer
s
ServiceRecoveryStrategies
Service Recovery Strategies
Service Recovery 8 Key Strategies
1. Make the Service Fail-Safe– Do it right the first time.– Poka yokes = automatic warnings or controls in place to ensure
mistakes are not made.– Create a “zero defects” culture
2. Encourage and Track Complaints– Research = satisfaction surveys, critical incidents studies, & lost
customer research.3. Act Quickly
– Front line response and employee empowerment (Ritz Carlton and complaint “ownership.”
– Allow customers to fix their own problems – usually through technology.
Service Recovery 8 Key Strategies
4. Provide Adequate Explanations– Dissatisfaction can be reduced if an adequate explanation is
provided.– 2 characteristics:
• First, the content of the explanation must be appropriate.• Second, the style of the explanation delivery is important.
– “Explanations perceived by customers as honest, sincere, and not manipulative are generally the most effective.”
5. Cultivate Relationships with Customers– “…strong customer-firm relationships can help shield the firm
from the negative effects of failures on customer satisfaction.”
Service Recovery 8 Key Strategies
6. Learn from Recovery Experiences– “By conducting root-cause analysis, firms can
identify the sources of the problems and modify processes, sometimes eliminating almost completely the need for recovery.”
7. Learn from Lost Customers– To prevent future failures, conduct formal market
research. This data is most effectively obtained by depth interviews, administered by skilled interviewers who truly understand the business.
Service Recovery 8 Key Strategies
8. Treat Customers Fairly– Understanding and Accountability. “Customers expect
an apology when things go wrong . . . if a firm provides an apology to the customer, the percentage of dissatisfied customers drops from 86 to 20 percent.”
– Fair Treatment. Customers look for 3 types of justice…1. Outcome Fairness. Equitable exchanges.2. Procedural Fairness. Policies, rules, and timeliness of the
complaint process.3. Interactional Fairness. Interpersonal treatment.
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 not guaranteed– cannot return the service– service experience is intangible
(so what do you guarantee?)
The Hampton Inn 100 PercentSatisfaction Guarantee
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
Source: Christopher W.L. Hart, “The Power of Unconditional Guarantees,” Harvard Business Review, July-August, 1988, pp. 54-62.
Service Guarantees
Q: Does everyone need to offer a guarantee?
• Reasons companies might NOT want to offer a service guarantee:– existing service quality is poor– guarantee does not fit the company’s image– too many uncontrollable external variables– fears of cheating or abuse by customers– costs of the guarantee outweigh the benefits– customers perceive little risk in the service– customers perceive little variability in service quality among
competitors
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
How to Enable Effective Service Recovery
• Be proactive—on 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• See Service Perspectives 13.2: Guidelines For Effective
Problem Resolution
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 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
The Hampton Inn 100% Satisfaction Guarantee
• What are benefits of such a guarantee?• Are there any downsides?
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
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
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