Service Marketing - Love Lock Chapter-13

Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 13 - 1

Chapter 13:

Achieving Service Recovery and

Obtaining Customer Feedback


Overview of Chapter 13

• Customer Responses to Effective Service Recovery• Principles of Effective Service Recovery Systems• Service Guarantees• Discouraging Abuse and Opportunistic Behavior• Learning from Customer Feedback


Customer Response Categories to Service Failures (Fig 13.1)

Service Encounter is Dissatisfactory

Take some form of Public Action

Take some form of Private Action

Take No Action

Complain to the service firm

Complain to a third party

Take legal action to seek redress

Defect (switch provider)

Negative word-of-mouth

Any one or a combination of these responses is possible


Understanding Customer Responses to Service Failure

• Why do customers complain?• Obtain compensation for economic loss• Vent their anger• Help improve the service . Ex Alumni Association• For altruistic reasons – Want to save prevent other customers from

undergoing the trauma of poor service • What proportion of unhappy customers complain? – 5-10%• Why don’t unhappy customers complain? – time cost, uncertain outcome,

complaint process is not known, fear of confrontation etc.• Who is most likely to complain? – people in Higher socioeconomic

circumstances• Where do customers complain? – To the service rep in immediate contact

only. Rarely to the HQ or through email. Customer service centers are also called up.

• What do customers expect once they have made a complaint?


Three Dimensions of Perceived Fairness in Service Recovery Process (Fig 13.3)

Procedural Justice

InteractiveJustice

OutcomeJustice

Complaint Handling and Service Recovery Process

Justice Dimensions of the Service Recovery Process

Customer Satisfaction with Service Recovery

Source: Tax and Brown

Procedure customer has to go through

Employees trying to resolve the issue

Compensation that the customer receives


Customer Responses to Effective Service Recovery


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


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

• 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


Principles of Effective Service Recovery Systems


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 researchMonitor complaintsDevelop “Complaints as opportunity” culture

Develop effective system and training in complaints handling

Conduct root cause analysis

=+

Close the loop via feedback


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

• Indicate the TAT for response

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


How Generous Should Compensation Be?

• Rules of thumb for managers to consider:o What is positioning of our firm?o How severe was the service failure?o Who is the affected customer?


Service Guarantees


Service Guarantees Help Promote and Achieve Service Loyalty

• Promising that if the service delivery fails to meet the predefined standards, the customer will be compensated for it

• Force firms to focus on what customers want• Set clear standards, telling customer and the employees

alike what the company stands for• Force the companies to understand why they fail and

encourage them to identify them and overcome them• Require systems to get and act on customer feedback• Reduce risks of purchase and build loyalty


How to Design Service Guarantees

• Unconditional : No element of surprise to be there• Easy to understand and communicate• Meaningful to the customer• Easy to invoke : More dependent on the service

provider rather than the customer • Easy to collect • Credible


Types of Service Guarantees Table 13.2

• Single attribute-specific guarantee o One key service attribute is covered. Ex Dominos pizza. Time Guarantee

• Multiattribute-specific guarantee o A few important service attributes are covered. Ex Mariott’s Guarantee. 1)

Friendly, efficient check in (2) Clean, comfortable room, where everything works (3) Friendly, efficient checkout

• Full-satisfaction guaranteeo All service aspects covered with no exceptions.

• Combined guaranteeo All service aspects are covered by the full satisfaction guaranteeo Explicit minimum performance standards on important attributes are

included. o Ex. Datapro Info syst : “ To deliver the report on time, to high quality std, and

to the contents outlined in this proposal. Should we fail to deliver according to this guarantee, or should you be dissatisfied with any aspect of our work, you can deduct any amount from the final payment which is deemed as fair”


Discouraging Abuse and Opportunistic Behavior


Dealing with Customer Fraud

• Treating all customers with suspicion is likely to alienate themo 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 cheatingo Amount of a guarantee payout had no effect on customer cheatingo Repeat-purchase intention reduced cheating intento Customers are reluctant to cheat if service quality is high (rather than just

satisfactory)• Managerial implication

o Firms can benefit from offering 100 percent money-back guaranteeso Guarantees should be offered to regular customers as part of membership

program o Excellent service firms have less to worry about than average providers


Learning from Customer Feedback


Key Objectives of Effective Customer Feedback Systems

• Assessment and benchmarking of service quality and performance• Objective : To Answer – How satisfied are our customers?• Performance of firm wrt competition, wrt previous yr performance,

investments have paid off?

• Customer-driven learning and improvements• Objective : To Answer – What makes our customer happy/unhappy?

What are the strengths we need to maintain, and where and how do we need to improve ?

• Creating a customer-oriented service culture

Travel to Final Destination Ch 14

Improving Service Quality and Productivity

Service Marketing - Love Lock Chapter-13

Education

Transcript of Service Marketing - Love Lock Chapter-13