Service RecoveryService Recovery

Mtg. 410Mtg. 410

Donna J. Hill, Ph.D.Donna J. Hill, Ph.D.

Fall 2000Fall 2000

Service RecoveryService Recovery

Refers to the actions taken by an Refers to the actions taken by an organization in response to a organization in response to a service failureservice failure

Figure 7-1Figure 7-1

Unhappy Customers’ Unhappy Customers’ Repurchase IntentionsRepurchase Intentions

95%

70%

46%

37%

82%

54%

19%

9%

Complaints Resolved Quickly

Complaints Resolved

Complaints Not Resolved

Minor complaints ($1-$5 losses) Major complaints (over $100 losses)

Unhappy Customers Who Don’t Complain

Unhappy Customers Who Do Complain

Percent of Customers Who Will Buy Again

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

Recovery ParadoxRecovery Paradox

Companies should plan to Companies should plan to disappoint customers so that they disappoint customers so that they can recover and gain even greater can recover and gain even greater loyalty from them as a result!loyalty from them as a result!

Figure 7-3Figure 7-3

Customer Response Customer Response Following Service FailureFollowing 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

Types of ComplainersTypes of Complainers

PassivesPassives VoicersVoicers IratesIrates ActivistsActivists

FairnessFairness

Outcome (fair compensation)Outcome (fair compensation) Procedural (policies, rules, and Procedural (policies, rules, and

timeliness)timeliness) Interactional (politeness, courtesy, Interactional (politeness, courtesy,

honesty)honesty)

Figure 7-5Figure 7-5

Service Recovery StrategiesService Recovery Strategies

Learn fromRecovery Experiences

Treat C

ustomers

Fairly

Learn

from

Lo

st Cu

stom

ers

Welcome and

Encourage ComplaintsFail S

afe the S

ervice

Act Q

uickly

Service Recovery Strategies

Figure 7-6Figure 7-6

Causes Behind Causes Behind Service SwitchingService 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 SwitchingSource: Sue Keaveney

Service GuaranteesService Guarantees

guarantee = an assurance of the fulfillment guarantee = an assurance of the fulfillment of a condition (of a condition (Webster’s DictionaryWebster’s Dictionary))

for products, guarantee often done in the for products, guarantee often done in the form of a warrantyform of a warranty

services are often services are often notnot guaranteed guaranteed•cannot return the servicecannot return the service•service experience is intangibleservice experience is intangible

–(so what do you guarantee?)(so what do you guarantee?)

Table 7-7Table 7-7 Characteristics of an Characteristics of an Effective Service GuaranteeEffective Service Guarantee

Unconditional The guarantee should make its promise unconditionally -

no strings attached.Meaningful

It should guarantee elements of the service that areimportant to the customer.

The payout should cover fully the customer'sdissatisfaction.

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.

Source: Christopher W.L. Hart, “The Power of Unconditional Guarantees,” Harvard Business Review, July-August, 1988, pp. 54-62.

Why a Good Guarantee Why a Good Guarantee WorksWorks

forces company to focus on customersforces company to focus on customers

sets clear standardssets clear standards

generates feedbackgenerates feedback

forces company to understand why it forces company to understand why it failedfailed

builds “marketing muscle”builds “marketing muscle”

Service GuaranteesService Guarantees

Does everyone need a guarantee?Does everyone need a guarantee?

Reasons companies do NOT offer Reasons companies do NOT offer guarantees:guarantees:• guarantee would be at odds with company’s guarantee would be at odds with company’s

imageimage• too many uncontrollable external variablestoo many uncontrollable external variables• fears of cheating by customersfears of cheating by customers• costs of the guarantee are too highcosts of the guarantee are too high

Service GuaranteesService Guarantees

service guarantees work for companies who service guarantees work for companies who are already customer-focusedare already customer-focused

effective guarantees can be BIG deals - they effective guarantees can be BIG deals - they put the company at risk in the eyes of the put the company at risk in the eyes of the customercustomer

customers should be involved in the design of customers should be involved in the design of service guaranteesservice guarantees

the guarantee should be so stunning that it the guarantee should be so stunning that it comes as a surprise -- a comes as a surprise -- a WOW!!WOW!! factor factor

““it’s the icing on the cake, not the cake”it’s the icing on the cake, not the cake”

Lessons from the Hampton Inn Lessons from the Hampton Inn GuaranteeGuarantee

Focus on customer needs.Focus on customer needs. KISSKISS Deep management conviction is fundamental.Deep management conviction is fundamental. Empowerment is the key.Empowerment is the key. Train, train, train. Reinforce, reinforce, Train, train, train. Reinforce, reinforce,

reinforce.reinforce. Perpetuate stories of the guarantee in actionPerpetuate stories of the guarantee in action Understand the moments of truth.Understand the moments of truth. Teach customers to complain.Teach customers to complain. Develop tracking systems.Develop tracking systems. Give regular feedback on reasons the Give regular feedback on reasons the

guarantee was invoked.guarantee was invoked. Use internal guarantees to support the Use internal guarantees to support the

external guarantees.external guarantees.