Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 13 - 1

Chapter 13

Customer Feedback and Service Recovery

Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 13 - 2

American Customer Satisfaction Index:Selected Industry Scores, 2002

Industry:

Soft d

rinks

Express m

ail,

parcels

Cars, va

ns,

etc.

Life insuranceCom

m. b

anks

Hotels

Perso

nal

com

puters

Airlines

Hosp

italsFast food

Restaurants

Broad

casting

(natl. n

ews)

IRS

(tax)

8579 80 79

74 71 7166

7076

65 62

0

10

20

30

40

50

60

70

80

90

100

3.7% 1.3% 0.0% 1.3% 2.8% 0.0% 0.0% 8.2% 2.9% -2.6% 4.8% 3.3%% Change 2002 vs 2001

Score (Max = 100)

Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 13 - 3

Key Questions for Managers to Ask about Customer Complaining Behavior

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?

Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 13 - 4

Courses of Action Open to a Dissatisfied Customer (Figure 13.1)

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

Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 13 - 5

Dimensions of Perceived Fairness in Service Recovery Process (Figure 13.2)

Procedural Justice

Procedural Justice

InteractiveJustice

InteractiveJustice

OutcomeJustice

OutcomeJustice

Complaint Handling & Service Recovery Process

Complaint Handling & Service Recovery Process

Justice Dimensions of the Service Recovery Process

Customer Satisfaction with the

Service Recovery

Customer Satisfaction with the

Service RecoverySource: Tax and Brown

Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 13 - 6

Proportion of Unhappy Customers Who Buy Again Depending on the Complaint Process

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

Source: TARP study

Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 13 - 7

Impact of Effective Service Recovery on Retention

NoProblem

ProblemUnresolved

Customer Retention

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

84%

92%

46%

Source: IBM-Rochester study

Problem, but effectively resolved

Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 13 - 8

Components of an Effective Service Recovery System (Figure 13.3)

Learn from the Recovery Experience

Learn from the Recovery Experience

Resolve Complaints Effectively

Resolve Complaints Effectively

Identify Service Complaints

Identify Service Complaints

Effective Complaint Handling

Effective Complaint Handling

Conduct Root CauseAnalysis

Conduct Root CauseAnalysis

Develop Effective System and Training in Complaints Handling

Develop Effective System and Training in Complaints Handling

Conduct Research

Monitor Complaints

Develop “Complaints as Opportunity” Culture

Conduct Research

Monitor Complaints

Develop “Complaints as Opportunity” Culture

=+

Close the Loop via Feedback

Increased Satisfaction and Loyalty

Increased Satisfaction and Loyalty

Do the Job Right the First Time

Do the Job Right the First Time

Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 13 - 9

Strategies to Reduce Customer Complaint Barriers (Table 13.1)

Complaint Barriers for Dissatisfied Customers

Strategies to Reduce These Barriers

Inconvenience Difficult to find the right complaint

procedure. Effort, e.g., writing a letter.

Make feedback easy and convenient by: Printing Customer Service Hotline numbers,

e-mail and postal addresses on all customer communications materials.

Doubtful Pay Off Uncertain whether any action, and

what action will be taken by the firm to address the issue the customer is unhappy with.

Reassure customers that their feedback will be taken seriously and will pay off by:

Having service recovery procedures in place, and communicating this to customers.

Featuring service improvements that resulted from customer feedback.

Unpleasantness Complaining customers fear that

they may be treated rudely, may have to hassle, or may feel embarrassed to complain.

Make providing feedback a positive experience:

Thank customers for their feedback. Train the frontline not to hassle and make

customers feel comfortable. Allow for anonymous feedback.

Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 13 - 10

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

Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 13 - 11

Guidelines for Effective Problem Resolution (Management Memo 13.1)

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

Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 13 - 12

Service Guarantees Help Promote and Achieve Service Loyalty

Force firms to focus on what customers want

Set clear standards

Highlights cost of service failures

Require systems to get & act on, customer feedback

Reduce risks of purchase and build loyalty

Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 13 - 13

Types of Service Guarantees

Single attribute-specific guarantee – one key service attribute is covered

Multiattribute-specific guarantee – a few important service attributes are covered

Full-satisfaction guarantee – all service aspects covered with no exceptions

Combined guarantee – like the full-satisfaction, adding explicit minimum performance standards on important attributes

Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 13 - 14

The Hampton Inn 100% Satisfaction Guarantee (Figure 13.4)

What are the benefits of such a guarantee?

Are there any downsides?

Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 13 - 15

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

Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 13 - 16

Building a Customer Feedback System

Total market surveys

Post-transaction surveys

Ongoing customer surveys

Customer advisory panels

Employee surveys/panels

Focus groups

Mystery shopping

Complaint analysis

Capture of service operating data

Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 13 - 17

Strengths and Weakness of Key Customer Feedback Collection Tools (Table 13.3)

Selection of a cocktail of effective customer feedback collection tools.

Potential for Service Recovery

Collection ToolsMulti-level Measurement

Action-able

Represen-tative,

Reliable

First Hand

Learning

Cost Effective

Cost EffectiveService

SatisfactionProcess

SatisfactionSpecific

Feedback

Total Market Survey (inclu. competitors)

Annual Survey on overall satisfaction

Transactional Survey (process specific)

Service Feedback Cards (process specific)

Mystery Shopping (service testers)

Unsolicited Feedback Recd(Online feedback system)

Focus Group Discussions

Service ReviewsService Reviews

Meets Requirements: Fully Moderate Little/Not at all

Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 13 - 18

Entry Points for Unsolicited Feedback

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 recipientsconsumer advocatestrade organizations legislative agenciesother customers