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Chapter 5

Handling Customer
Complaints and
Managing Service
Recovery
Chapter 5 Objectives
z To outline the courses of action open to
a dissatisfied customer
z Explain the factors influencing complaint
behaviour
z Identify the principles of an effective
service-recovery system
z Explain the techniques for identifying
the root cause of service failures

Lovelock, Patterson, Walker: Services Marketing 3e © 2004 Pearson Education Australia 2


Customer Satisfaction

z Customer satisfaction is linked not only to


fault free service, but also to what transpires
when something does go wrong.

z First law of quality might be: “do it right the


first time” - but service failure does occur.

Lovelock, Patterson, Walker: Services Marketing 3e © 2004 Pearson Education Australia 3


Figure 5.1:
Customer Satisfaction Formula

Doing the Effective Increased


job Right complaint customer
the first handling satisfaction &
time + = loyalty

Lovelock, Patterson, Walker: Services Marketing 3e © 2004 Pearson Education Australia 4


Figure 5.2 How Customers Handle
Dissatisfaction
Seek redress directly
from business firms

Take some Take legal action to


form of
public action
obtain redress

Complain to business,
Take private, or govt.
some agencies
action
Dissatisfaction
occurs Decide to stop buying
product or brand or
boycott seller
Take some form
of private action

Take no Warn friends about the


action product and/or seller
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Customer Response to
Service Failure
z Do nothing, but the service provider’s
reputation is diminished
z Complain to the service firm
z Take action with a third party such as
ACCC
z Defect and do not use the provider
again

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Complaints as Research Data

Responsive organisations look at


complaints in two ways:
z As a stream of market research
information highlighting where
improvements are needed
z Series of individual customer problems
which need to be solved

Lovelock, Patterson, Walker: Services Marketing 3e © 2004 Pearson Education Australia 7


Capturing Complaints
Complaints may be made through:
z the service provider’s own employees
z intermediary organisations acting on behalf of
the original supplier
z managers who normally work backstage but
are contacted by a customer seeking higher
authority
z suggestions or complaint cards mailed or
placed in a special box
z complaints to third parties

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Complaining Behaviour in
South-East Asia
z Asian consumers may be less willing to
send written complaints than others
z Asian consumers are less likely to
complain about poor service
z Service failures are more likely to be
tolerated
z Individuals may restrain their own self
interest if it would disturb others

Lovelock, Patterson, Walker: Services Marketing 3e © 2004 Pearson Education Australia 9


SOCAP-TARP 1995 Study

z 57% of respondents had experienced at least one


problem with products/services in the past 12
months
z 73% with a serious problem took some action to
have it corrected (this varied between 49% and 93%
depending on the industry and nature of problem).
z Only 34% who took action were satisfied with the
way the problem was resolved
z 89% of those who were not happy with their
complaint outcome said they would not deal with the
same firm again
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SOCAP-TARP 1995 Study (cont’d)

z Complaining households made an average 3.4


contacts in an effort to have their most serious
problem resolved
z Satisfaction declined the further up the hierarchy
the customer had to go to get it resolved
z On average, a dissatisfied complainant tells nine
other people, while a satisfied complainant tells half
as many

Lovelock, Patterson, Walker: Services Marketing 3e © 2004 Pearson Education Australia 11


Factors Influencing Complaining
Behaviour

z Level of dissatisfaction i.e. does it seem


worth it?
z Cost of complaining e.g. time and effort
z Benefits of complaining i.e. value of the
outcome?
z Likelihood of resolution i.e. belief that the
problem will/can be solved satisfactorily

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Factors Influencing
Complaining Behaviour
z Available resources for making a complaint

z Access to a means of registering a complaint

z Knowing who is to blame for the problem

z Demographics e.g. younger and better


educated people are more likely to complain

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Standards for Complaint
Handling

“ The overriding aim of any complaints


handling process is to turn
dissatisfied consumers into satisfied
consumers. This is best done by
speedy and effective remedies at the
first point of contact.”

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Figure 5.4 Impact of response time on
satisfaction with action taken on most serious
problems
% Exceeded/satisfied expectations with action taken
70
60 56%
All
50 respondents
39% 35%
40 34% 33%
25% 21%
30
20
10
0
Immedi- Under Within 3 -14 15-28 Over
ately days days 28
24 hrs 48 hrs
18% 29% 8% days
8% 8% 29%
Perceived response time
Lovelock, Patterson, Walker: Services Marketing 3e © 2004 Pearson Education Australia 15
Figure 5.5
Impact of number of contacts made to get
problem resolved on satisfaction

% Exceeded/satisfied expectations with action taken

70
60 55% All respon-
dents
50
37% 34%
40
27%
30
18%
20
10
0
1 2 3-4 5+
27% 19% 30% 24%
Number of contracts (Average: 3.4)
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Figure 5.6
Impact of problem experience/complaining
on Customer loyalty for all products/services
% Exceeded/satisfied expectations with action taken
100 95
%
90 83
80 %
70
60
46
50
%
40
23 23
30 % %
20 10
10 %
0
No Exceeded Satisfied Dissatisfied Non-
Mollified
problem expectations complainants complainant
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Figure 5.7 Components of an
effective service-recovery system

Do the job right + Effective complaint = Increased satisfaction


the first time handling & loyalty

Conduct research
Identify service Monitor complaints
complaints Develop ‘complaints as
opportunity’ culture

Develop effective
Resolve complaints
systems & training in
effectively complaints handling

Learn from the Conduct root cause


recovery experience analysis
Feedback
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Service Recovery

z A crucial element in achieving a


satisfied customer
z A true test of the organisation’s
commitment to the customer
z Justice considerations have a large
impact on how customers evaluate a
provider’s recovery efforts

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Figure 5.8 The role of justice in the
complaint handling procedure

Justice Considerations

Procedure Interaction Outcome

Complaint handling process

Source: S.Tax and S.W. Brown, Handbook of Services Marketing and Management, © 2000, Reprinted by permission of
Sage Publications Inc.
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The Role of Justice in the
Complaint Handling Procedure

z Procedural justice concerns the policies


and rules that comprise the complaining
process
z Interactional justice concerns the
behaviour of the firm’s representatives
during the complaint resolution process
z Outcome or distributive justice relates to
how fairly consumer’s are compensated
for their complaints

Lovelock, Patterson, Walker: Services Marketing 3e © 2004 Pearson Education Australia 21


Principles of Effective
Service Recovery

z Top management commitment


z ‘Complaints as opportunity’ culture
z Training and empowerment
z Ownership of complaint

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Guidelines for Effective
Complaint Resolution

z Act fast: time is of the essence to


achieve full recovery
z Apologise but do not be defensive: it is
important to impress on the consumer
that the problem is an infrequent
occurrence
z Show understanding for the customer’s
viewpoint

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Guidelines for Effective
Complaint Resolution

z Do not argue with customers: gather


facts to reach a mutually acceptable
solution
z Acknowledge the customer’s feelings to
help build rapport
z Give customers the benefit of the doubt
z Clarify the steps needed to solve the
problem

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Guidelines for Effective
Complaint Resolution

z Keep customers informed of progress:


uncertainty breeds anxiety
z Consider compensation: this may
reduce further complaints and legal
action
z Persevere to regain customer goodwill:
outstanding recovery efforts can build
loyalty and referrals

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Learning From Experience

z Blueprinting: understand the


processes behind service delivery to
identify potentially weak links
z Control charts: displaying performance
as measured by specific criteria over a
period of time

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Learning From Experience

z Fishbone diagram: a
cause and effect analysis

z Pareto analysis: 80/20 rule

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