Contents WHAT IS SERVICE RECOVERY?....................................................................1 STAGES OF SERVICE RECOVERY MATURITY.................................................3 SERVICE RECOVERY PARADOX....................................................................4 SERVICE RECOVERY TRIANGLE....................................................................

6 SERVICE RECOVERY VS SERVICE EXCELLENCE...........................................7 LOOKING AHEAD.........................................................................................9 REFERENCES.............................................................................................10 REFERENCES

WHAT IS SERVICE RECOVERY?

'Service recovery' deals with the handling of customer dissatisfaction, customer complaints, returns and any customer problems or difficulties with your firm's service. Assume a customer has a very positive and memorable experience with you. The experience somehow exceeded his expectations, whatever they were. Perhaps the server was more attentive and thorough than expected, or the price was better than expected, or he received a double latte with room to go while he waited, or delivery and set-up was no charge. How many people will he tell about that experience? Given that service that exceeds your

expectations is quite rare. Most probably the customer will tell many others of that positive and memorable experience. And if that person expects good service as the price of admission these days, and that expectation is exceeded by great or memorable service, he will absolutely rave about you and give active and positive referrals. You create "raving fans" by exceeding expectations - but we know already know that. So we have a satisfied customer telling a few others about that 'satisfactory' experience. Let's say that number is two to four. And we can 'get' that a customer whose expectations are exceeded perhaps "wowed" will tell many. Let's say that number is ten to twenty. What about another likely and very common possibility? A customer has a negative experience with you, and all negative experiences are very memorable. The product didn't work. It wasn't delivered when needed and promised. The customer was ignored. Your associate was rude. The customer had a problem that wasn't rectified. How many people will she tell about that experience? And how 'active' do you think she will be in giving negative referrals for your business? I suggest she will actively tell a lot of others about her 'problem' with you for a very long time. It's like never forgetting versus always remembering. I suggest that the number of memorable negative referrals will be at least twice that of memorable positive experiences. Satisfed customer tells two others. Wowed customer tells ten others. Dissatisfied customer tells twenty others, or perhaps fifty others. This is truly the essence of service recovery which add to the feedback and reviews which customers have to give to other customers. Bad service always lives longer in the minds of a consumer and can lead to the loss of not just one but a whole host of customers along with them. The goal of service recovery is to identify customers with issues and then to address those issues to the customers' satisfaction to promote customer retention. However, service recovery doesn't just happen. It is a systematic business process that must be designed properly and implemented in an organization. Perhaps more importantly, the organizational culture must be supportive of an idea that customers are important and their voice has value. One way to think about service recovery is that it is a positive approach to complaint handling. Complaint handling has serious negative connotations; whereas, service recovery has positive connotations. Complaint handling is placating people, minimizing a negative. Service recovery practices are a means to achieve the potential, latent value a customer holds for a company by fostering an ongoing positive relationship. Service recovery has a secondary value. It creates positive word-of-mouth about your company and minimizes the

bad spin that lack of service recovery practices can create. So adding it all up, service
recovery is a theory that suggests that a customer who has a bad experience and gets prompt,

effective response to their issues will be a more loyal customer than a customer who had no bad experience at all. The reason for this is a bad experience provides an organization the opportunity to demonstrate how valuable the customer is. Most organizations have some sort of customer service but poor customer service is common in many organizations. It stems from poor training, ineffective performance management and having the wrong people in critical positions. We all have stories to tell about a bad customer service experience. In fact bad service is so common place that we often accept it and try to find places to do business with that are the best of the worst. All organizations, no matter how well trained their employees are or how technical their systems are have times when something goes wrong. It is at these times when an organization can take a negative experience and turn it into a great experience. This is why it is critical to have a good Service Recovery process in place. Successful organizations train employees on what to do in these situations and when there is a service breakdown, employees are empowered to respond quickly to make good on the situation with the customer. As an example, some companies give their employees a certain dollar amount that they can use to fix a problem for a customer, no questions asked. One sees this a lot in the hospitality industry. The finer hotels have customer service representatives at the counter who are empowered to handle small customer issues.

STAGES OF SERVICE RECOVERY MATURITY

Service Recovery in an organization progresses through a series of stages, shown in the above diagram. Stage 1, Moribund. There is no complaint handling. Angry customers are ignored. Drugstore.com is an example of a company with totally moribund service recovery practices. Letters to VPs and even the CEO about a damaged shipment go unanswered. Stage 2: Reactive. Customer complaints are heard, and a response is made. But it's a haphazard process with no defined goals for the response and no one owning this business process. Stage 3: Active Listening. At this stage, the response to issues voiced by customers is structured. Specific people have the responsibility to respond to complaints and guidelines are in place for the response. However, it is still reactive. Stage 4. Solicitous. The critical change from Stage 3 to 4 is the move from reactive to proactive solicitation of customers with issues. The reason this is so important is that most customers don't bother to complain. They just move on to other suppliers of products. It's a lot of work to complain. The solicitous role is accomplished by encouraging customers to

voice their complaints. Event surveys (also known as transactional or transaction-driven survey) are a commonly used technique to get issues voiced. The survey design must be such that more than just high level measurement of customer satisfaction is captured. The design must allow for action to be taken. The desire for anonymity complicates the task. Stage 5: Infused. The pinnacle of Service Recovery Practices is achieved when the complaint identification merges with business process improvement or six sigma programs to support root cause identification and resolution. The owners of business processes that cause customer issues are notified of the occurrences to prompt reexamination of the process design. In essence, we see two levels of feedback loops. First, feedback from the customer to the organization. Second, feedback from the customer-facing groups to its business partners within the organization. While company culture is clearly critical to implementing this level of feedback management, certain technologies can infuse this information sharing into business practice.

SERVICE RECOVERY PARADOX

The service recovery paradox states that with a highly effective service recovery, a service or product failure offers a chance to achieve higher satisfaction ratings from customers than if the failure had never happened. A little bit less academically, this means that a good recovery can turn angry and frustrated customers into loyal customers. In fact it can create even more goodwill than if things had gone smoothly in the first place.

Nevertheless not all service recovery efforts will lead to increased satisfaction ratings as several studies have already shown. The key is to understand that there are certain situations when it is highly likely that a service recovery will lead to increased customer satisfaction. Service recoveries that are likely to be efficient are obviously those where the service failure is perceived to be not systematic or that the company has little control over it. But even in cases when there is a systematic failure and the company has control over the failure, there is a benefit when service recovery activities are put into action to ensure that one can win back customers and that the source of failure is eliminated. A perfect example of this theory at work is as follows: A customer takes his family to Disney World every other year. One year, he books a package including hotel and tickets. The family arrives at the hotel in the late afternoon, and wants to see an evening performance the last one before the act goes to Europe. But no one at the hotel has their tickets, and the ticket offices are closed. The family visits the Customer Service Representative at the park, who immediately provides four passes for that evening. After he gets home, the customer writes a letter, thanking Disney for the way the incident was handled, and suggesting that the hotel ticket office stay open later to avoid frustration in the future. In response, he receives an apology and four 7-day admission tickets worth $750. He is delighted. A few weeks later, he receives a full refund for the tickets he had bought for the trip since their experience had been less than wonderful, Disney wanted to refund their money. The customer is elated even happier than he would have been if there had been no error in the first place. He tells all his friends how great Disney is, and writes about it online.

SERVICE RECOVERY TRIANGLE

Although perfect service is the ideal, it can be elusive, and recovery is therefore needed. But unfortunately, most companies have the customer department service sort out the immediate problem, via some service recovery activity, and then assume all is well. This approach is particularly damaging because it does nothing to address the underlying problem, practically guaranteeing similar failures and complaints in the future. What businesses should be doing is looking at service recovery as a mission that involves three stakeholders: customers who want their complaints resolved (customer recovery); managers in charge of the process of addressing those concerns (process recovery); and the frontline employees who deal with the customers (employee recovery). All three need to be integrated into addressing and fixing service problems. Tensions naturally arise in and among the groups. For example, customers can be left feeling that their problem wasnt addressed seriously, even when theyve received some form of compensation. Service reps can start seeing complaining customers as the enemy, even though they point out flaws that need fixing. Managers in charge of service recovery, meanwhile, can feel pressure to limit flows of critical customer comments, even though acting on the information will improve efficiency and profits. The experience with a majority of managers interested in improving service recovery indicates that most hope for a quick fix of some specific tensions. But quick fixes only treat the symptoms of underlying problems. Real resolutions should involve closer integration among the three stakeholders, such as gathering more information from customers and sharing it throughout the company, and adopting new structures and practices that make it easier to spot problems and fix them.

SERVICE RECOVERY VS SERVICE EXCELLENCE

Healthcare Industry

Clinical managers in hospitals across the nation are faced with a myriad of challenges and issues. Keeping patients satisfied amidst everything else can be frustrating, and busy managers need to know how to address patient satisfaction in the most effective and efficient manner. First and foremost, managers must realize that increasing patient satisfaction begins with focusing efforts very narrowly, not trying to attack a wide range of problems and challenges. This is why some hospitals provide Key Drivers of Satisfaction for each unit in a hospital. But once a manager knows what his or her number one key driver is, the next question arises, How do I get my arms around this? How do I change that mean score? Should I track down those fair/poor responses? The answer begins by drawing a distinction between two important and necessary types of customer satisfaction management techniques: Service Excellence and Service Recovery. Simply put, Service Excellence emphasizes training employees to provide outstanding customer service that exceeds the expectations of the patient, which affects yourexcellent responses. Service Recovery emphasizes training employees to rectify a bad situation that would otherwise result in a dissatisfied patient, which affects your fair/poor responses. Both of these approaches are important. For example, Service Recovery training is necessary because no employee should be expected to solve customer problems without education, guidance, and possibly even some tools that empower the employee to respond adequately. However, we often spend so much of our time and energy worrying about how to address an ugly situation that we have no energy left to create an atmosphere in which those unpleasant episodes are less likely to take place. If managers want to increase their patient satisfaction mean scores, they must focus their leadership efforts on Service Excellence. The goal must be to increase the percent of excellent scores, rather than decrease the percent offair and poor scores. Of course, both strategies are beneficial to some extent; but increasing the excellent responses providing better customer service, while decreasing fair and poor responses is typically a result of handling individual problems. Employees should be empowered and educated in Service Recovery techniques so they can handle complaints themselves. While employees are empowered to solve individual problems, managers should then take the lead in identifying and implementing strategies to increase the number of patients whose expectations are exceeded. This involves a group-wide effort to improve the way everyone communicates, carries out duties, and organizes their work.

Accepting that we sometimes have fair and poor responses is common sense: There will always be some unhappy campers who will never be satisfied. Of course, our first reaction could be to wonder why we cannot create a zero defect atmosphere. Well, you could have a perfect process in place, but also have a patient whose source of dissatisfaction is beyond your control and possibly even unknown to you. Remember, even the top performers in patient satisfaction getfair and poor responses, and the irony is that the percentage offair and poor responses received by the top performers is not that different from the percentage fair/poor responses received by those with the lowest scoring performance. The best strategy for a hospital or nursing unit that wants to increase its patient satisfaction score is to move its patients perceptions from good and very good to excellent. A Service Excellence strategy, in which managers learn what makes patients rate their care excellent, as well as focusing on statistically-derived key driver issues, are the best starting points for the manager who wants to make a positive impact on patient satisfaction scores. From this example of the Healthcare industry we see how service excellence and service recovery are on opposite sides of the same spectrum yet are important to give us indicators as to how the service delivery is working. The various responses on feedback forms can be interpreted very differently yet a clear roadmap must be set out to understand how to tackle these situations and how to improve the overall service deliver to the end user. It is imperative for the organisation to go beyond the numbers to find out what is truly missing from the service experience and how it can be rectified. On the whole even though service excellence is an important motive for a company to function, lack of service recovery skills can ruin the service experience and may lose the company a customer for good.

STRATEGIES OF SERVICE RECOVERY:

1] Fail Safe Your Service:
The first rule of service quality is to do it right at the first time. Even more fundamentally, it is important to create a culture of zero defections for ensuring, doing it right the first time. Within a zero defections culture, everyone understands the importance of reliability. Employees and managers aim to satisfy every customer and look for a way to improve service. Employees in a zero defection culture truly understand and appreciate the Lifetime value of customer concept. Thus they are motivated to provide quality service at every time and to every customer.

2] Welcome & Encourage Complaints:

A critical component of a service recovery strategy is to welcome and encourage complaints. Complaints should be anticipated, encouraged and tracked. The complaining customer should truly be viewed as a friend. There are number of ways to encourage and track complaints. Customer research can be designed specifically to do this, through satisfaction surveys and critical incident studies. Part of encouraging complaints also involves teaching customers how to complain. Sometimes they have no idea whom to speak to, what the process is, or what will be involved. It is best to make this process as simple as possible and posses no problems. One way that the complaining process has been simplified for customers is through technology. New technologies have resulted in easier access for customers to sales and service representatives. For e.g. Toll- free, call centers, e- mail, SMS etc.

3] Act Quickly:
Complaining customer want quick response. Thus if the company welcomes, even encourages complaints, it must be prepared to act on them quickly. This requires following system and procedures that allow quick action as well as empowered employees.

1) Take Care of problems on the frontline: Customers want the persons who hear their complaints to solve their problems, whether the complaint is registered in person, over the phone or via the internet. The first person to hear a complaint from a customer owns that complaint until he or she is sure that it is solved.

2) Empower Employees: Employees must be trained and empowered to solve problems as they occur. A company may use customer knowledge database as the key source for immediate problem solving by its customer service representatives. These representatives are empowered to solve the customers problems.

3) Allow Customer to Solve Their Own Problem: Another way that problem or complaints can be handled quickly is by building systems that allow customers to actually solve their own service needs and fix their own problems. Typically this is done through technology and advancement.

4] Treat Customer Fairly: In responding quickly, it is also critical to treat each customer fairly. Customer expects to be treated fairly in the terms of the outcome they receive, the process by which the service recovery takes place, and the interpersonal treatment they receive.

5] Learn from Recovery Experiences: By tracking service recovery efforts and solutions, managers can often learn about systematic problems in the delivery system that needs fixing. By conducting root- cause analysis, firms can identify the sources of the problem and modify processes. Sometimes eliminating is completely a need for service recovery. 6] Learn from Lost Customers: Another key component of an effective service recovery strategy is to learn from the customer who defects or decides to leave. Formal market research discovers the reasons for customers left out, which can assist in preventing failures in the future. This type of research is difficult and painful for companies, as no one really likes to examine their failures. Yet this is essential for preventing the same mistakes and losing more customers in the future. This is most effectively done by depth interviews and administered by skilled interviewers who truly

understand the business. In conducting this type of research, it is important to focus on important or profitable customers who have left, not just everyone who has left the company.

Empowering employees for service recovery

Employee empowerment is a tactic currently used widely by service organizations to cope with change in the environment and to support service quality and service recovery initiatives. The importance of empowering employees for service recovery is mentioned widely in management literature and is considered important by many successful organizations. For example, once a service failure has occurred, customers prefer to deal with staff that is empowered to solve their problem quickly. More importantly, the staff has to have a clear understanding of the value of service recovery with respect to being competitive and for surviving in the competitive service sector market, a view that is considered imperative by many service industry professionals. Generally many organizations empowered employees to some degree, which implies that formal empowerment policies were in place in the larger organizations and informal practices tended to predominate in the smaller organizations. Significantly, informal practices are consistent with the management style in most organizations, which featured a strong reliance on horizontal communication and personal relationships with the customers. While most companies recognize the importance of organization policies, systems and procedures supporting service recovery, and the importance of training and empowering staff, a common difficulty in empowering staff is when many are part time or casual and therefore might not remain long with the organization. Staff turnover would present a threat to the development of the skills and attitudes required for excellent service recovery and that staff turnover does result in a loss of valuable skills and expertise .In part, this problem arises from broader labor market trends. Nevertheless, the link between staff retention and training for empowerment are serious considerations, since the service provider's skills, motivations and attitudes greatly affect customers evaluations of service quality. Hence, it would appear in the organization ' s best interests to implement human resource management policies to retain staff to support service recovery and employee empowerment strategies wherever possible. It would also appear that empowerment itself might help also to solve employee commitment problems. Service quality, service recovery and

empowerment are all products of the organization s policies, systems, processes and procedures which must be optimized and coordinated to produce the best service outcomes. In other words, the organization must offer a complete and consistent service experience. However, empowerment is not an end in itself. It serves to contribute to service quality and service recovery, while good service quality, in turn, reduces the demand for service recovery. In order to truly be responsive to customer needs, front-line employees must be empowered to accommodate customer requests and recover on the spot when problems arise.
Empowerment means giving employees the desire, skills, tools and authority to serve

the customer.
It is important to remember however, that authority alone is not enough. Employees

need the knowledge and tools to be able to make decisions on the customers behalf, and they need incentives that encourage them to make the right decisions.

Potential Costs and Benefits of Empowerment

Benefits Quicker responses to customer needs during service delivery. Quicker responses to dissatisfied customers during service recovery. Employees feel better about their jobs and themselves. Employees will interact with customers with more warmth and enthusiasm. Empowered employees are a source of service ideas. Word-of-mouth advertising from customers. Costs Potentially greater investment in selection and training. Higher labour costs. Potentially slower or inconsistent service delivery.

 May violate customers perceptions of fair play. Employees may give away the store, or make poor decisions.

Train Staff in Service Recovery Processes Once the team develops the specific protocols for handling the most frequent complaints and those involving loyalty factors, all staff should he trained, coached, and assigned a readily available mentor (usually the patient representative or designated manager or administrator) for developing their Service Recovery skills. Some staff may want their Service Recovery steps printed on a note card taped next to the telephone to help them remember the process. Others find that a notebook or "shingle cards" that include scripting for various types of complaints area helpful reference. Part of the training should include a technique recommended by Ron Zemke and his associates called "Solution Spaces". They have also been called "Decision Zones."These are the parameters on which the staff defines their scope of decision making authority when resolving customer concerns. For a number of years there has been considerable discussion about empowering employees. Using these "spaces" or zones helps accomplish that goal.

Fig: Solution Spaces

The staff person in solution space 1 is authorized to make decisions up to a certain point; the staff person in solution space 2 is authorized to make the same decisions at 1s level, plus a higher level of decisions. Staff person 3 has the widest range of decision-making authority. The zone approach defines the "safe zone," the "low-risk zone," and the "high risk zone". All employees have the authority to make decisions in the "safe zone"; an employee should consult with a supervisor in the low-risk zone" and a supervisor must be involved in "highrisk zone" issues. For example, taking the example of a hospital where a patient has waited more than 3o minutes after the scheduled time of an appointment, the receptionist (space I) may be authorized to waive an appointment co-payment but may not be authorized to waive other fees. The receptionist (space 1) may not be authorised to schedule a non-urgent patient in an urgent appointment slot, but the registered nurse (space 2) does have the authority to do so. In the hospital, a patient may complain that the room is too cold. The nurses aide or patientcare technician (space 1) would give the patient extra blanket and turn up the heat for that room, but the nurse (space 2) must be involved in the decision to move the patient to a different room, and the manager or patient representative (space 3) could decide if the bill should he adjusted. Whatever the boundaries are, they need to be clear to the staff. Once the agreements arc reached, management must support the decisions made, and not return to second-guess every staff decision. If staff are authorised to write off charges, they must be assigned a budget code or given the necessary funds. Otherwise, resolving complaints that impact their department's or another department's budget only creates conflict between the staff responsible for complaint handling and those responsible for the budget, a no-win barrier to a quality process.

When responding to patient concerns about service, physicians need to differentiate between the "medical model" and the "service recovery model". When a patient presents a list of symptoms to the physician, the physician generally follows the medical model for arriving at a diagnosis and a treatment plan. However, the medical model does not adapt well to patient complaints about service or about medical care. The Service Recovery model is a different way of addressing the patient's problem- is a different thought process- and works better in these situations because the patient has a different expectation for the response.

Examples of organisations with strong service recovery procedures

Ritz Carlton The Ritz Carlton which started in Boston, USA, has redefined the concept of luxury hotels in the USA. It embodies European luxury coupled with Yankee ingenuity which makes for a great a experience for any traveller and an exquisite combination for any connoisseur of luxury. The hotel has a very strong service foundation at the base of its success and some of its salient features are as follows:

Ritz focuses on three fundamentals. First on the list is location which they make sure by getting absolutely the best location. Second with the product, building the right physical product for what the guests want and what they will want tomorrow. Thats the platform. And finally the people which simply put was Ritzs ladies and gentlemen serving ladies and gentlemen. They animate the platform.

Ritz uses what they call a lineup, which is a Ritz-Carlton tradition and they want every single hotel, everywhere in the world, every partner, every shift, to utilize lineup, which typically takes around 15 minutes every day. That is a wonderful training and communication tool, where every department layers on the department message.

Part of the lineup everywhere around the world is a wow story, which means talking about great things that their ladies and gentlemen have done. They entrust every single Ritz-Carlton staff member, without approval from their general manager, to spend up to $2,000 on a guest. And thats not per year. Its per incident. The concept is to do something, to create an absolutely wonderful stay for a guest.

Therefore Ritz Carlton have a very effective Service Recovery system which gives employees overriding powers to diffuse a potentially explosive system by allowing room discounts, free meals and other benefits. Blizzard Entertainment Blizzard is computer games developer with one of its most popular offerings being Warcraft. The game has captivated audiences across age groups around the world. By taking an example of a service recovery situation between a customer and Blizzard we can understand the efficiency of their service recovery system. When a customers Warcraft account was hacked, a call was placed to Blizzard and they immediately froze the current user and returned the account to the customer with all his game credits and extra credits within 4 hours much before the promised 36 hours as mentioned by Blizzard. This led to great customer satisfaction and immense loyalty from the consumer. Blizzard went one step ahead and even educated their young consumer how to avoid the problem and how to be able to react faster the next time such a problem occurs. Southwest Airlines As Southwest recognizes, providing great customer service is much more than just a job for the front lines or the call centers. It takes coordination from the top, bringing together people, management, technology, and processes to put customers' needs first.

LOOKING AHEAD
Further in the term paper, we will be looking at the following aspects of service recovery: Empowering employees with service recovery skills and tools Examples of organisations with strong service recovery procedures

REFERENCES
http://www.greatbrook.com/service_recovery.htm http://www.usatoday.com/money/companies/management/2005-06-26-service-usat_x.htm http://www.answerstat.com/articles/3/06.html http://thethrivingsmallbusiness.com/articles/recovery-theory-customer-service/

Boshoff and Leong (1998, p. 24) Keaveney, 1995; Smith et al,. 1999;
L M s and Spvrakopoulos. 2001 Reports The Service Recovery Paradox Dispelling the Myth by Michel Coughlan