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Chapter 7
SERVI CE RECOVERY
Objectives for Chapter
Service Recovery

Illustrate the importance of recovery from service
failures in building loyalty
Discuss the nature of consumer complaints and
why people do and do not complain
Provide evidence of what customers expect and
the kind of responses they want when they
complain
Provide strategies for effective service recovery
Discuss service guarantees
Service Recovery

Service Failure:
Service Performance < Expectation = Dissatisfaction

Service Recovery: resolving failure / problem

Reasons for Failure:
No promised Service
Delayed Service
Poor Outcome
Uncaring Employees
Service Recovery


Fixing Service Failure / Customer Problem

Customer Satisfaction

Positive WOM communication

Bottom Line performance
Service Recovery


Service Paradox:
Excellent Service Recovery = More Satisfied

Should the Company plan to Disappoint Customer
and provide good Service Recovery?
Strategy fails

Doing it Right the First time is the best option
Figure 7-3
Customer Response Following Service
Failure
Service Failure
Do Nothing Take Action
Stay with Provider
Switch Providers
Complain to
Provider
Complain to
Family & Friends
Complain to
Third Party
Stay with Provider
Switch Providers
Why people Do (Do not) complain


People complaint

People Do not take Action


High Involvement Service
Types Complaint Actions


On the spot

Negative WOM


Switching vs Staying


Remain Loyal Switch

How the Failure
is Handled




Customers Recovery Expectations


Understanding & Accountability

Fair Treatment
Outcome Fairness
Procedural Fairness
Interactional Fairness

Magnitude of the Failure

Nature of Relationship with the Firm

Attitude toward Switching

Demographic Factors ( Income, Education, Age)

Individual Factors (Risk Aversive)

EXPERIENCE with all ENCOUNTERs
Figure 7-1
Unhappy Customers
Repurchase 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 Dont Complain
Unhappy Customers Who Do Complain
Percent of Customers Who Will Buy Again
Source: Adapted from data reported by the Technical Assistance Research Program.
Figure 7-6
Themes underlying service switching
Service
Switching
Behavior
Pricing
Inconvenience
Core Service Failure
Service Encounter
Failures
Response to Service
Failure
Competition
Ethical Problems
Involuntary Switching
Source: Sue Keaveney
Figure 7-5
Service Recovery Strategies
Service
Recovery
Strategies
Make the Service fail Safe

Meeting consumers Expectation > Cost

Expectation = Reliability

How to assure Reliability? = Quality Practice
Encourage & Track Complaints

Research
Satisfaction Survey
Lost Customer Research
Toll Free number, email
Blog Activities

Anticipate the problem in advance
Act Quickly

Complaining customer seek Quicker Response

Well Prepared to Act

Customer Problem > Solved with the First
encounter > Satisfied
Treat the Customer Fairly
Learn from Recovery Experience

Problem Solving = Opportunities to
Create Relationship


Service Recovery Strategies
Make the Service fail Safe

Meeting consumers Expectation > Cost

Expectation = Reliability

How to assure Reliability? = Quality Practice
Service Guarantees
guarantee = an assurance of the fulfillment of a
condition (Websters Dictionary)

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

services are often not guaranteed

Table 7-7
Characteristics of an Effective Service
Guarantee
Unconditional
The guarantee should make its promise unconditionally -
no strings attached.
Meaningful
It should guarantee elements of the service that are
important to the customer.
The payout should cover fully the customer's
dissatisfaction.
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.
Service Guarantees
Does everyone need a guarantee?

Reasons companies do NOT offer guarantees:
guarantee would be at odds with companys
image
fears of cheating by customers
costs of the guarantee are too high