Chapter 13

Customer Feedback and Service Recovery

American Customer Satisfaction Index: Selected Industry Scores, 2002

Score
(Max = 100)

100 90 80 70 60 50 40 30 20 10 85 79 80 79 76 65 62

74

71

71

66

70

0 % Change 3.7% 2002 vs 2001

1.3%

0.0%

1.3%

2.8%

0.0%

0.0%

8.2%

2.9%

-2.6%

4.8% 3.3%

Industry:

Key Questions for Managers to Ask about Customer Complaining Behavior

Why do customers complain?

What proportion of unhappy customers complain? Why dont unhappy customers complain?
Who is most likely to complain?

Where do customers complain?

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

Complain to the service firm Take some form of public action Service Encounter is Dissatisfactory Take some form of private action Complain to a third party Take legal action to seek redress Defect (switch provider) Negative word-ofmouth

Take no action

Any one or a combination of these responses is possible

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

Complaint Handling & Service Recovery Process
Justice Dimensions of the Service Recovery Process Interactive Justice Outcome Justice

Procedural Justice

Customer Satisfaction with the

Service Recovery
Source: Tax and Brown

Proportion of Unhappy Customers Who Buy Again Depending on the Complaint Process
100 90 80 70 60 50 40 30 20 10 0 82% 70% 54% 46% 37% 19% 9%
Customer did not complain Complaint was not resolved Complaint was resolved
Problem cost $1 - 5

95%

Complaint was resolved quickly

Problem cost > $100

Source: TARP study

Impact of Effective Service Recovery on Retention

No Problem
Problem, but effectively resolved Problem Unresolved
0%

84%

92%

46%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Customer Retention
Source: IBM-Rochester study

Components of an Effective Service Recovery System (Figure 13.3)

Do the Job Right the Do the Job Right the First Time First Time

Effective Complaint Effective Complaint Handling Handling

Increased Satisfaction Increased Satisfaction and Loyalty and Loyalty Conduct Research Conduct Research Monitor Complaints Monitor Complaints Develop Complaints Develop Complaints as Opportunity as Opportunity Culture Culture Develop Effective Develop Effective System and Training in System and Training in Complaints Handling Complaints Handling Conduct Root Cause Conduct Root Cause Analysis Analysis

Identify Service Identify Service Complaints Complaints

Resolve Complaints Resolve Complaints Effectively Effectively

Learn from the Learn from the Recovery Experience Recovery Experience

Close the Loop via Feedback

Strategies to Reduce Customer Complaint Barriers (Table 13.1)

Complaint Barriers for Dissatisfied Customers
Inconvenience Difficult to find the right complaint procedure. Effort, e.g., writing a letter.
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.

Strategies to Reduce These Barriers

Make feedback easy and convenient by: Printing Customer Service Hotline numbers, e-mail and postal addresses on all customer communications materials.
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.

How to Enable Effective Service Recovery

Be proactiveon 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

Guidelines for Effective Problem Resolution (Management Memo 13.1)

Act fast Admit mistakes but dont be defensive Understand problem from customers viewpoint Dont argue Give benefit of doubt

Clarify steps to solve problem

Keep customers informed of progress Consider compensation

Persevere to regain goodwill

Acknowledge customers feelings

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

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

The Hampton Inn 100% Satisfaction Guarantee (Figure 13.4)

What are the benefits of such a guarantee? Are there any downsides?

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

Building a Customer Feedback System

Total market surveys Post-transaction surveys

Ongoing customer surveys

Customer advisory panels Employee surveys/panels

Strengths and Weakness of Key Customer Feedback Collection Tools (Table 13.3)
Selection of a cocktail of effective customer feedback collection tools.

Multi-level Measurement

Collection Tools
Total Market Survey (inclu. competitors) Annual Survey on overall satisfaction Transactional Survey specific) (process

Service Satisfaction

Process Satisfaction

Specific Feedback

Actionable

Represen- Potential for Service tative, Recovery Reliable

First Hand Learning

Cost Effective

Service Feedback Cards (process specific)

Mystery Shopping (service testers) Unsolicited Feedback Recd (Online feedback system) Focus Group Discussions Service Reviews

Meets Requirements:

Fully

Moderate

Little/Not at all

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 recipients