Service Recovery

Service Recovery

Service Recovery  It refers to the actions taken by an

organization in response to a service failure.  Reasons of failure:  Service may be unavailable when promised  It may be delivered later or too slowly  Outcome may be incorrect or poorly executed  Employees may be rude or uncaring

The Impact of Service Failure and Recovery  Resolving customer problems effectively has

a strong impact on:  Customer satisfaction  Loyalty  Word of mouth communication  Bottom line performance

How Customers Respond to Service Failures

Types of Complainers  Passives- Don’t Complain  Voicers- complain but don’t do negative

things  Irates- Angry, Negative WOM, likely to switch  Activists- beyond complaining

Unhappy Customers’ Repurchase Intentions Unhappy Customers Who Don’t Complain

9%

Unhappy Customers Who Do Complain Complaints Not Resolved

Complaints Resolved

19% 54% 82%

Complaints Resolved Quickly

Percent of customers who will buy again after a major complaint (over $100 in losses) Source: Adapted from data reported by the Technical Assistance Research Program.

Customers’ Recovery Expectations  Understanding & accountability on the part of

the service provider  Fair treatment

Causes Behind Service Switching Pricing • • • •

High price Price increases Unfair pricing Deceptive pricing

Response to Service Failure • Negative response • No response • Reluctant response

Inconvenience • Location/hours • Wait for appointment • Wait for service

Core Service Failure • Service mistakes • Billing errors • Service catastrophe

Service Encounter Failures • • • •

Uncaring Impolite Unresponsive Unknowledgeable

Service Switching Behavior

Competition • Found better service

Ethical Problems • • • •

Cheat Hard sell Unsafe Conflict of interest

Involuntary Switching • Customer moved • Provider closed

Source: Sue Keaveney, “Customer Switching Behavior in Service Industries: An Exploratory Study,” Journal of Marketing, April, 1995, pp. 71-82.

Service Recovery Strategies  Do it right the first time- make the service fail

safe  Encourage & track complaints  Act quickly  Provide adequate explanations  Treat customers fairly  Cultivate relationship with customers  Learn from recovery experiences  Learn from lost customers

Service Guarantees  Guarantee: an assurance of the fulfillment of a

condition

 in a business context, a guarantee is a pledge or

assurance that a product offered by a firm will perform as promised and, if not, then some form of reparation will be undertaken by the firm

 for tangible products, a guarantee is often done in the

form of a warranty

 services are often not guaranteed  cannot return the service  service experience is intangible

Benefits of service guarantees  It forces the company to focus on its

customers  Sets clear standards for the organization  Generates immediate and relevant feedback from the customers  Instant opportunity for service recovery  Helps in continuous improvement effort  Enhance employees morale & loyalty  Reduces the sense of risk

Characteristics of an Effective Service Guarantee

 Unconditional  the guarantee should make its promise unconditionally – no strings attached  Meaningful  the firm 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  customers need to understand what to expect  employees need to understand what to do  Easy to Invoke and Collect  the firm should eliminate hoops or red tape in the way of accessing or collecting on the guarantee