Service Recovery Mtg 410 Donna J Hill Ph

Service Recovery Mtg. 410 Donna J. Hill, Ph. D. Fall 2000

Service Recovery b Refers to the actions taken by an organization in response to a service failure

Unhappy Customers’ Repurchase Intentions Unhappy Customers Who Don’t Complain 9% 37% Unhappy Customers Who Do Complaints Not Resolved 19% 46% 54% Complaints Resolved 70% 82% Complaints Resolved Quickly Percent of Customers Who Will Buy Again Minor complaints ($1 -$5 losses) Major complaints (over $100 losses) Source: Adapted from data reported by the Technical Assistance Research Program. 95%

Recovery Paradox b Companies should plan to disappoint customers so that they can recover and gain even greater loyalty from them as a result!

Customer Response Following Service Failure Take Action Do Nothing Switch Providers Complain to Provider Complain to Family & Friends Switch Providers Complain to Third Party Stay with Provider

Types of Complainers b Passives b Voicers b Irates b Activists

Fairness b Outcome (fair compensation) b Procedural (policies, rules, and timeliness) b Interactional (politeness, courtesy, honesty)

Figure 7 -5 Service Recovery Strategies We En lcom co ura e an ge d Co m ce i rv l ai fe Sa t he Se pla i nts F Act Quickly Learn from mers Lost Custo Service Recovery Strategies s Le Re arn f co rom ve ry Ex p er om eri en ce s Tr t ea C t us rl ai F y

Pricing • • High Price Increases Unfair Pricing Deceptive Pricing Causes Behind Service Switching 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 Response to Service Failure • Negative Response • No Response • Reluctant Response 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

Service Guarantees b guarantee = an assurance of the fulfillment of a condition (Webster’s Dictionary) b for products, guarantee often done in the form of a warranty b services are often not guaranteed • cannot return the service • service experience is intangible –(so what do you guarantee? )

Table 7 -7 Characteristics of an Effective Service Guarantee Source: Christopher W. L. Hart, “The Power of Unconditional Guarantees, ” Harvard Business Review, July-August, 1988, pp. 54 -62.

Why a Good Guarantee Works b forces company to focus on customers b sets clear standards b generates feedback b forces company to understand why it failed b builds “marketing muscle”

Service Guarantees b Does everyone need a guarantee? b Reasons companies do NOT offer guarantees: • guarantee would be at odds with company’s image • too many uncontrollable external variables • fears of cheating by customers • costs of the guarantee are too high

Service Guarantees b service guarantees work for companies who are already customer-focused b effective guarantees can be BIG deals - they put the company at risk in the eyes of the customer b customers should be involved in the design of service guarantees b the guarantee should be so stunning that it comes as a surprise -- a WOW!! factor b “it’s the icing on the cake, not the cake”

Lessons from the Hampton Inn Guarantee b Focus on customer needs. b KISS b Deep management conviction is fundamental. b Empowerment is the key. b Train, train. Reinforce, reinforce. b Perpetuate stories of the guarantee in action b Understand the moments of truth. b Teach customers to complain. b Develop tracking systems. b Give regular feedback on reasons the guarantee was invoked. b Use internal guarantees to support the external guarantees.