Service Recovery

1. The Impact of Service Failure and Recovery How Customers Respond to Service Failures Customers’ Recovery Expectations Switching versus Staying Following Service Recovery Service Recovery Strategies Service Guarantees Service Recovery

2. Objectives Service Recovery • Illustrate the importance of recovery from service failures in keeping customers and 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 do complain. • Present strategies for effective service recovery, together with examples of what does and does not work. • Discuss service guarantees—what they are, the benefits of guarantees, and when to use them—as a particular type of service recovery strategy.

3. Reliability is Critical in Service but… • In all service contexts, service failure is inevitable/tdk dpt dielakkan • Service failureoccurs when service performance that falls below a customer’s expectations in such a way that leads to customer dissatisfaction. • Service recovery refers to the actions taken by a firm in response to service failure.

4. Complaining Customers:The Tip of the Iceberg Figure 8.1 Source: TARP Worldwide Inc., 2007.

5. Unhappy Customers’ Repurchase Intentions Figure 8.2

6. Dissatisfied Consumers’ Behavior • The Retail Customer Dissatisfaction Study 2006 by the Verde Group found: • 48% of respondents reported that they avoided a store because of someone else’s negative experience • for those who encountered problems, 33% said they would “definitely not” or “probably not” return • The exponential power of storytelling: • as people tell the story, the negativity is embellished/dibumbui and grows

7. Customer Rage/marah Study Conducted by In collaboration with

8. How Customers Expressed Their Displeasure ?

9. What Customers Wanted to Get ? Non-monetary remedies

10. What Complainants Got ? • 56% of complainants felt they got NOTHING

11. Ping-Ponging (Number of Contacts Needed to Resolve Complaint) Mean number of contacts Complainants = 4.3 % complainants

12. Length of Time to Resolve Complaints % complainants

13. Fairness Themes in Service Recovery Insert Crisper Image Here Exhibit 8.3

14. Customer Complaint Actions Following Service Failure Insert Crisper Image Here Figure 8.4

15. Service Recovery Paradox • “A good recovery can turn angry, frustrated customers into loyal ones. ..can, in fact, create more goodwill than if things had gone smoothly in the first place.” (Hart et al.) • HOWEVER: • only a small percent of customers complain • service recovery must be SUPERLATIVE • only with responsiveness, redress, and empathy/courtesy • only with tangible rewards • even though service recovery can improve satisfaction, it has not been found to increase purchase intentions or perceptions of the brand • service recovery is expensive

16. Service Recovery Paradox/lawan • The service recovery paradox is more likely to occur when: • the failure is not considered by the customer to be severe • the customer has not experienced prior failures with the firm • the cause of the failure is viewed as unstable by the customer • the customer perceives that the company had little control over the cause of the failure • Conditions must be just right in order for the recovery paradox to be present!

17. “Causes” Behind Service Switching Pricing • High price • Price increases • Unfair pricing • Deceptive pricing Response to Service Failure • Negative response • No response • Reluctant response Inconvenience Competition • Location/hours • Wait for appointment • Wait for service Service Switching Behavior • Found better service Ethical Problems Core Service Failure • Cheat • Hard sell • Unsafe • Conflict of interest • Service mistakes • Billing errors • Service catastrophe Service Encounter Failure Involuntary Switching • Uncaring • Impolite • Unresponsive • Unknowledgeable • Customer moved • Provider closed Figure 8.5 Source: Sue Keaveney, “Customer Switching Behavior in Service Industries: An Exploratory Study,” Journal of Marketing 59 (April, 1995), pp. 71-82.

18. Act Quickly Encourage and Track Complaints Provide Adequate Explanations Service Recovery Strategies Fail-safe the Service Learn from Lost Customers Cultivate Relationships with Customers Learn from Recovery Experiences Service Recovery Strategies Treat Customers Fairly Figure 8.6

19. Eight Most Common Remedies/perbaiki Customers Seek with Serious Problems • Have the product repaired or service fixed • Be reimbursed for the hassle of having experienced a problem • Receive a free product or service in the future • Explanation by the firm as to what happened • Assurance that the problem will not be repeated • A thank you for the customer’s business • An apology from the firm • An opportunity for the customer to vent his or her frustrations to the firm

20. Customer Satisfaction with Timeliness of Firm Responses to Service Failures Insert Crisper Image Here Figure 8.7

21. Service Guarantees • guarantee = an assurance of the fulfillment of a condition (Webster’s Dictionary) • 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/garansi/jaminan • services are often not guaranteed • cannot return the service • service experience is intangible (so what do you guarantee?)

22. The Hampton Inn 100 PercentSatisfaction Guarantee Insert Crisper Image Here Figure 8.3

23. Characteristics of an EffectiveService 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/diminta and Collect • the firm should eliminate hoops or red tape in the way of accessing or collecting on the guarantee

24. Benefits of Service Guarantees • A good guarantee forces the company to focus on its customers. • An effective guarantee sets clear standards for the organization. • A good guarantee generates immediate and relevant feedback from customers. • When the guarantee is invoked there is an instant opportunity to recover, thus satisfying the customer and helping retain loyalty. • Information generated through the guarantee can be tracked and integrated into continuous improvement efforts. • Employee morale and loyalty can be enhanced as a result of having a service guarantee in place. • A service guarantee reduces customers’ sense of risk and builds confidence in the organization.

25. British Airways Guarantee Insert Crisper Color Image Here

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

27. Does everyone need a service guarantee? • Reasons companies might NOT want to offer a service guarantee: • existing service quality is poor • guarantee does not fit the company’s image • too many uncontrollable external variables • fears of cheating or abuse by customers • costs of the guarantee outweigh the benefits • customers perceive little risk in the service • customers perceive little variability in service quality among competitors

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