CUSTOMER SATISFACTION Service Failure, Service Recovery, Service Guarantee

1. CUSTOMER SATISFACTION Service Failure, Service Recovery, Service Guarantee

2. Customer Satisfaction (CS) • All customers want to be satisfied. • CS is generally recognised as a POST-PURCHASED construct → How much a person LIKES or DISLIKES a product or service after experiencing it (Woodside et al, 1989) • Giving customers some extra value will delight them by exceeding their expectationsand insure their return

3. Customer Satisfaction • Satisfaction is defined as . . . “a person’s feelings of pleasure or disappointment resulting from comparing a product’s perceived performance (or outcome) in relation to his or her expectations.” • i.e., Performance – Expectation Satisfaction results when expectations are equaled or surpassed.

4. CUSTOMER SATISFACTION Customer satisfaction is considered a prerequisite for customer retention and loyalty, and obviously helps in realizing economic goals like profitability,market share, return on investment, etc.(Scheuing, 1995; Reichheld, 1996; Hackl and Westlund, 2000).

5. SERVICE QUALITY AND CUSTOMER SATISFACTION RELATIONSHIP In today’s world of intense competition, the key to sustainable competitive advantage lies in delivering high quality service that will in turn result in satisfied customers (Shemwell et al., 1998) SERVICE QUALITY → SATISFACTION

6. SQ and CS RELATIONSHIP - CONT • Customer judge the quality of service delivered as GOOD but they may not have had satisfaction from the experience • SATISFACTION and SERVICE QUALITY are not the same thing: Satisfaction is psychological outcome emerging from an experience, whereas: Service Qualityis concerned with the attributes of the service itself. * Customer use the same criteria to judge both(Parasuraman et al, 1988)

7. Table 1: Customer Judgement of SQ and CS Oliver (1997) SQ and CS RELATIONSHIP - CONT

8. SQ and CS RELATIONSHIP - CONT • Perceptions of service quality could occur at multiple levels in an organization – e.g. with the core service, physical environment, interaction with the service providers, etc. (Bitner and Hubert, 1994). • On the other hand, the customer’s overall satisfaction with the services of the organization is based on (or a function of) all the encounters/experiences of the customers with that organization. • Similar to service quality, customer satisfaction can occur at multiple levels in an organization, e.g. satisfaction with the contact person, satisfaction with the core service and satisfaction with the organization as a whole.

9. Customer Satisfaction-cont The expectancy/disconfirmation paradigm in process theory (Mohr, 1982) provides the grounding for the vast majority of satisfaction studies and encompasses four constructs: • (1) expectations; • (2) performance; • (3) disconfirmation; and • (4) satisfaction.

10. Customer Satisfaction-cont • Dis/confirmation arises from discrepancies between prior expectations and actual performance. This conceptualisation is reflected in the definition of satisfaction by Tse and Wilton (1988, p. 204) as: The consumer’s response to the evaluation of the perceived discrepancy between prior expectations (or some norm of performance) and the actual performance of the product as perceived after its consumption.

11. Zone of Tolerance Theory (ZTT) • Customer subjective judgement is not as simple as YES or NO answer • Satisfaction can be to a lesser or greater degree from ADEQUATE → DESIRED → DELIGHT. • Customer Zone of Toleranceis between desired and adequate. • Below adequate represents totally unacceptable levels of service (Parasuraman, 1995)

12. ZONE OF TOLERANCETHEORY (PARASURAMAN, 1995) PRE-PURCHASED DURING POST- PURCHASED PURCHASE ↓ ↓ ↓ CUSTOMER CUSTOMER CUSTOMER EXPECTATION PERCEPTIONS SATISFACTION LEVELS ► DELIGHT ► DESIRABLE SERVICE ZONE OF TOLERANCE ►SATISFACTORY SERVICE ►UNACCEPTABLE SERVICE

13. Zone of Tolerance Theory-CONT • If customer perceive that the activity has a HIGH RISK : their ZTT will be very narrow. • Example: ??? • Thus service provider must manipulate by ≈ giving information/assurance ≈ delighting rather than satisfying • Implication of knowing ZTT to practitioners: >reduce levels of service >reduce costs >but still satisfy them

14. Customer Expectations Factors that influence customers’ formulation of expectations: • Word of mouth • Personal needs • External communications and past experience (Ziethaml et al, 1990) *Image of Organisation(Gummesson and Grönroos, 1987)

15. Customer Perceptions A comparison to excellence in service by the customer (Oliver, 1997) Normally, customer perceptions of service are made at the end of a service encounter. BUT ZIETHAML et al (1990) disagreed. → They believed that there is an endless potential for judgements to be made during the service delivery process.

16. Customer Perceptions -cont • Some service are too technical for customer to judge whether they are being carried out correctly and stated that organisations need to be fair when offering them. • Factors that may influence customer perceptions judgement: ► the purpose of encounter ► the importance the customer places on the encounter ►perceived risk ► cost involved

17. Customer Perceptions -cont Other factors that may have some influence: → MOOD of customer could affect their perceptions of service. → EMPLOYEES’ PERCEPTION are directly related to customer’s perceptions of service and vice versa. SPC or internal customer vs external customer

18. DISSATISFACTION DISSATISFACTION occur when : Customer perceptions of a service do not meet their expectations. Causes of Dissatisfaction: 1. Research – lack, inappropriate, etc 2. External Information – false expectation 3. Inadequate training –staff 4. Financial objectives taking priority –lead to unsafe custom and practices

19. DISSATISFACTION-cont Research indicate that many cases of customer dissatisfaction came about as a result of organisation’s failure to address a complaint, rather than the original service problem. → design and instigate service recovery techniques to safe guard customer satisfaction.

20. Customer Feedback andWord-of-Mouth • The average business only hears from 4% of their customers who are dissatisfied with their products or services. Of the 96% who do not bother to complain, 25% of them have serious problems. • The 4% complainers are more likely to stay with the supplier than are the 96% non-complainers. • About 60% of the complainers would stay as customers if their problem was resolved and 95% would stay if the problem was resolved quickly. • A dissatisfied customer will tell between 10 and 20 other people about their problem. • A customer who has had a problem resolved by a company will tell about 5 people about their situation.

21. SERVICE FAILURE and SERVICE RECOVERY • A service failure occurs when the service delivery falls short of customers' expectations (Bell and Zemke, 1987), and • A service recovery refers to the actions a service provider takes in response to a service failure (Grönroos, 1988).

22. Service failure What is called “service failure” means the service or product couldn’t reach the expected level because some fault happened in one link of service delivery (Mueller et al., 2003).

23. Table 14.1 Service Failures Types Failure Subgroups Primary Failure Type Unavailable Service Unreasonably Slow ServiceOther Core Service Failure “Special Needs” Customers Customer Preferences Admitted Customer Error Disruptive Others Level of Attention Unusual Action Cultural Norms Gestalt Drunkenness Verbal and Physical Abuse Breaking Company Policies Uncooperative Customers Service Delivery System Failures Customer Needs and Requests Unprompted/Unsolicited Employee ActionsProblematic Customers

24. Types of Complaints Instrumental • expressed for the purpose of altering an undesirable state of affairs Noninstrumental • expressed without the expectation that an undesirable state will be altered Ostensive • outer-directed complaints Reflexive • Inner-directed complaints

25. Why don’t unhappy customers complain? • “It’s not worth the time or effort.” • “No one would be concerned about my problem or interested in acting on it.” • “I don’t know where to go or what to do.” • Up to 40-60% of people complaining report dissatisfaction with the outcome of their complaints.

26. Why Don’t Customers Complain? • Don’t know who to complain to • Don’t think it will do any good • May doubt their own subjective evaluation • May accept part of the blame • May want to avoid confrontation • May lack expertise

27. Why customers do not register a complaint ? • they perceive the service provider would not be responsive to a complaint • their attitude toward complaining • lack the sophistication to complain • the level of product importance • do not know how to complain about poor service.

28. Service Recovery Framework Psychological -apology -show interest Perceived Service Quality Psychological -empathy -apology Tangible -fair fix -value add Severity Of Failure Loyalty Satisfaction Retention Patronage Service Recovery Expectations Follow-up Service Recovery Service Recovery Customer Loyalty Service Guarantee Speed of Recovery Tangible -small token Frontline Discretion Service Failure Occurs Provider Aware of Failure Fair Restitution Pre-recovery Phase Immediate Recovery Phase Follow-up Phase

29. Approaches to Service Recovery • Case-by-caseaddresses each customer’s complaint individually but could lead to perception of unfairness. • Systematic response uses a protocol to handle complaints but needs prior identification of critical failure points and continuous updating. • Early intervention attempts to fix problem before the customer is affected. • Substitute service allows rival firm to provide service but could lead to loss of customer.

30. Top Ten Guidelines for Effective Service Recovery 1. Act quickly 2. Admit mistakes but don’t be defensive 3. Show that you understand the problem from each customer’s point of view 4. Don’t argue with customers 5. Acknowledge the customer’s feelings 6. Give customers the benefit of the doubt 7. Clarify the steps needed to solve the problem 8. Keep customers informed of progress 9. Consider compensation 10. Persevere to regain customer goodwill Source: Adapted from Lovelock (1996), pg. 477

31. What Do Customer Expect from A Recovery Effort ? Bell and Zemke (1987) suggested five ingredients were important to successful service recovery : • apology • urgent reinstatement • empathy • atonement • follow-up • Other ???

32. The Service Guarantee • Should a service firm offer a “service guarantee”?

33. The Service Guarantee • A service guarantee without service worker empowerment is no guarantee of success. • Firnstahl (1989)

34. Hart et al. (1992) • “Firms hesitate to adopt unconditional guarantees because they are afraid to assume complete responsibility for customer satisfaction.” (23)

35. Unconditional Service Guarantee: Customer View • Unconditional (L.L. Bean) • Easy to understand and communicate (Bennigan’s) • Meaningful (Domino’s Pizza) • Easy to invoke (Cititravel) • Easy to collect (Manpower) 6-35

36. Unconditional Service Guarantee: Management View • Focuses on customers (British Airways) • Sets clear standards (FedEx) • Guarantees feedback (Manpower) • Promotes an understanding of the service delivery system (Bug Killer) • Builds customer loyalty by making expectations explicit 6-36