Service Recovery

1. Service Recovery Chapter 13

2. Discussion Question Why is service recovery so important?

3. Discussion Question Why do some customer never complain? Do you complain as a customer?

4. Reasons for Complaining • Obtain compensation • Refund • Service performed again • Other form of compensation – future services • Release their anger • Help to improve the service • Out of concern for others • Warning others of service failures

5. Customer Response Categories to Service Failures

6. Unhappy Customers’ Repurchase Intentions Unhappy Customers Who Don’t Complain 9% Unhappy Customers Who Do Complain 19% Complaints Not Resolved 54% Complaints Resolved 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.

7. Case 19: The Complaint Letter What are the issues that Mr. Metz should note and be concerned with? How credible is the evidence provided by the letter? How would you ‘repair’ this situation?

8. Guidelines for Front-line Employees and Handling Customer Complaints Service Insights 13.2, page 406

9. Expectations of Complaint Behaviour • Procedural justice • Customers expect the firm to take responsibility. Flexible recovery process that may include customer inputs. • Interactional justice • Employees of the firm provide the service recovery (requires empowerment). Should be seen as genuine and honest. • Outcome justice • Compensation that the customer receives as a result of the service failure. Compensation for not only service failure, but for time, effort and energy spent during the process of service recovery.

10. Classroom Discussion What do the following Quotes mean? • “A complaint is a gift” • “The customer who complains is your friend” • What are some of your personal service recovery experiences?

11. 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 • Services are often not guaranteed • cannot return the service • service experience is intangible (so what do you guarantee?)

12. The Power of Service Guarantees • Force firms to focus on what customers want • Set clear standards, that both employees and customers can and should understand • Require systems to get & act on customer feedback • Force organizations to understand why they fail and to overcome potential fail points • Reduce risks of purchase decision for customers and build loyalty

13. 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 Source: Christopher W.L. Hart, “The Power of Unconditional Guarantees,” Harvard Business Review, July-August, 1988, pp. 54-62.

14. Types of Service Guarantees • Single attribute-specific guarantee • One key service attribute is covered – e.g., lunch guarantee from • Multi-attribute-specific guarantee • A few important service attributes are covered • Full-satisfaction guarantee • All service aspects covered with no exceptions – e.g., full refund if not satisfied • Combined guarantee • All service aspects are covered • Explicit minimum performance standards on important attributes