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Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 13 - 1
Chapter 13:
Achieving Service Recoveryand
Obtaining Customer Feedback
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Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 13 - 2
Overview of Chapter 13
• Customer Responses to Effective Service Recovery • Principles of Effective Service Recovery Systems • Service Guarantees
• Discouraging Abuse and Opportunistic Behavior
• Learning from Customer Feedback
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Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 13 - 5
Customer Response Categories toService Failures (Fig 13.1)
Service Encounteris Dissatisfactory
Take some formof Public Action
Take some formof Private Action
Take No Action
Complain to theservice firm
Complain to a thirdparty
Take legal actionto seek redress
Defect (switchprovider)
Negative word-of-
mouth
Any one or a combination ofthese responses is possible
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Understanding Customer Responses toService Failure
• Why do customers complain?• Obtain compensation for economic loss• Vent their anger• Help improve the service . Ex Alumni Association• For altruistic reasons – Want to save prevent other customers from
undergoing the trauma of poor service• What proportion of unhappy customers complain? – 5-10%
• Why don’t unhappy customers complain? – time cost, uncertain outcome,complaint process is not known, fear of confrontation etc.
• Who is most likely to complain? – people in Higher socioeconomiccircumstances
• Where do customers complain? – To the service rep in immediate contactonly. Rarely to the HQ or through email. Customer service centers are also calledup.
• What do customers expect once they have made a complaint?
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Three Dimensions of Perceived Fairness inService Recovery Process (Fig 13.3)
ProceduralJustice
Interactive
JusticeOutcome
Justice
Complaint Handling and ServiceRecovery Process
Justice Dimensions of the Service Recovery Process
Customer Satisfaction withService Recovery
Source: Tax and Brown
Procedure customer has to go through
Employees trying to resolve the issue
Compensation that the customer receives
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Customer Responses to EffectiveService Recovery
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How Complaint Resolution AffectsCustomer Retention Rates
9%
37%
19%
46%54%
70%
82%
95%
0
10
20
30
40
5060
70
80
90100
Customer did notcomplain
Complaint wasnot resolved
Complaintwas resolved
Complaint wasresolved quickly
Problem cost > $100 Problem cost $1 –$5
Percent of Unhappy
Customers Retained
Source: Claes Fornell, Birger Wernerfelt, ―A Model for Customer Complaint Management,‖ Marketing
Science, Vol. 7, No. 3 (Summer, 1988), pp. 287 –298
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The Service Recovery Paradox
• Customers who experience a service failure that issatisfactorily resolved may be more likely to make futurepurchases than customers without problems
• If second service failure occurs, the paradoxdisappears—customers’ expectations have been raisedand they become disillusioned
• Severity and ―recoverability‖ of failure (e.g., spoiled
wedding photos) may limit firm’s ability to delightcustomer with recovery efforts
• Best strategy: Do it right the first time
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Principles of Effective ServiceRecovery Systems
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Components of an EffectiveService Recovery System (Fig 13.4)
Do the job right thefirst time
Effective ComplaintHandling
Identify ServiceComplaints
Resolve ComplaintsEffectively
Learn from theRecovery Experience
IncreasedSatisfaction and
Loyalty
Conduct research
Monitor complaints Develop ―Complaints asopportunity‖ culture
Develop effective systemand training in
complaints handling
Conduct root cause analysis
=+
Close the loop via feedback
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Strategies to Reduce CustomerComplaint Barriers (Table 13.1)
Complaint Barriers for DissatisfiedCustomers
Strategies to Reduce These Barriers
Inconvenience
• Hard to find right complaintprocedure
• Effort involved in complaining
• Put customer service hotline numbers,e-mail and postal addresses on allcustomer communications materials
Doubtful Pay Off • Uncertain if action will be taken by
firm to address problem
• Have service recovery procedures inplace, communicate this to customers
• Feature service improvements thatresulted from customer feedback
• Indicate the TAT for response
Unpleasantness
• Fear of being treated rudely
• Hassle, embarrassment
• Thank customers for their feedback• Train frontline employees
• Allow for anonymous feedback
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Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 13 - 16
How to EnableEffective Service Recovery
• Be proactive—on the spot, before customerscomplain
• Plan recovery procedures
• Teach recovery skills to relevant personnel • Empower personnel to use judgment and skills to
develop recovery solutions
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How GenerousShould Compensation Be?
• Rules of thumb for managers to consider: o What is positioning of our firm? o How severe was the service failure?
o Who is the affected customer?
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Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 13 - 18
Service Guarantees
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Service Guarantees Help Promote andAchieve Service Loyalty
• Promising that if the service delivery fails to meet thepredefined standards, the customer will be compensatedfor it
• Force firms to focus on what customers want • Set clear standards, telling customer and the employees
alike what the company stands for • Force the companies to understand why they fail and
encourage them to identify them and overcome them • Require systems to get and act on customer feedback
• Reduce risks of purchaseand build loyalty
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Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 13 - 20
How to Design Service Guarantees
• Unconditional : No element of surprise to be there • Easy to understand and communicate • Meaningful to the customer • Easy to invoke : More dependent on the service
provider rather than the customer• Easy to collect• Credible
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Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 13 - 21
Types of Service GuaranteesTable 13.2
• Single attribute-specific guaranteeo One key service attribute is covered. Ex Dominos pizza. Time Guarantee
• Multiattribute-specific guaranteeo A few important service attributes are covered. Ex Mariott’s Guarantee. 1)
Friendly, efficient check in (2) Clean, comfortable room, where everythingworks (3) Friendly, efficient checkout
• Full-satisfaction guarantee o All service aspects covered with no exceptions.
• Combined guarantee o All service aspects are covered by the full satisfaction guarantee
o Explicit minimum performance standards on important attributes are
included.o Ex. Datapro Info syst : ― To deliver the report on time, to high quality std, and
to the contents outlined in this proposal. Should we fail to deliver accordingto this guarantee, or should you be dissatisfied with any aspect of our work,you can deduct any amount from the final payment which is deemed as fair‖
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Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 13 - 23
Discouraging Abuse andOpportunistic Behavior
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Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 13 - 24
Dealing with Customer Fraud
• Treating all customers with suspicion is likely to alienate them o TARP found only 1 to 2 percent of customer base engages in premeditated
fraud—so why treat remaining 98 percent of honest customers as potentialcrooks?
• Insights from research on guarantee cheating o Amount of a guarantee payout had no effect on customer cheating o Repeat-purchase intention reduced cheating intent o Customers are reluctant to cheat if service quality is high (rather than just
satisfactory)
• Managerial implication o Firms can benefit from offering 100 percent money-back guarantees
o Guarantees should be offered to regular customers as part of membership
programo Excellent service firms have less to worry about than average providers
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Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 13 - 25
Learning from Customer Feedback
K Obj ti f
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Key Objectives ofEffective Customer Feedback Systems
• Assessment and benchmarking of service quality andperformance• Objective : To Answer – How satisfied are our customers?• Performance of firm wrt competition, wrt previous yr performance,
investments have paid off?
• Customer-driven learning and improvements• Objective : To Answer – What makes our customer happy/unhappy?What are the strengths we need to maintain, and where and how do weneed to improve ?
• Creating a customer-oriented service culture
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Travel to Final DestinationCh 14
Improving Service Quality and
Productivity