complaint management

Service Marketing

Session 9

Complaint Management and Service Recovery

To be covered…

• Customer Complaining Behavior

• Customer Responses to Effective Service Recovery

• Principles of Effective Service Recovery Systems

• Service Guarantees

• Methods of Root Cause Analysis

Customer Response Categories to Service Failures

Service Encounter is Dissatisfactory

Service Encounter is Dissatisfactory

Take some form of Public Action

Take some form of Public Action

Take some form of Private Action

Take some form of Private Action

Take No ActionTake No Action

Complain to the service firm

Complain to the service firm

Complain to a third party

Complain to a third party

Take legal action to seek redress

Take legal action to seek redress

Defect (switch provider)

Defect (switch provider)

Negative word-of-mouth

Negative word-of-mouth

Any one or a combination of these responses is possible

Any one or a combination of these responses is possible

Understanding Customer Responses to Service Failure

• Why do customers complain?

• What proportion of unhappy customers complain?

• Why don’t unhappy customers complain?

• Where do customers complain?

• What do customers expect once they have made a complaint?

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Recipient’s normal reaction to complaints

• Ignore complaints

• Defensiveness

• Anger

• Concern re loss of trade, reputation

• Annoyance, time consuming, rectification costs

• Hindrance- wish they would just go away!

• Not believe some or all of what the customer was saying

These reactions are as a result of “negative attribution” – blame is being attributed to us or our business. A complaint is evidence that, in the customer’s view, we have not met their expectations.

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Complaint deterrent techniques

• Apology only, no rectification• Blame• Promise but don’t deliver• No response• Rudeness• Pass on to another department• Customer Interrogation

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The Gift

If a customer is complaining, you are being given a chance to retain that customer

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Unwrapping The Gift

• Free direct communication from customer about service failures, competitors offerings-no survey costs

• Readily available market research-Complaints define what customers want

• Opportunity to increase customer trust• Opportunity to build long term relationships-customers will

re-purchase if they believe complaints are welcomed• Opportunity to rectify service failures• Opportunity of engaging customers as advocates

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Engaging Customer as your Advocate

• Customers becoming your advocates is based upon “reciprocity” principle – humans like to return favours

• When businesses handle customer complaints in a respectful way and a token of atonement is offered beyond their expectation, customers are likely to reciprocate with positive advocacy

• Token of atonement can be financial, but can also be an apology, acknowledgement of making a difference- recognition of their value

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What are the elements of “Complaint is a gift” strategy (1)

• Complaints Policy and guidelines based on “complaint welcoming” culture

• Complaints data base to maximize complaints capture

• Complaint handling training, including empathy and conflict handling training- front line staff and induction training

• Target response and resolution times

• Regular complaints reporting

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What are the elements of “Complaint is a gift” strategy (2)

• Clearly defined Escalation path for difficult complaints

• Specialist Complaints case managers

• Continuous improvement focus

• Unreasonable Complainant conduct management guidelines (demands, persistence, lack of co-operation, arguments, behavior)

• Complaints Analysis- root cause analysis

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Practical Implementation of Gift Strategy

• Thank customer for contacting you

• Explain why feedback is appreciated

• Apologize for service failure

• Take responsibility and make commitment to customer to do all you can to rectify situation

• Collect all information from customer

• Correct or facilitate correction of service failure as promptly as possible

• Check customer satisfaction

• Prevent future service failures of this type-root cause analysis (5 whys, causal factor tree analysis etc)

What is Service Recovery

Service recovery refers to the actions a service provider takes in response to service failure.

It is a thought-out, planned, process of returning a dissatisfied customer to a state of satisfaction.

Service recovery differs from complaint management in its focus on service failures and the company’s immediate reaction to it.

Complaint management is based on customer complaints.

However, since most dissatisfied customers are reluctant to complain,

service recovery attempts to solve problems at the service encounter before customers complain.

Both complaint management and service recovery are considered as customer retention strategies

Three Dimensions of Perceived Fairness in Service Recovery Process

Procedural JusticeProcedural Justice InteractiveJustice

InteractiveJustice

OutcomeJustice

OutcomeJustice

Complaint Handling and Service Recovery Process

Complaint Handling and Service Recovery Process

Justice Dimensions of the Service Recovery Process

Customer Satisfaction with Service Recovery

Customer Satisfaction with Service Recovery

Importance of Service Recovery

• Plays a crucial role in achieving customer satisfaction

• Tests a firm’s commitment to satisfaction and service quality– Employee training and motivation is highly important

• Impacts customer loyalty and future profitability– Complaint handling should be seen as a profit center,

not a cost center

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Benefits of Customer Recovery

• Only 4% of dissatisfied customers complain. 96% leave without any communication to business

• Of the 96% who leave, 91% will never return

• A typical dissatisfied customer will tell 8 to 10 people about the issues with your business- significantly more in global communications

• It takes 12 positive service incidents to make up for one negative incident

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Benefits of Customer Recovery (cont’d)

• 7 out of 10 complaining customers will do business again with you if resolve the complaint in their favour

• Of complaining customers, 95% will do business with you again if you resolve the complaint at the first contact

• On average, a satisfied complainer will tell 5 people about their problem and how it was solved

• It costs 6 times more to attract new customers than it does to retain current ones

• Customer loyalty is worth 10 times the price of a single purchase

The Service Recovery Paradox

• Customers who experience a service failure that is satisfactorily resolved may be more likely to make future purchases than customers without problems

• If second service failure occurs, the paradox disappears—customers’ expectations have been raised and they become disillusioned

• Severity and “recoverability” of failure (e.g., spoiled wedding photos) may limit firm’s ability to delight customer with recovery efforts

• Best strategy: Do it right the first time

Components of an Effective Service Recovery System

Do the job right the first time

Effective Complaint Handling

Identify Service Complaints

Resolve Complaints Effectively

Learn from the Recovery Experience

Increased Satisfaction and Loyalty

Conduct research

Monitor complaints

Develop “Complaints as opportunity” culture

Develop effective system and training in complaints handling

Conduct root cause analysis

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Close the loop via feedback

Strategies to Reduce Customer Complaint Barriers

Complaint Barriers for Dissatisfied Customers

Strategies to Reduce These Barriers

Inconvenience Hard to find right complaint procedure Effort involved in complaining

Put customer service hotline numbers, e-mail and postal addresses on all customer communications materials

Doubtful Pay Off Uncertain if action will be taken by firm

to address problem

Have service recovery procedures in place, communicate this to customers

Feature service improvements that resulted from customer feedback

Unpleasantness Fear of being treated rudely Hassle, embarrassment

Thank customers for their feedback

Train frontline employees

Allow for anonymous feedback

How to Enable Effective Service Recovery

• Be proactive—on the spot, before customers complain

• Plan recovery procedures

• Teach recovery skills to relevant personnel

• Empower personnel to use judgment and skills to develop recovery solutions

How Generous Should Compensation Be?

Rules of thumb for managers to consider:– What is positioning of our firm?– How severe was the service failure?– Who is the affected customer?

Service Guarantees Help Promote and Achieve Service Loyalty

• Force firms to focus on what customers want

• Set clear standards• Highlight cost of service

failures• Require systems to get and act

on customer feedback• Reduce risks of purchase and

build loyalty

Service Recovery Scenario 1Back in March, we took a Southwest Airlines flight.. It was a fairly lengthy flight, so I had planned on catching up on work using the airline’s WiFi. Unfortunately, things did not go as planned.

The signup process went well. I entered my credit card number for the $8.00 WiFi charge; however once the transaction went through, transaction went through nothing else worked.

I looked at the guy across the aisle from me, and he was having trouble too.We hailed a flight attendant, and told her the WiFi was not working. She was pleasant but began explaining basic connection concepts. After a minute or so, we convinced her that the two of us knew what we were doing and that the WiFi simply wasn’t working.

She went to investigate, and after another 5-10 minutes, she returned to tell us that the WiFi could not be repaired in flight and that we would have no WiFi service on this trip. Since we did not have WiFi to receive email, I was not even sure if the $8.00 charge had gone through, so I didn’t sweat it much

A few days later, I discovered a charge for $8.00 on my credit card from Southwest Airlines; the charge had gone through!

After seeing the charge, I added “call Southwest for a refund” to my To Do list. The charge was so small however, that it never made it to the top of the list. The situation was mildly annoying, but more important matters always got placed on top of it.

So, imagine my surprise when a few days later I received the following email from Southwest Airlines:

Service Recovery Scenario 1

Service Recovery Scenario -2The vacationers had nothing but trouble getting from New York to their Mexican destination. The flight took off 6 hours late, made 2 unexpected stops, and circled for 30 minutes before it could land. Because of all the delays and mishaps, the plane was en route for 10 hours more than planned and ran out of food and drinks.It finally arrived at 2 o’clock in the morning, with a landing so rough that oxygen masks and luggage dropped from overhead. By the time the plane pulled up to the gate, the soured passengers were faint with hunger and convinced that their vacation was ruined before it had even started. One lawyer on board was already collecting names and addresses for a class-action lawsuit.

Silivio de Bortoli, the general manager of the [Club Med] Cancun resort and a legend throughout the organization for his ability to satisfy customers, got word of the horrendous flight and immediately created an antidote. He took half the staff to the airport, where they laid out a table of snacks and drinks and set up a stereo system to play lively music.

Service Recovery Scenario 2

As the guests filed through the gate, they received personal greetings, help with their bags, a sympathetic ear, and a chauffeured ride to the resort. Waiting for them at Club Med was a lavish banquet, complete with mariachi band and champagne. Moreover, the staff had rallied other guests to wait up and greet the newcomers, and the partying continued until sunrise.

Many guests said it was the most fun they’d had since college.”

Why Do Root Cause Analysis?

“Just fix it, there is too much to do.”“We don’t have time to think, we need results now.”

Reality - fix symptoms without regard to actual causes

Root Cause Analysis - structured and thorough review of problem designed to identify and verify what is causing the symptoms

How Is Root Cause Analysis Done?

• Teams identify all possible causes

• The actual root causes are identified and verified

• Corrective action(s) are identified to reduce or eliminate the problem

Root Cause Tools

• Cause and Effect Diagram• Scatter Diagram - prove cause-effect relationship• Control Chart - process stable?• Five Whys• Tree Diagram• Change Analysis• Barrier Analysis• Event and Causal Factor Analysis• Management Oversight & Risk Tree Analysis (MORT)

Tree Diagram

• State the problem

• Causes are listed as branches to the right of the problem

• Continue to clarify causes, drawing additional branches to the right

• Repeat until each branch reaches its logical end

Tree Diagram Example

TrainingClass

Cancelled

Not enough students signed up

Too much work

No reward

Schedule not communicated

Trainer not prepared

New trainer assigned late

No time

Turnover

Materials notcompleted

Late changes

Other critical priorities

Training Dept -other projects

Floating due date

This project-low priority More info needed

Five Whys

• Describe the problem in specific terms• For each likely cause ask, “Why did this happen?”• Continue for a minimum of five times• Show logical relationship of each response to the one that

preceded it• Stop when the team has enough information to identify the

root cause

Example of 5 WHYs analysisProblem Statement: The pizza delivery personnel's motorbike stopped while on his way to deliver several orders of pizza resulting into delay!Cost Impact: All delayed pizza were given free of charge to the customers amounting to a total of Rs. 2400

Why 1: Why did the motorbike stop?Answer 1: Because it ran out of petrol while on its way to deliver pizzas!

Why 2: Why did then petrol run out?Answer 2: Because the delivery personnel did not fuel the motorbike that morning!

Why 3: Why didn't the personnel fuel the motorbike that morning?Answer 3: Because the personnel did not have money to buy the petrol

Why 4: Why did the personnel not have money to buy the petrol?Answer 4: Because he was not able to ask money from his manager!

Why 5: Why was he not able to ask money from his manager?Answer 5: Because he came in late and was not able to find the manager!

Solution: The pizza delivery personnel should come to the office on time!!!