Service Recovery

It refers to the actions taken by an organization in response to a service failure. Reasons of failure:  Service may be unavailable when promised  It may be delivered later or too slowly  Outcome may be incorrect or poorly executed  Employees may be rude or uncaring

The Impact of Service Failure and Recovery Resolving customer problems effectively has a strong impact on:  Customer satisfaction  Loyalty  Word of mouth communication  Bottom line performance

How Customers Respond to Service Failures

Types of Complainers Passives- Don’t Complain Voicers- complain but don’t do negative things Irates- Angry, Negative WOM, likely to switch Activists- beyond complaining

Unhappy Customers’ Repurchase Intentions 82% 54% 19% 9% Complaints Resolved Quickly Complaints Resolved Complaints Not Resolved Unhappy Customers Who Don’t Complain Unhappy Customers Who Do Complain 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.

Customers’ Recovery Expectations Understanding & accountability on the part of the service provider Fair treatment

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

Service Recovery Strategies Do it right the first time- make the service fail safe Encourage & track complaints Act quickly Provide adequate explanations Treat customers fairly Cultivate relationship with customers Learn from recovery experiences Learn from lost customers

Service Guarantees  Guarantee: an assurance of the fulfillment of a condition  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

Benefits of service guarantees It forces the company to focus on its customers Sets clear standards for the organization Generates immediate and relevant feedback from the customers Instant opportunity for service recovery Helps in continuous improvement effort Enhance employees morale & loyalty Reduces the sense of risk

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