1. Recovery and Obtaining Customer Feedback
Chapter 13:
Achieving Service
Recovery and Obtaining
Customer Feedback

2. Overview of Chapter 13
Customer Complaining Behavior
Customer Responses to Effective Service Recovery
Principles of Effective Service Recovery Systems*
Service Guarantees
Discouraging Abuse and Opportunistic Behavior
Learning from Customer Feedback

3. 1. Customer Complaining Behavior

4. American Customer Satisfaction Index: Selected Industry Scores, 2006
Express mail,
parcels
Cars, vans, etc.
Life insurance
Fast food
Restaurants
Broadcasting
(natl. news)
Industry:
Soft drinks
Comm. banks
Hotels
Personal
computers
Airlines
Hospitals 83 81 75 77 65 74 69 10 20 30 40 50 60 70 80 90
100
-3.5%
2.5%
-7.4%
1.4%
0.0%
-1.3%
-9.7%
-4.1%
11.6%
-10.4%
% Change
2006 vs. 2005
Score
(Max = 100)
Source:
Accessed

5. Customer Response Categories to Service Failures (Fig 13.1)
Complain to the service firm
Take some form of Public Action
Complain to a third party
Take some form of Private Action
Take legal action to seek redress
Service Encounter is Dissatisfactory
Defect (switch provider)
Take No Action
Negative word-of-mouth
Any one or a combination of these responses is possible

6. Understanding Customer Responses to Service Failure
Why do customers complain?
What proportion of unhappy customers complain?
Why don’t unhappy customers complain?*
Who is most likely to complain?
Where do customers complain?*
What do customers expect once they have made a complaint? (Figure 13.3)

7. Customers Often View Complaining as Difficult and Unpleasant (Fig 13

8. Three Dimensions of Perceived Fairness in Service Recovery Process (Fig 13.3)
Complaint Handling and Service Recovery Process
Justice Dimensions of the Service Recovery Process
Procedural Justice
Interactive
Justice
Outcome
Justice
Customer Satisfaction with
Service Recovery
Source: Tax and Brown

9. 2. Customer Responses to Effective Service Recovery

10. 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

11. How Complaint Resolution Affects Customer Retention Rates
Percent of Unhappy
Customers Retained 9%
37%
19%
46%
54%
70%
82%
95% 10 20 30 40 50 60 70 80 90
100
Customer did not
complain
Complaint was
not resolved
Complaint
was resolved
resolved quickly
Problem cost > $100
Problem cost $1–$5
Source: Claes Fornell, Birger Wernerfelt, “A Model for Customer Complaint Management,” Marketing Science, Vol. 7, No. 3 (Summer, 1988), pp. 287–298

12. 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 (Note: not all research supports this paradox)
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

13. 3. Principles of Effective Service Recovery Systems

14. Components of an Effective Service Recovery System (Fig 13.4)
Do the job right the first time
Increased Satisfaction and Loyalty +
Effective Complaint Handling =
Conduct research
Monitor complaints
Develop “Complaints as opportunity” culture
Identify Service Complaints
Resolve Complaints Effectively
Develop effective system and training in complaints handling
Learn from the Recovery Experience
Conduct root cause analysis
Close the loop via feedback

15. Strategies to Reduce Customer Complaint Barriers (Table 13.1)
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, 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

16. How to Enable Effective Service Recovery
Be proactive—on the spot, before customers complain (ex: Ritz Carlton)
Plan recovery procedures
Teach recovery skills to relevant personnel
Empower personnel to use judgment and skills to develop recovery solutions

17. 4. Service Guarantees

18. 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

19. The Hampton Inn 100% Satisfaction Guarantee (Fig 13.5)
What are benefits of such a guarantee?
Are there any downsides?

20. Types of Service Guarantees Table 13.2
Single attribute-specific guarantee
One key service attribute is covered
Multiattribute-specific guarantee
A few important service attributes are covered
Full-satisfaction guarantee
All service aspects covered with no exceptions
Combined guarantee
All service aspects are covered
Explicit minimum performance standards
on important attributes

21. How to Design Service Guarantees
Unconditional
Easy to understand and communicate
Meaningful to the customer
Easy to invoke
Easy to collect
Credible

22. 5. Discouraging Abuse and Opportunistic Behavior

23. Dealing with Customer Fraud
Treating all customers with suspicion is likely to alienate them
TARP found only 1 to 2 percent of customer base engages in premeditated fraud—so why treat remaining 98 percent of honest customers as potential crooks?
Insights from research on guarantee cheating*
Amount of a guarantee payout had no effect on customer cheating
Repeat-purchase intention reduced cheating intent
Customers are reluctant to cheat if service quality is high (rather than just satisfactory)
Managerial implication
Firms can benefit from offering 100 percent money-back guarantees
Guarantees should be offered to regular customers as part of membership program
Excellent service firms have less to worry about than average providers

24. 6. Learning from Customer Feedback

25. Key Objectives of Effective Customer Feedback Systems
Assessment and benchmarking of service quality and performance
Customer-driven learning and improvements
Creating a customer-oriented service culture

26. Customer Feedback Collection Tools
Total market surveys
Post-transaction surveys
Ongoing customer surveys
Customer advisory panels
Employee surveys/panels
Focus groups
Mystery shopping
Complaint analysis
Capture service operating data

27. REPRESENTATIVE RELIABLE
Key Customer Feedback Collection Tools: Strengths and Weakness (Table 13.3)
POTENTIAL
FOR
SERVICE
RECOVERY
LEVEL OF MEASUREMENT
FIRST
HAND
LEARNING
COST
EFFECTIVENESS
TRANSACTION SPECIFIC
REPRESENTATIVE RELIABLE
COLLECTION TOOLS
FIRM
PROCESS
ACTIONABLE
TOTAL MARKET SURVEY (INCLU. COMPETITORS)
ANNUAL SURVEY ON OVERALL SATISFACTION
TRANSACTIONAL SURVEY
SERVICE FEEDBACK CARDS
MYSTERY SHOPPING
Brown: Fully yes; white: Not at all
UNSOLICITED FEEDBACK (e.g., COMPLAINTS)
FOCUS GROUP DISCUSSIONS
SERVICE REVIEWS
Source: Adapted from Jochen Wirtz and Monica Tomlin, “Institutionalizing Customer-Driven Learning Through Fully Integrated Customer Feedback Systems.” Managing Service Quality,10, no.4 (2000): p. 210.

28. Entry Points for Unsolicited Feedback
Frontline employees
Intermediaries acting for original supplier
Managers contacted by customers at head/regional office
Complaint cards deposited in special box or mailed
Telephone or
Complaints passed to company by third-party recipients
Consumer advocates
Trade organizations
Legislative agencies