service recovery(3)
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Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 13 - 1
Chapter 13
Customer Feedback and Service Recovery
Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 13 - 2
American Customer Satisfaction Index:Selected Industry Scores, 2002
Industry:
Soft d
rinks
Express m
ail,
parcels
Cars, va
ns,
etc.
Life insuranceCom
m. b
anks
Hotels
Perso
nal
com
puters
Airlines
Hosp
italsFast food
Restaurants
Broad
casting
(natl. n
ews)
IRS
(tax)
8579 80 79
74 71 7166
7076
65 62
0
10
20
30
40
50
60
70
80
90
100
3.7% 1.3% 0.0% 1.3% 2.8% 0.0% 0.0% 8.2% 2.9% -2.6% 4.8% 3.3%% Change 2002 vs 2001
Score (Max = 100)
Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 13 - 3
Key Questions for Managers to Ask about Customer Complaining Behavior
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?
Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 13 - 4
Courses of Action Open to a Dissatisfied Customer (Figure 13.1)
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
Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 13 - 5
Dimensions of Perceived Fairness in Service Recovery Process (Figure 13.2)
Procedural Justice
Procedural Justice
InteractiveJustice
InteractiveJustice
OutcomeJustice
OutcomeJustice
Complaint Handling & Service Recovery Process
Complaint Handling & Service Recovery Process
Justice Dimensions of the Service Recovery Process
Customer Satisfaction with the
Service Recovery
Customer Satisfaction with the
Service RecoverySource: Tax and Brown
Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 13 - 6
Proportion of Unhappy Customers Who Buy Again Depending on the Complaint Process
9%
37%
19%
46%54%
70%
82%
95%
0102030405060708090
100
Customer did notcomplain
Complaint wasnot resolved
Complaintwas resolved
Complaint wasresolved quickly
Problem cost > $100 Problem cost $1 - 5
Source: TARP study
Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 13 - 7
Impact of Effective Service Recovery on Retention
NoProblem
ProblemUnresolved
Customer Retention
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
84%
92%
46%
Source: IBM-Rochester study
Problem, but effectively resolved
Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 13 - 8
Components of an Effective Service Recovery System (Figure 13.3)
Learn from the Recovery Experience
Learn from the Recovery Experience
Resolve Complaints Effectively
Resolve Complaints Effectively
Identify Service Complaints
Identify Service Complaints
Effective Complaint Handling
Effective Complaint Handling
Conduct Root CauseAnalysis
Conduct Root CauseAnalysis
Develop Effective System and Training in Complaints Handling
Develop Effective System and Training in Complaints Handling
Conduct Research
Monitor Complaints
Develop “Complaints as Opportunity” Culture
Conduct Research
Monitor Complaints
Develop “Complaints as Opportunity” Culture
=+
Close the Loop via Feedback
Increased Satisfaction and Loyalty
Increased Satisfaction and Loyalty
Do the Job Right the First Time
Do the Job Right the First Time
Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 13 - 9
Strategies to Reduce Customer Complaint Barriers (Table 13.1)
Complaint Barriers for Dissatisfied Customers
Strategies to Reduce These Barriers
Inconvenience Difficult to find the right complaint
procedure. Effort, e.g., writing a letter.
Make feedback easy and convenient by: Printing Customer Service Hotline numbers,
e-mail and postal addresses on all customer communications materials.
Doubtful Pay Off Uncertain whether any action, and
what action will be taken by the firm to address the issue the customer is unhappy with.
Reassure customers that their feedback will be taken seriously and will pay off by:
Having service recovery procedures in place, and communicating this to customers.
Featuring service improvements that resulted from customer feedback.
Unpleasantness Complaining customers fear that
they may be treated rudely, may have to hassle, or may feel embarrassed to complain.
Make providing feedback a positive experience:
Thank customers for their feedback. Train the frontline not to hassle and make
customers feel comfortable. Allow for anonymous feedback.
Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 13 - 10
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
Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 13 - 11
Guidelines for Effective Problem Resolution (Management Memo 13.1)
Act fast
Admit mistakes but don’t be defensive
Understand problem from customer’s viewpoint
Don’t argue
Acknowledge customer’s feelings
Give benefit of doubt
Clarify steps to solve problem
Keep customers informed of progress
Consider compensation
Persevere to regain goodwill
Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 13 - 12
Service Guarantees Help Promote and Achieve Service Loyalty
Force firms to focus on what customers want
Set clear standards
Highlights cost of service failures
Require systems to get & act on, customer feedback
Reduce risks of purchase and build loyalty
Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 13 - 13
Types of Service Guarantees
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 – like the full-satisfaction, adding explicit minimum performance standards on important attributes
Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 13 - 14
The Hampton Inn 100% Satisfaction Guarantee (Figure 13.4)
What are the benefits of such a guarantee?
Are there any downsides?
Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 13 - 15
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
Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 13 - 16
Building a Customer Feedback System
Total market surveys
Post-transaction surveys
Ongoing customer surveys
Customer advisory panels
Employee surveys/panels
Focus groups
Mystery shopping
Complaint analysis
Capture of service operating data
Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 13 - 17
Strengths and Weakness of Key Customer Feedback Collection Tools (Table 13.3)
Selection of a cocktail of effective customer feedback collection tools.
Potential for Service Recovery
Collection ToolsMulti-level Measurement
Action-able
Represen-tative,
Reliable
First Hand
Learning
Cost Effective
Cost EffectiveService
SatisfactionProcess
SatisfactionSpecific
Feedback
Total Market Survey (inclu. competitors)
Annual Survey on overall satisfaction
Transactional Survey (process specific)
Service Feedback Cards (process specific)
Mystery Shopping (service testers)
Unsolicited Feedback Recd(Online feedback system)
Focus Group Discussions
Service ReviewsService Reviews
Meets Requirements: Fully Moderate Little/Not at all
Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 13 - 18
Entry Points for Unsolicited Feedback
Employees serving customers face-to-face or by phone
Intermediaries acting for original supplier
Managers contacted by customers at head/regional office
Complaint cards mailed or placed in special box
Complaints passed to company by third-party recipientsconsumer advocatestrade organizations legislative agenciesother customers
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