banking service recovery and role of bank employees

McGraw-Hill © 2000 The McGraw-Hill Companies

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SMSM


Bank Service Recovery

And

Employees Role in bank service delivery


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SMThe Impact of Bank Service The Impact of Bank Service

Failure & RecoveryFailure & Recovery

Service recovery refers to the actions taken by an Organization in response to a service failure. Failure occurs for all kinds of reasons:

1. The service may be unavailable when promised2. it may be delivered late or too slowly3. the outcome may be incorrect or poorly executed4. employees may be rude or uncaring

All of these types of failures bring about negative feelings and responses from customers.


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SMCases related to service Cases related to service

Failure and RecoveryFailure and Recovery

• Sidely Austin and Brown & Wood law firm

• Club Med (Cancan Resort of Mexico)

• Star Bucks Coffee (Terrorist Customer!!!


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SMUnhappy Customers Unhappy Customers Repurchase IntentionRepurchase Intention

9%37%

19%

46%

54%

70%

82%

95%

Major complaints over $ 100 losses

Minor complaints

$ 1-5 losses

Unhappy customers who don’t complain

Unhappy customers who do complain

Complaints not resolved

Complaints resolved

Complaints resolved quickly

Percentage of customers who will buy again


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SMBank Service Recovery Bank Service Recovery

effectseffects

• Research has shown that resolving customers problems effectively has a strong impact on customer satisfaction, loyalty, W-O-M, bottom-line performance.(TARP, HMO, HAMPTON Inn etc)


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SMThe Impact of Service Failure The Impact of Service Failure

& Recovery& Recovery

An effective service recovery strategy has multiple potential Positive impacts:

1. It can increase customer satisfaction and loyalty2. Generate positive word of mouth3. A well designed, well-documented service recovery

strategy also provides information that can be used to improve service as part of a continuous improvement effort.

4. Making adjustments learned from recovery experiences, companies increase the likelihood of “doing it right first time”.

5. This ultimately reduces costs of failures and increases initial customer satisfaction.


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Negative impact of poor service recovery:Unfortunately many firms do not employ effective recovery

strategies.Research suggests that 50%…….

• A bad service experience can make the customer “terrorists”.Actively pursuing opportunities to openly criticize the company.(See Exhibit 8.2 The star bucks coffee terrorists)

• Repeated service failure can also have bad impact on employee

• This ultimately results in huge amount of costs.[7 VS 25]


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The Recovery Paradox

1. Some researchers have suggested that customers who are dissatisfied, but experience a high level of excellent service recovery, may ultimately be even more satisfied and more likely to repurchase than are those who were satisfied in the first place.

Example: a hotel customer recovery effects.


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The Recovery Paradox

2. The logical, but not very rational, conclusion is that companies should plan to disappoint customers so they can recover and gain even greater loyalty from them as a result. This idea has become known as recovery paradox. This is more complex because:

a. It is expensive to fix mistakesb. Research suggests that only the highest level of service recovery results in

increased customer satisfaction and loyalty.c. It would appear somewhat ludicrous to encourage service failure(No

guarantee that customer will be satisfied after recovery)d. The recovery paradox is highly dependent on context and situation. (Ex: Dinner reservation failure may cause failure to propose marriage to his

date mate)


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SM

Service Failure

Dissatisfaction/

Negative emotions

Complaint Action Non complaint Action

Complain to provider

Negative word of mouth

Third party action

Exit/Switch Stay Exit/Switch Stay

How Bank Customers How Bank Customers Respond To Service FailuresRespond To Service Failures

When there is a service failure, customers can respond in a variety of negative ways: anger, discontent, disappointment, self-pity and anxiety


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SMWhy Do (And Don’t) People Why Do (And Don’t) People

Complain?Complain?

People taking action believe they will and should be provided compensation for the service failure in some form.

They believe that fair treatment and good service are their due. In some cases they feel a social obligation to complain.


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Complain?Complain?

People who are unlikely to take any action have opposite beliefs. They often see complaining as a waste of time, don’t believe anything positive will occur.

Sometimes they don’t know how to complain, may engage in “emotion focused coping”. This type of coping involves self-blame, denial and possibly seeking social support etc.

They may feel failure was somehow their fault and they don’t deserve redress.


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Complain?Complain?

Personal relevance of failure can also influence whether people complain.

If service failure is not important, don’t have critical consequences, don’t have that much ego involvement- in these cases people normally don’t complain.

People normally complain about services that are expensive, risky and ego involving. E.g. vacation, medical service, airline travel and vice versa.


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SMTypes of Customer Types of Customer Complaint ActionsComplaint Actions

• A dissatisfied customer can choose to complain on the spot to the service provider, giving the company the opportunity to respond immediately.

• Some customers choose not to complain directly to the provider but rather spread negative word of mouth about the company to friends, relatives and coworkers.

• Customers may choose to complain to third parties like CAB, Professional association, private attorney etc.


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SM Types of ComplainersTypes of Complainers

Research suggests that people can be grouped into four categories based on how they respond to failures:

Passives: (less risky)

1. This group of customers is less likely to take any action because they often doubt the effectiveness of complaining, thinking the consequences will not merit the time and effort they will expend.

2. Sometimes their personal values or norms argue against complaining.


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Voicers: (less risky)

1. This group of customers actively complain to the service provider, but they are less risky to spread negative word of mouth, switch to others.

2. These customers should be viewed as the service providers best friends because they give the company a second chance.

3. They tend to believe complaining has social benefits and has positive consequences.


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Irates: (Risky)

1. This group of customers is likely to engage in negative word of mouth to friends and relatives and to switch providers than are others.

2. They are unlikely to complain to third parties and they also think that complaining has social benefits.

3. They are less likely to give service provider a second chance and stead switch to a competitor.They are more angry with the service provider.


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Activists: (Very risky)

1. This group of customers actively complain to all the parties.They have the above average propensity to complain to all dimensions.

2. Complaining fits with their personal norms.3. They have a very optimistic sense of the

potential positive consequences of all types of complaining.[In extreme case: They Become Terrorists]


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SMBank Customer’s Recovery Bank Customer’s Recovery

ExpectationsExpectations

Understanding and Accountability7 most common remedies:

1.product repaired or service fixed2.Reimbursed all their money3.Reimbursed part of their moneyFollowing 4 gives opportunity to communicate with customers:4.An apology to the customer5.An explanation by the firm as to what happened6.An assurance that problem would not be repeated7. An opportunity for the customer to vent his frustration to the

firm.


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SMWhen They Complain, What When They Complain, What

Do Customers Expect?Do Customers Expect?

Fair Treatment Outcome Fairness

1. Customers expect outcomes or compensation that match the level of their dissatisfaction. This compensation can take the form of monetary compensation, apology, future free service etc.

2. They expect equity in exchange (Repayment equal to sufferings)

3. They also appreciate when a company gives them choices in terms of compensation.(Full refund or free upgraded hotel room; Club MeD example)

4. Customers may feel uncomfortable if they are overly compensated.(Pizza delivery case: A $3 off for late delivery)


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Procedural Fairness

1. Customers expect fairness in terms of policies, rules and timeliness of the complaint process.

2. They want easy access to the complaint process and want things handled quickly, preferably by the first person they contact.

3. Fair procedures are characterized by clarity, speed and absence of hassles.

4. Customers also feel unfair if they have to prove their case- when the assumption seems to be they are wrong or lying until they can prove otherwise.(Exhibit 8.3, club Med case)


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Interaction Fairness

1. Above and beyond this customers expect to be treated politely, with care and honesty.

2. This form of fairness can dominate the others if customers feel the company and employees have uncaring attitudes and have done little to try to resolve the problem.

3. This may be due to lack of training and empowerment.(Exh: 8.3 Med club example: Silvio de bartoli and his stuff were gracious,

caring and upbeat when they greeted the long delayed passengers………)


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SMSwitching Vs. Staying Switching Vs. Staying

Following Service RecoveryFollowing Service Recovery

Whether or not customers switch to a new provider following service failure will depend on a number of factors:

1. Magnitude and criticality of the failure

1. The nature of the customer relationship with the firm

1. Customers attitude toward switching.

1. Switching may not occur immediately following service failure but may follow an accumulation of events.


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SM

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encourage complaint

Act Quickly

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Learn

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Fail-safe the service

Service Recovery Strategies

Bank Service Recovery Bank Service Recovery StrategiesStrategies


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SMEmployees' Roles in Banking

Service Delivery

• The assumption is that even when customer expectations is well understood (Gap1) and services have been designed and specified to conform to those expectations (Gap2), there may still may discontinuities in service quality when the service is not delivered as specified.


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SMEmployees are the service Employees are the service

and brandand brand

• 2 cases:

• Singapore airlines flight

• Universal card services

• 1 Video Case

• Japanese Benihana Restaurant


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• The failure to deliver services as designed and specified can result from a number of employee and human performance factors:

• Ineffective recruitment of service oriented employees,• role ambiguity and role conflict among contact

employees,• poor-employee-technology job fit;• inappropriate evaluation and compensation systems

and• lack of empowerment, perceived control and team

work.

Employees are the service Employees are the service and brandand brand


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SM Service CultureService Culture

The behavior of employees in an organization will be heavily influenced by the culture of the organization or the pervasive norms and values that shape individual and group behavior.

Corporate culture has been defined as, “ the pattern of shared values and beliefs that give the members of the organization meaning, and provide them with the rules for behavior in the organization.

More simply and informally culture has been defined as “ the way we do things around here.


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SM

Personal level understanding of culture. Experts have suggested that a customer-oriented,

service oriented organizations will have its heart a service culture.

Defined as “A culture where an appreciation for good service exits, and where giving good service to internal as well as external ultimate customers is considered as a natural way of life and one of the most important norms by everyone.”

Bank Service CultureBank Service Culture


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1. Exhibiting service leadership: Leaders of successful service firms tend to have similar core values, such as integrity , joy, and respect and they infuse those values into the fabric of organization.

-- Employees are more likely to embrace a service culture when they see management living out these values.

-Espoused values;

-Enacted values.



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SM

2. Developing a service culture: The HR and internal marketing practices can help develop a service culture overtime.

For example: Yellow roadway corporation, IBM all found that it takes several years of consistent , concerted effort to build a service culture and to shift the organization from its old patterns to new patterns of doing business.

3. Transporting the service culture: Transporting a service culture through international business expansion is also very challenging. Attempting to export a corporate culture to another country creates additional issues. Four seasons in Paris example.



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SMThe critical importance of The critical importance of

Banking Service EmployeesBanking Service Employees

Often heard Quote about service organization goes like this- “In a service organization, if you’re not serving the customer, you’d better be serving someone who is.”

People- front line employee and those supporting them from behind the scenes- are critical to the success of any service organization.


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People- captured in the elements of service marketing mix (human actors who play a part in service)-

They are the Service: In many cases the contact employees is the service. In most personal and professional services like haircutting, counseling, physical trainer, child care, limousine service, the contact person provides the entire single-handedly.

Here the offering is the employee. They are the organization in the customer's eyes. All the

employees in a law firm, or health clinic represent the firm to the client. and everything this individual say or do can influence the perceptions of the organization.

Even off-duty employees (flight attendants/restaurant employees on a break, reflect the organization they represent. Disney corporation for example).

The critical importance of The critical importance of Banking Service EmployeesBanking Service Employees


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They are the brand: An American express financial advisor, a southwest flight attendants, the primary image that a customer has of the firm is formed by the interactions the customer has with the employees of that firm..

A customer sees American express as a good provider of financial services if the employees she interacts with are knowledgeable ,understanding, and concerned about his financial situations and goals. Ex: Audi- a automobile company

They are marketers: They physically embody the product and are walking bill boards from a promotional standpoints. Some service employees may perform more traditional selling roles (bank tellers)

The critical importance of The critical importance of Banking Service EmployeesBanking Service Employees


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SMService Quality Dimensions Are Service Quality Dimensions Are Driven by Employee Behaviors Driven by Employee Behaviors

Customers’ perceptions of service quality will be impacted by the customer oriented behaviors of employees.

The following service quality can be influenced by service employee.

1. Reliability (ATM teller, auto repair personnel)2. Responsiveness (retail store clerks)3. Assurance (credibility trust and confidence may come from

employees)4. Empathy (attention, listen, adapt, flexibility help evaluate service

more highly)5. Tangibles (appearance and dress)


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SMService Quality Dimensions Are Service Quality Dimensions Are Driven by Employee Behaviors Driven by Employee Behaviors


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SM Strategies for Closing Gap 3Strategies for Closing Gap 3

A complex combination of strategies is needed to ensure that service employees are willing and able to deliver services and that they stay motivated to perform in customer-oriented, service-minded ways.

“When it comes to building great companies, the most urgent business challenge is finding and keeping great people. The best companies know that people are the foundation of greatness.”

By approaching from human resource decisions and strategies from the point of views that the primary goal is to motivate and enable employees to deliver customer-oriented promises successfully, an organization will move toward delivering service quality through people.


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SM Strategies for Closing Gap 3Strategies for Closing Gap 3

To build customer-oriented and service-minded work force, an organization must: 1. Hire the right people

2. Develop people to deliver service quality

3. Provide needed support system

4. Retain the best people

banking service recovery and role of bank employees

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