customer feedback f
TRANSCRIPT
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Slide 2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 13 - 1
Customer Feedback andService Recovery
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Slide 2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 13 - 2
American Customer Satisfaction Index:Selected Industry Scores, 2002
Industry:
8579 80 79
7471 71
6670
76
6562
0
10
20
30
40
5060
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%% Change2002 vs 2001
Score
(Max = 100)
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Slide 2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 13 - 3
Key Questions for Managers to Ask aboutCustomer Complaining Behavior
Why do customers complain?
What proportion of unhappy customers complain?
Why dont unhappy customers complain?
Who is most likely to complain?
Where do customers complain?
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Slide 2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 13 - 4
Customer Response categories to service failures
Service Encounteris Dissatisfactory
Take some formof public action
Take some formof private action
Take no action
Complain to theservice firm
Complain to athird party
Take legal actionto seek redress
Defect (switchprovider)
Negative word-of-mouth
Any one or a combination ofthese responses is possible
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Slide 2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 13 - 5
Understanding customer responses to servicefailures
To be able to deal effectively with dissatisfied & complaining customers,managers need to understand key aspects of complaining behavior, startingwith several questions:
1. Why do customers complain?
a. Obtain restitution or compensation: Often consumers complain torecover some economic loss by seeking a refund, compensation, &/orhave the service performed again.
b. Vent their anger: Some customers complain to rebuild self-esteem &/orto vent their anger & frustration. When service processes arebureaucratic & unreasonable or when employees are rude, deliberatelyintimidating, or apparently uncaring, the customers self-esteem, self-worth, or the sense of fairness can be negatively affected. They maybecome angry & emotional.
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Slide 2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 13 - 6
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c. Help to improve the service: When customers are highly involved with aservice, they give feedback to try & contribute toward service improvements.These customers are motivated by the prospect of getting better service inthe future.
d. For altruistic reasons: These customers want to spare other customers
from experiencing the same problems, & they might feel bad if a problem isnot highlighted.
2. What proportion of unhappy customers complain?
Research shows that an average, only 5-10% of customers who have beenunhappy with a service actually complain.
However, although generally only a minority of dissatisfied customerscomplain, there is evidence that consumers across the world are becomingbetter informed, more self- confident, & more assertive about seekingsatisfactory outcomes for their complaints.
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3. Why dont unhappy customers complain?
TARP, a customer satisfaction & measurement firm, has identified anumber of reasons why customers dont complain.
Some dont wish to take the time to write a letter, fill out a form, or make aphone call, especially if they dont see the service sufficiently important tomerit the effort.
Many customers see the payoff as uncertain & believe that no one wouldbe concerned about their problem or willing to resolve it.
In some situations, people simply do not know where to go or what to do
Additionally, many people may feel that complaining is unpleasant.
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4. Who is most likely to complain?
Research findings consistently show that people in higher socioeconomiclevels are more likely to complain than those in lower levels.
There better education, higher income, & greater social involvement givethem the confidence, knowledge & motivation to speak up when theyencounter problems.
5. Where do customers complain?
Studies show that majority of complaints are made at the place where theservice was received.
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Slide 2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 13 - 9
Customer expectations about their complaints
When a service failure occurs, people expect to be adequatelycompensated in a fair manner.
However, recent studies have shown that many customers feel that theywere not treated fairly & did not receive adequate justice. When thishappens, customer reactions tend to be immediate, emotional & enduring.
It was found in a research, that as much as 85% of the variation in thesatisfaction with a service recovery was determined by the 3 dimensions offairness:
1. Procedural justice: It deals with the policies & rules that any customerwill have to go through in order to seek fairness. Here, customers expect thefirm to assume responsibility, which is the key to the start of a fair procedure,followed by a convenient & responsive recovery process.
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2. Interactional justice:
It involves the firms employees who provide the service recovery & theirbehavior towards the customer.
Giving an explanation for the failure & making an effort to resolve theproblem are very important.
However, the recovery effort must be perceived as genuine, honest &polite.
3. Outcome justice:
It pertains to the compensation that a customer receives as a result of thelosses & inconvenience incurred because of the service failure.
It includes compensation for time, effort, spent during service process
recovery.
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Slide 2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 13 - 11
Dimensions of Perceived Fairness in ServiceRecovery Process
Procedural
Justice
Interactive
Justice
Outcome
Justice
Complaint Handling & Service
Recovery Process
Justice Dimensions of the Service Recovery Process
Customer Satisfaction with the
Service RecoverySource: Tax and Brown
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Slide 2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 13 - 12
Customer responses to effective service recovery
Service recovery is an umbrella term for systematic efforts by a firm tocorrect a problem following a service failure & retain a customers goodwill.
Service recovery efforts play a crucial role in achieving customer satisfaction.
The true test of a firms commitment to satisfaction & service quality is notin the advertising promises but in the way it responds when things go wrongfor the customer.
Effective service recovery requires thoughtful procedures for resolvingproblems & handling dissatisfied customers.
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Slide 2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 13 - 13
Impact of Effective Service Recoveryon Retention
No
Problem
Problem
Unresolved
Customer Retention
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
84%
92%
46%
Source: IBM-Rochester study
Problem,but effectively
resolved
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Principles of effective service recovery systems
1. Make it easy for customers to give feedback:
Many companies have improved their complaint- collection procedures byadding special toll-free phone lines, links on the Web sites, prominentlydisplayed customer comment cards in their branches.
In the customer newsletter, some companies feature service improvementsthat were the direct result of customer feedback under the motto you toldus, & we responded
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Slide 2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 13 - 15
Strategies to Reduce Customer ComplaintBarriers
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.
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Cont..
2. Enable effective service recovery:
Recovering from service failures take more than pious expressions ofdetermination to resolve any problems that may occur.
It requires commitment, planning & clear guidance.
Specifically, effective service recovery procedure should be:
a. Proactive: Service recovery needs to be initiated on the spot, ideallybefore customers have a chance to complain. Service personnel should
be sensitized to signs of dissatisfaction & ask whether customers mightbe experiencing a problem.
b. Planned: Contingency plans have to be developed for service failures,especially for those that can occur regularly.
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c. Recovery skills must be taught: Customers easily feel insecure at the pointof service failure because things are not turning out as anticipated. Effectivetraining arms frontline staff with the confidence & competence to turn distressinto delight.
d. Recovery requires empowered employees: Service recovery efforts
should be flexible & employees should be empowered to use their judgment& communication skills to develop solutions that will satisfy complainingcustomers. Employees need to have the authority to make decisions &spend money in order to resolve service problems promptly & recover customer goodwill.
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Slide 2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 13 - 18
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3. How generous should compensation be?
How much compensation should a firm offer when there has been aservice failure? Or would an apology be sufficient instead?
The following rules of thumb can help to answer these questions:
a. What is the firms market positioning?
b. How severe was the service failure?
c. Who is the affected customer? Overly generous compensation is not only expensive but may be
negatively interpreted by customers.
It may raise questions about the soundness of the business & lead
customers to become suspicious.
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Slide 2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 13 - 19
Cont.
4. Dealing with complaining customers;
Both managers & frontline employees must be prepared to deal with angrycustomers who are confrontational & sometimes behave in insulting waystoward service personnel.
The following guidelines provide specific guidelines for effective problemresolution, designed to calm upset customers & deliver a resolution.
Act quickly
Admit mistakes, but dont be defensive
Show that you understand the problem from each customers point ofview
Dont argue with customers
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Acknowledge the customers feelings
Give customers the benefit of the doubt
Clarify the steps needed to solve the problem
Keep customers informed of progress
Consider compensation
Persevere to regain customer goodwill
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Slide 2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 13 - 21
Components of an Effective Service RecoverySystem
Lea rn fr om t e
R ec ov er y E p e rie n ce
Lear n fr om t e
R ec ov er y E p e rie n ce
R es o v e C om p ain ts
E f fe c tiv e y
R eso v e C o mp a in ts
E f fe c tiv e y
enti fy S ervice
C o m p a in ts
enti fy S erviceC o m p a in ts
E f fe c tiv e C o m p a in t
a n in
E f fe c tiv e C o m p a in t
a n in
Conduct Root Cause
Analysis
Conduct Root Cause
Analysis
Develop Effective
System and Training in
Complaints Handling
Develop Effective
System and Training in
Complaints Handling
Conduct Research
Monitor Complaints
Develop Complaints
as pportunity
Culture
Conduct Research
Monitor Complaints
Develop Complaints
as pportunity
Culture
=+
Close the Loop via Feedback
Increased Satisfaction
and Loyalty
Increased Satisfaction
and LoyaltyDo the Job Right the
First Time
Do the Job Right the
First Time
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Slide 2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 13 - 22
Service Guarantees
A growing number of companies offer customers a satisfaction guarantee,promising that if service delivery fails to meet predefined standards, thecustomer is entitled to one or more forms of compensation, such as easy-to-claim replacement, refund or credit.
From the customers perspective, the primary function of service guaranteesis to lower the perceived risks associated with purchase.
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Slide 2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 13 - 23
The power of service guarantees
Guarantees are powerful tools for both promoting & achieving service qualityfor the following reasons:
1. Guarantees force firms to focus on what their customers want & expect ineach element of the service.
2. Guarantees set clear standards, telling customers & employees alike whatthe company stands for.
3. Guarantees require the development of systems for generating meaningfulcustomer feedback & acting on it.
4. Guarantees force service organization to understand why they fail &encourage them to identify & overcome potential fail points.
5. Guarantees help in reducing the risk of the purchase decision & buildinglong-term loyalty.
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Slide 2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 13 - 24
How to design service guarantees
Some guarantees are simple & unconditional. Others appear to have beenwritten by lawyers & contain many restrictions.
Service guarantees should be designed to meet the following criteria:
1. Unconditional
2. Easy to understand & communicate
3. Meaningful to customers
4. Easy to invoke
5. Easy to collect
6. Credible
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Types of Service Guarantees
Single attribute-specific guarantee one key serviceattribute is covered
Multiattribute-specific guarantee a few important serviceattributes are covered
Full-satisfaction guarantee all service aspects coveredwith no exceptions
Combined guarantee like the full-satisfaction, addingexplicit minimum performance standards on important
attributes
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Slide 2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 13 - 26
Is it always appropriate to introduce a serviceguarantee?
Managers should think carefully about their firms strength & weaknessesbefore deciding to introduce a service guarantee.
Companies that have a strong reputation for high-quality service may notneed a guarantee.
In contrast, a firm whose service is currently poor must first work to improvequality to level above that at which the guarantee might be invoked on a regularbasis by most of its customers.
In a market where consumers se little financial, personal or physiological riskassociated with purchasing & using a service, a guarantee adds little value butstill costs money to design, implement & manage.
Where little perceived difference in service quality among competing firmsexists, the first company to institute a guarantee may be able to obtain a first-mover advantage & create a valued differentiation for its services.
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Slide 2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 13 - 27
Key objectives of effective customer feedbacksystems
Many strategists have concluded that in increasingly competitive markets, theultimate competitive advantage for a firm is to learn & change more rapidly thancompetition.
Specific objectives of effective customer feedback systems typically fall intothree main categories:
1. Assessment & benchmarking of service quality & performance:
The objective is to answer the question, How satisfied are the customers?
This objective includes learning about how well a firm performed incomparison to its main competitors?
How it performed in comparison to the previous year?
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Whether investments in certain service aspects have paid off in terms ofcustomer satisfaction?
Often, a key objective of comparison against other units (branches, teams,competitors) is to motivate managers & service staff to improve performance,especially when the results are linked to compensation.
2. Customer-driven learning & improvements: The objective is to answer:
Why our customers are unhappy?
Where & how can we improve?
This objective is about gaining an understanding of the things that othersuppliers do well & those that make customers happy.
3. Creating a customer-oriented service culture
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Slide 2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 13 - 29
Customer feedback collection tools
Recognizing that different tools have different strengths & weaknesses,service marketers should select a mix of customer feedback collection toolsthat jointly deliver the needed information.
1. Total market surveys, annual surveys & transactional surveys:
Total market surveys & annual surveys measure satisfaction with allmajor customer service processes & products.
The level of measurement is usually at high level, with the objective ofobtaining a global index or indicator of overall service satisfaction for theentire firm.
Overall indices tell how satisfied customers are but not why they arehappy or unhappy.
There is a limit to the number of questions that can be asked about eachindividual process or product.
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In contrast, transactional surveys are typically conducted after customershave completed a specific transaction & query them about this process insome depth.
All three types are representative & reliable when designed properly.Representativeness & reliability are required for:
1. Accurate assessment of where the company, a process, branch orindividual stands relative to quality goals.
2. Evaluation of individuals, staff, teams, branches &/or processesespecially when incentive schemes are linked to such measures.
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Strengths and Weakness ofKey Customer FeedbackCollection Tools
Potentialfor ServiceRecovery
Collection Tools
Multi-level MeasurementAction-
able
Represen
-tative,
Reliable
First
Hand
earning
Cost
EffectiveServiceSatisfaction
Process
Satisfaction
Specific
Feedback
Total Market Survey (inclu.
competitors)
Annual Survey on overallsatisfaction
Transactional Survey(process specific)
Service Feedback Cards(process specific)
Mystery Shopping(service testers)
Unsolicited Feedback Recd(Online feedback system)
Focus Group Discussions
Service Reviews
Meets Requirements: Fully Moderate Little/Not at all
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Entry Points forUnsolicited 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 recipients
consumer advocates
trade organizations legislative agencies
other customers
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Analysis, reporting & dissemination of customerfeedback
Choosing the relevant feedback tools & collecting customer feedback ismeaningless if company is unable to disseminate the information to therelevant parties to take action.
Hence, to drive continuous improvement & learning, a reporting systemneeds to deliver feedback & analysis to frontline staff, process owners, branch
or department managers & top management.
The feedback loop to the frontline should be immediate for complaints &complements as is practiced in a number of service businesses wherecomplaints, compliments & suggestions are discussed with the staff.
There are 3 types of service performance reports to provide informationnecessary for service management :
1. A monthly Service Performance update provides process owners withtimely feedback on customer comments. Here the feedback is provided to theprocess manager who can discuss it with service staff.
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Cont.
2. A quarterly service performance review provides process owners &branch or department managers with trends in process performance &service quality.
3. An annual service performance report gives top management arepresentative assessment of the status & long-term trends relating to
customer satisfaction with the firms services.
The reports should be short & reader friendly, focusing on key indicators.