handling customer complaints and managing service recovery

Chapter 5

Handling Customer Complaints and

Managing Service Recovery

Lovelock, Patterson, Walker: Services Marketing 3e © 2004 Pearson Education Australia 2

Chapter 5 Objectives To outline the courses of action open to a dissatisfied customerExplain the factors influencing complaint behaviourIdentify the principles of an effective service-recovery systemExplain the techniques for identifying the root cause of service failures


Customer Satisfaction

Customer satisfaction is linked not only to fault free service, but also to what transpires when something does go wrong.

First law of quality might be: “do it right the first time” - but service failure does occur.


+ =

Doing the job Right the first

time

Effective complaint handling

Increased customer

satisfaction & loyalty

Figure 5.1:Customer Satisfaction Formula


Seek redress directly from business firms

Take legal action to obtain redress

Complain to business, private, or govt.

agencies

Decide to stop buying product or brand or

boycott seller

Warn friends about the product and/or seller

Take some form of private action

Take some form of

public action

Take some action

Take no action

Dissatisfaction occurs

Figure 5.2 How Customers Handle Dissatisfaction


Customer Response to Service Failure

Do nothing, but the service provider’s reputation is diminishedComplain to the service firmTake action with a third party such as ACCCDefect and do not use the provider again


Complaints as Research Data

Responsive organisations look at complaints in two ways:As a stream of market research information highlighting where improvements are neededSeries of individual customer problems which need to be solved


Capturing Complaints

Complaints may be made through:the service provider’s own employeesintermediary organisations acting on behalf of the original suppliermanagers who normally work backstage but are contacted by a customer seeking higher authoritysuggestions or complaint cards mailed or placed in a special boxcomplaints to third parties


Complaining Behaviour in South-East Asia

Asian consumers may be less willing to send written complaints than othersAsian consumers are less likely to complain about poor serviceService failures are more likely to be toleratedIndividuals may restrain their own self interest if it would disturb others


SOCAP-TARP 1995 Study

57% of respondents had experienced at least one problem with products/services in the past 12 months 73% with a serious problem took some action to have it corrected (this varied between 49% and 93% depending on the industry and nature of problem). Only 34% who took action were satisfied with the way the problem was resolved 89% of those who were not happy with their complaint outcome said they would not deal with the same firm again


Complaining households made an average 3.4 contacts in an effort to have their most serious problem resolvedSatisfaction declined the further up the hierarchy the customer had to go to get it resolved On average, a dissatisfied complainant tells nine other people, while a satisfied complainant tells half as many

SOCAP-TARP 1995 Study (cont’d)


Factors Influencing Complaining Behaviour

Level of dissatisfaction i.e. does it seem worth it?Cost of complaining e.g. time and effortBenefits of complaining i.e. value of the outcome?Likelihood of resolution i.e. belief that the problem will/can be solved satisfactorily


Factors Influencing Complaining Behaviour

Available resources for making a complaint

Access to a means of registering a complaint

Knowing who is to blame for the problem

Demographics e.g. younger and better educated people are more likely to complain


Standards for Complaint Handling

“ The overriding aim of any complaints handling process is to turn dissatisfied consumers into satisfied consumers. This is best done by speedy and effective remedies at the first point of contact.”


% Exceeded/satisfied expectations with action taken

70605040302010

0

56%

39% 35%34% 33%

25% 21%

Immedi-ately 18%

Under

24 hrs

8%

Within

48 hrs

8%

3 -14 days 29%

15-28 days 8%

Over 28 days 29%

All respondents

Perceived response time

Figure 5.4 Impact of response time on satisfaction with action taken on most serious problems


706050403020100

55%

37% 34%27%

18%

1

All respon-dents


Number of contracts (Average: 3.4)

2 3-4 5+

24%27% 19% 30%

Figure 5.5 Impact of number of contacts made to get problem resolved on satisfaction


70

60

50

40

30

20

10

0

95%

83%

46%

23%

10%

23%

No Exceeded expectations

Satisfied complainants

Dissatisfied Non-


8090

100

problemMollified

complainant

Figure 5.6 Impact of problem experience/complaining on Customer loyalty for all products/services


Do the job right the first time

Effective complaint handling

Identify service complaints

Resolve complaints effectively

Learn from the recovery experience

Increased satisfaction & loyalty

Conduct root cause analysis

Develop effective systems & training in complaints handling

Conduct research Monitor complaints Develop ‘complaints as opportunity’ culture

+ =

Figure 5.7 Components of an effective service-recovery system

Feedback


Service Recovery

A crucial element in achieving a satisfied customerA true test of the organisation’s commitment to the customerJustice considerations have a large impact on how customers evaluate a provider’s recovery efforts


Figure 5.8 The role of justice in the complaint handling procedure

Source: S.Tax and S.W. Brown, Handbook of Services Marketing and Management, © 2000, Reprinted by permission of Sage Publications Inc.

Justice Considerations

Procedure Interaction Outcome

Complaint handling process


The Role of Justice in the Complaint Handling Procedure

Procedural justice concerns the policies and rules that comprise the complaining processInteractional justice concerns the behaviour of the firm’s representatives during the complaint resolution processOutcome or distributive justice relates to how fairly consumer’s are compensated for their complaints


Principles of Effective Service Recovery

Top management commitment

‘Complaints as opportunity’ culture

Training and empowerment

Ownership of complaint


Guidelines for Effective Complaint Resolution

Act fast: time is of the essence to achieve full recoveryApologise but do not be defensive: it is important to impress on the consumer that the problem is an infrequent occurrenceShow understanding for the customer’s viewpoint



Do not argue with customers: gather facts to reach a mutually acceptable solutionAcknowledge the customer’s feelings to help build rapportGive customers the benefit of the doubtClarify the steps needed to solve the problem



Keep customers informed of progress: uncertainty breeds anxietyConsider compensation: this may reduce further complaints and legal actionPersevere to regain customer goodwill: outstanding recovery efforts can build loyalty and referrals


Learning From Experience

Blueprinting: understand the processes behind service delivery to identify potentially weak links

Control charts: displaying performance as measured by specific criteria over a period of time


Learning From Experience

Fishbone diagram: a cause and effect analysis

Pareto analysis: 80/20 rule

handling customer complaints and managing service recovery

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