mkt 350, ch 8, service recovery
TRANSCRIPT
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SMChapter 7
SERVICE RECOVERY
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Objectives for Chapter Service Recovery
• Illustrate the importance of recovery from service failures in building loyalty
• Discuss the nature of consumer complaints and why people do and do not complain
• Provide evidence of what customers expect and the kind of responses they want when they complain
• Provide strategies for effective service recovery
• Discuss service guarantees
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Service Recovery
• Service Failure:
Service Performance < Expectation = Dissatisfaction
• Service Recovery: resolving failure / problem
• Reasons for Failure:
– No promised Service
– Delayed Service
– Poor Outcome
– Uncaring Employees
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Service Recovery
• Fixing Service Failure / Customer Problem
– Customer Satisfaction
– Positive WOM communication
– Bottom Line performance
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Service Recovery
• Service Paradox:
Excellent Service Recovery = More Satisfied
• Should the Company plan to Disappoint Customer and provide good Service Recovery?
– Strategy fails
– “Doing it Right the First time” is the best option
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Figure 7-3
Customer Response Following Service Failure
Service Failure
Do NothingTake Action
Stay with ProviderSwitch Providers
Complain to Provider
Complain to Family & Friends
Complain to Third Party
Stay with ProviderSwitch Providers
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Why people Do (Do not) complain
• People complaint
• People Do not take Action
High Involvement Service
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Types Complaint Actions
• On the spot
• Negative WOM
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Switching vs Staying
Remain Loyal Switch
How the Failure
is Handled
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Customers’ Recovery Expectations
• Understanding & Accountability
• Fair Treatment
– Outcome Fairness
– Procedural Fairness
– Interactional Fairness
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• Magnitude of the Failure
• Nature of Relationship with the Firm
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• Attitude toward Switching
– Demographic Factors ( Income, Education, Age)
– Individual Factors (Risk Aversive)
• EXPERIENCE with all ENCOUNTERs
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Figure 7-1
Unhappy Customers’ Repurchase Intentions
95%
70%
46%
37%
82%
54%
19%
9%
Complaints Resolved Quickly
Complaints Resolved
Complaints Not Resolved
Minor complaints ($1-$5 losses) Major complaints (over $100 losses)
Unhappy Customers Who Don’t Complain
Unhappy Customers Who Do Complain
Percent of Customers Who Will Buy Again
Source: Adapted from data reported by the Technical Assistance Research Program.
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Figure 7-6
Themes underlying service switching
Service Switching Behavior
•Pricing
Inconvenience
Core Service Failure
Service Encounter Failures
Response to Service Failure
Competition
Ethical Problems
Involuntary SwitchingSource: Sue Keaveney
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Figure 7-5
Service Recovery Strategies
Service
Recovery
Strategies
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Make the Service fail Safe
• Meeting consumer’s Expectation > Cost
• Expectation = Reliability
• How to assure Reliability? = Quality Practice
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Encourage & Track Complaints
• Research
– Satisfaction Survey
– Lost Customer Research
– Toll Free number, email
– Blog Activities
• Anticipate the problem in advance
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Act Quickly
• Complaining customer seek Quicker Response
• Well Prepared to Act
• Customer Problem > Solved with the First encounter > Satisfied
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Treat the Customer Fairly
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Learn from Recovery Experience
• Problem Solving = Opportunities to
Create Relationship
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Service Recovery Strategies
• Make the Service fail Safe
• Meeting consumer’s Expectation > Cost
• Expectation = Reliability
• How to assure Reliability? = Quality Practice
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Service Guarantees
• guarantee = an assurance of the fulfillment of a condition (Webster’s Dictionary)
• for products, guarantee often done in the form of a warranty
• services are often not guaranteed
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Table 7-7
Characteristics of an Effective Service Guarantee
Unconditional The guarantee should make its promise unconditionally -
no strings attached.
Meaningful It should guarantee elements of the service that are
important to the customer.
The payout should cover fully the customer'sdissatisfaction.
Easy to Understand and Communicate For customers - they need to understand what to expect.
For employees - they need to understand what to do.
Easy to Invoke and Collect There should not be a lot of hoops or red tape in the way
of accessing or collecting on the guarantee.
Source: Christopher W.L. Hart, “The Power of Unconditional Guarantees,” Harvard Business Review, July-August, 1988, pp. 54-62.
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Service Guarantees
• Does everyone need a guarantee?
• Reasons companies do NOT offer guarantees:
– guarantee would be at odds with company’s image
– fears of cheating by customers
– costs of the guarantee are too high