Service

Failure

Crisis at Taj

The Siege At Taj Heritage

At least seven gunmen enter the lobby of the Taj Mahal Palace hotel, where about 450 people were staying, and begin firing. 60 hours of siege.Left 195 people dead and hundreds injured. Large fire reported.Took Indian security forces nearly three days to eliminate the last of the attackers.

SERVICE FLAWSIntelligence Failures.Gaps in Coastal Surveillance.Incomplete Execution of Response Protocols.Response Timing Problems.Inadequate Counterterrorism Training and Equipment for the Local Police.

SERVICE FLAWSLimitations of Municipal Fire and Emergency Services.Flawed Hostage-Rescue Plan.Poor Strategic Communications and Information Management by the Govt.

Service Failure

• Service failure: Service performance that fails to meet customer expectations

Customer Response Categories to Service Failures

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

Types of complainers

• Passives• Voicers• Irates• Activists

Singh ‘ A typology of customer complaint styles’

Kiruba Incident

• ClearTrip.com took my money and DID NOT book my ticket to Malaysia. Had a harrowing experience at airport.

• http://www.kiruba.com/2009/06/cleartrip-episode-my-experience.html

• http://blog.cleartrip.com/2009/06/16/the-kiruba-incident/

Understanding Customer Responses to Service Failure

• 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?

• What do customers expect once they have made a complaint?

Three Dimensions of Perceived Fairness in Service Recovery Process

Procedural Justice

Procedural Justice

Interactive

Justice

Interactive

JusticeOutcome

Justice

Outcome

Justice

Complaint Handling and Service Recovery Process

Complaint Handling and Service Recovery Process

Justice Dimensions of the Service Recovery Process

Customer Satisfaction with

Service Recovery

Customer Satisfaction with

Service RecoverySource: Tax and Brown

Employees of taj during THE SERVICE crisis

Staff- Waiters, Executives, Chefs.Providing food and other necessary things to the guests as needed by them.Established a helpline in Wellington Mews in the midst of the crisis.Security staff.

The telephone operators.Karamveer Singh Kang, Taj's general manager.Hotel management.Ratan tata - Chairman of the Tata group.

Service recovery

Immeditely created the Taj Public Welfare Trust.Assisting people affected by the attack.Not laid off a single employee.Promised to rebuild and restore every inch of the hotel to its original glory.

Ratan Tata, surveyed the heritage building.The Indian National Trust for Art and Cultural Heritage (INTACH). Planned to reopen the Hotel in phases.Opening the Hotel as soon as possible.

ReopeningRe-opened the doors of its 268-room Tower Wing on Sunday 21 December 2008.Guest services have been upgraded.Use of the Taj Club, with free breakfast and tea, coffee and cocktails. Free use the hotel's personal butler service.

SECURITYInvestment of large sums of money on security systems and procedures. Created a security team headed by a retired Major General from the army. Retained the services of a top international security service company.Around 75 people have been trained overseas. Equipped them to be the first line of defence in the event of an attack.

Trained security people in plain clothes at the lobby and other key points.Security ring outside the hotel. Mock attacks to assess the preparedness of our people, system and procedures.

Maitaining hotel image

The hotel’s biggest loss was the death of 10 staff members and 21 guests.November - spent in quiet reflection and remembrance. Private multi-faith prayers.

Nov. 26, 2009

Mr Tata unveiled the new permanent memorial at the lobby. The memorial has the names of the thirty one victims.Gathering of private staff and employees which was also attended by family members of the martyrs.

Unhappy Customers’ Repurchase Intentions

82%

54%

19%

9%

Complaints Resolved Quickly

Complaints Resolved

Complaints Not Resolved

Unhappy Customers Who Don’t Complain

Unhappy Customers Who Do Complain

Percent of customers who will buy again after a major complaint (over $100 in losses)

Source: Adapted from data reported by the Technical Assistance Research Program.

Importance of Service Recovery

• Plays a crucial role in achieving customer satisfaction

• Tests a firm’s commitment to satisfaction and service quality– Employee training and motivation is highly important

• Impacts customer loyalty and future profitability– Complaint handling should be seen as a profit center,

not a cost center

The Recovery Paradox

• Q: Since effective service recovery often leads to increased loyalty, should firms intentionally “screw up” and then recover in an effort to garner increased loyalty?

• A: Uh, probably not. Problems w/this approach include:– Many customers don’t complain.– It’s expensive to fix mistakes. One study reveals that only the

very highest levels of service recovery result in increased satisfaction & loyalty.

– Since Reliability is the most critical of the 5 Dimensions, does it make sense to make deliberate mistakes?

– Only some customers may respond positively to recovery.

Components of an Effective Service Recovery System

Do the job right the first time

Effective Complaint Handling

Identify Service Complaints

Resolve Complaints Effectively

Learn from the Recovery Experience

Increased Satisfaction and Loyalty

Conduct researchMonitor complaintsDevelop “Complaints as opportunity” culture

Develop effective system and training in complaints handling

Conduct root cause analysis

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Close the loop via feedback

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Treat Customers

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Fail-safethe Service

Cultivate

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Encourage and Track

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ServiceRecoveryStrategies

Service Recovery Strategies

Service Recovery 8 Key Strategies

1. Make the Service Fail-Safe– Do it right the first time.– Poka yokes = automatic warnings or controls in place to ensure

mistakes are not made.– Create a “zero defects” culture

2. Encourage and Track Complaints– Research = satisfaction surveys, critical incidents studies, & lost

customer research.3. Act Quickly

– Front line response and employee empowerment (Ritz Carlton and complaint “ownership.”

– Allow customers to fix their own problems – usually through technology.

Service Recovery 8 Key Strategies

4. Provide Adequate Explanations– Dissatisfaction can be reduced if an adequate explanation is

provided.– 2 characteristics:

• First, the content of the explanation must be appropriate.• Second, the style of the explanation delivery is important.

– “Explanations perceived by customers as honest, sincere, and not manipulative are generally the most effective.”

5. Cultivate Relationships with Customers– “…strong customer-firm relationships can help shield the firm

from the negative effects of failures on customer satisfaction.”

Service Recovery 8 Key Strategies

6. Learn from Recovery Experiences– “By conducting root-cause analysis, firms can

identify the sources of the problems and modify processes, sometimes eliminating almost completely the need for recovery.”

7. Learn from Lost Customers– To prevent future failures, conduct formal market

research. This data is most effectively obtained by depth interviews, administered by skilled interviewers who truly understand the business.

Service Recovery 8 Key Strategies

8. Treat Customers Fairly– Understanding and Accountability. “Customers expect

an apology when things go wrong . . . if a firm provides an apology to the customer, the percentage of dissatisfied customers drops from 86 to 20 percent.”

– Fair Treatment. Customers look for 3 types of justice…1. Outcome Fairness. Equitable exchanges.2. Procedural Fairness. Policies, rules, and timeliness of the

complaint process.3. Interactional Fairness. Interpersonal treatment.

Service Guarantees• guarantee = an assurance of the fulfillment of a condition

(Webster’s Dictionary)

• in a business context, a guarantee is a pledge or assurance that a product offered by a firm will perform as promised and, if not, then some form of reparation will be undertaken by the firm

• for tangible products, a guarantee is often done in the form of a warranty

• services are often not guaranteed– cannot return the service– service experience is intangible

(so what do you guarantee?)

The Hampton Inn 100 PercentSatisfaction Guarantee

Characteristics of an EffectiveService Guarantee

• Unconditional– the guarantee should make its promise unconditionally – no strings

attached• Meaningful

– the firm should guarantee elements of the service that are important to the customer

– the payout should cover fully the customer’s dissatisfaction• Easy to Understand and Communicate

– customers need to understand what to expect– employees need to understand what to do

• Easy to Invoke and Collect– the firm should eliminate 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.

Service Guarantees

Q: Does everyone need to offer a guarantee?

• Reasons companies might NOT want to offer a service guarantee:– existing service quality is poor– guarantee does not fit the company’s image– too many uncontrollable external variables– fears of cheating or abuse by customers– costs of the guarantee outweigh the benefits– customers perceive little risk in the service– customers perceive little variability in service quality among

competitors

Strategies to Reduce Customer Complaint Barriers (Table 13.1)

Complaint Barriers for Dissatisfied Customers

Strategies to Reduce These Barriers

Inconvenience

Hard to find right complaint procedure

Effort involved in complaining

Put customer service hotline numbers, e-mail and postal addresses on all customer communications materials

Doubtful Pay Off

Uncertain if action will be taken by firm to address problem

Have service recovery procedures in place, communicate this to customers

Feature service improvements that resulted from customer feedback

Unpleasantness

Fear of being treated rudely

Hassle, embarrassment

Thank customers for their feedback

Train frontline employees

Allow for anonymous feedback

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• See Service Perspectives 13.2: Guidelines For Effective

Problem Resolution

How Generous Should Compensation Be?

• Rules of thumb for managers to consider:– What is positioning of our firm?– How severe was the service failure?– Who is the affected customer?

Service Guarantees Help Promote and Achieve Service Loyalty

• Force firms to focus on what customers want

• Set clear standards• Highlight cost of service

failures• Require systems to get and act

on customer feedback• Reduce risks of purchase and

build loyalty

How to Design Service Guarantees• Unconditional• Easy to understand and communicate• Meaningful to the customer• Easy to invoke• Easy to collect• Credible

The Hampton Inn 100% Satisfaction Guarantee

• What are benefits of such a guarantee?• Are there any downsides?

Dealing with Customer Fraud• Treating all customers with suspicion is likely to alienate them

– TARP found only 1 to 2 percent of customer base engages in premeditated fraud—so why treat remaining 98 percent of honest customers as potential crooks?

• Insights from research on guarantee cheating– Amount of a guarantee payout had no effect on customer cheating– Repeat-purchase intention reduced cheating intent– Customers are reluctant to cheat if service quality is high (rather than just

satisfactory)• Managerial implication

– Firms can benefit from offering 100 percent money-back guarantees– Guarantees should be offered to regular customers as part of membership

program – Excellent service firms have less to worry about than average providers

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

Customer Feedback Collection Tools

• Total market surveys• Post-transaction surveys• Ongoing customer surveys• Customer advisory panels• Employee surveys/panels• Focus groups• Mystery shopping• Complaint analysis• Capture service operating data

Entry Points for Unsolicited Feedback

• Frontline employees• Intermediaries acting for original supplier• Managers contacted by customers at head/regional office• Complaint cards deposited in special box or mailed• Telephone or e-mail• Complaints passed to company by third-party recipients

– Consumer advocates– Trade organizations– Legislative agencies