Chapter # 08

Service Recovery

9/11
The 9/11 attacks "geared organizations toward a completely different way of thinking,". "Everyone has always had backup and co-location and back-up plans, every large company has. After 9/11 and Katrina and the string of other things, even a three-person law firm, a three-person insurance agency, a doctor with his files, if your building gets wiped out and you have six decades of files, not only is your business gone, not only is your credibility gone, but you're putting hundreds of lives at risk.

The loss of a doctor's records could be fatal in some cases, and with the loss of a law firm's records, "you could have people tied in knots legally until you find alternative records, if you find them,"

Service Recovery

It refers to the actions taken by an organization in response to service failure. Complaints are inevitable, no matter how large or small a firm is. But what is important is to have a strong complaint management technique. Contained within each complaint is a customer that has tried your product or service and was dissatisfied. Customer complaints are valuable. They give the firm the opportunity to restore endangered customers confidence while strengthening underlying weakness that cause complaints.

Complaints should be converted into the voice of change for the organization. It must be a first step towards changing service design and contingency planning.

Unhappy Customers Repurchase Intentions

1% - 5% to management

45% complain to frontline employees

50% Customers do not complain

Customer Response Following Service Failure

Service Failure

Take Action

Do Nothing

Switch Providers Complain to Provider

Complain to Family & Friends

Stay with Provider

Complain to Third Party

Switch Providers

Stay with Provider

The Recovery Paradox

The company should plan to disappoint customers so that they can recover well and hopefully gain even greater loyalty from them!!

Should this be the strategy?

Customers weigh their most recent experience heavily in their determination of whether to buy again. If the most recent experience is negative then the overall feelings about the company will decrease.

?
Why people do and do not complain?

Types of Complainers

Passives Unlikely to say anything, less likely to spread negative word-of- mouth. Voicers Service providers best friends. Irates More likely to engage in negative WOM and to switch providers. Activists Above average propensity to complain on all dimensions of service. Sometimes called the terrorists

Customers Recovery Expectations

1. Understanding and Accountability o o o o o o Product repaired/service fixed Reimbursement all/part of money An apology from a firm Explanation of failure cause Assurance Customer to vent his/her frustration to the firm

2. Fair Treatment

o Outcome fairness o Procedural fairness o Interactional fairness

Service Recovery Strategies

Do it right the first time Encourage and track complaints Act quickly Empower Employees Allow customers to solve their own problems Provide adequate explanations Treat customers fairly CRM Learning

Service Recovery Strategies

Service Recovery Strategies

Service Guarantees
Unconditional Clear cutshould standard setting for the unconditionally organization - no strings attached. Theguarantee make its promise

Meaningful Customer focus

It should guarantee elements of the service that are important to the customer. Immediate and relevant feedback Thepayout should cover fully the customer's dissatisfaction.

Instant recovery of service failure Easy toUnderstand and Communicate For customers - they need to understand what to expect. Continuous Improvement For employees - they need to understand what to do. Easy toInvoke and Collect Reduction in risk and confidence building There should not be a lot of hoops or red tape in the way of accessing or collecting on the guarantee.

Example #1
Customer service guarantee

Otter Tail Power Company

We will provide timely, courteous customer service. If ever were discourteous, or if customers inquiries are not handled in a timely manner, we encourage customers to let us know. Customer comments will help us to better serve them.

We will connect a customers service by the date promised. If we fail, well automatically credit that customers account $50. This commitment does not apply during severe storm conditions or emergency events, if access to that premises is not available or is deemed unsafe, if contractors are the cause of the delay, or if extenuating circumstances prevent a timely connection.
We will provide customers with an accurate bill. If a customers bill is inaccurate, in addition to correcting it, well automatically credit that account ($25 for residential customers and $150 for commercial customers). This does not apply to estimated or prorated bills or to self-read meters. We will respect each customers property. Respecting the property of others is a fundamental courtesy. If our employees damage property, they will initiate a prompt, mutually agreeable resolution of the problem.

Example #2 customer service guarantee

Pearle Vision We want you to be happy with your new glasses. Thats why well repair or exchange them for up to 30 days at no charge to you. This guarantee does not cover accidental damage, scratches or breakage. Valid at participating locations.

Example #3 Domino's Pizza

Domino's Pizza promised "delivery within 30 minutes or the pizza is free." Management found that customers considered this too generous; they felt uncomfortable accepting a free pizza for a mere 5- to 15- minute delay and did not always take advantage of the guarantee. Consequently, Domino's changed the guarantee to "delivery within 30 minutes or $3 off," and customers appear to consider this commitment reasonable. The important point here is that you want your customers to use your warranty as much as possible. It a sure way to discover cracks in your service or products and avoid customer defection.

REMEMBER

Guarantee is the icing on the cake, not the cake

When to Use (or Not Use) a Guarantee

Existing service quality in the company is poor When guarantee does not fit the company's image Service Quality is truly uncontrollable Cost of the guarantee outweigh the benefits Customers perceive little risk in the service Customers perceive little variability in service quality among competitors