CHAPTER 11:

SERVICE FAILURE,
COMPLAINT
HANDLING AND
SERVICE RECOVERY
 DISCONFIRMATION MODEL

EXPECTED PERCEIVED
PERFORMANCE PERFORMANCE

COMPARISION

P>E P=E P<E

+VE D Confirmation - VE D
Satisfaction Neutral Dissatisfaction
Memorable: Forgetful: Has Awful: Never
Repeat options Repeat Buy
Purchase
CUSTOMER RESPONSES TO SERVICE
FAILURES
SERVICE FAILURE

TAKE ACTION DO NOTHING

Complain Complain Complain Switch Stay

to the to Family to Third Provider with the
Provider and Party Provider
Friends

STAY SWITCH
 WHY DO PEOPLE COMPLAIN?
• Social Benefits
• Compensation
• Social Obligation
• Trouble Causers/ Complaining personalities

WHY DONT PEOPLE COMPLAIN?

• Time and Effort
• Unaware of Process
• Belief that Service Failure was their own fault
• Service does not hold any critical Consequence.
 TYPES OF COMPLAINERS
TYPE ACTION SAY TO -VE SAY TO
PROVIDER WOM 3RD
PARTY
Passive Least Unlikely Less Unlikely
likely likely

Voicers Complain Less Never Best

likely friend of
SP
Irates Yes Yes Unlikely Switch

Activists Yes Yes Yes Terrorists

Graph
 EFFECTS OF FAILURE: IMP

Failure= informs 10-15 people

Success= informs 2-3 people

 Lifetime Value = Average Transaction

Value * Frequency of Purchase *
Customer Life Expectancy
 3 TYPES OF JUSTICE / FAIRNESS
CUSTOMERS LOOK FOR AFTER
COMPLAINING

• OUTCOME FAIRNESS: Compensation

• PROCEDURAL FAIRNESS: Policies &

Procedures

• INTERACTIONAL FAIRNESS: Polite

treatment with care and honesty
 CAUSES BEHIND CUSTOMER
SWITCHING
1. Pricing
2. Inconvenience
3. Core service failure
4. Service encounter failure
5. Response to service failure
6. Competition
7. Ethical problems
8. Involuntary switching: Customer moved or
Provider closed
 SERVICE RECOVERY SYSTEM:
VVIMP
• “It is an umbrella term for systematic
efforts made by a firm to correct a problem
following a service failure and to retain a
customers goodwill.”

• “It helps to achieve/ restore customer

satisfaction”
 COMPONENTS OF EFFECTIVE SERVICE
RECOVERY SYSTEM: VIMP
Do the job Effective INCREASED
right the complaint SATISFACTION &
first time handling LOYALTY

Identify service •Research

complaints •Monitor complaints
•Complaints as opportunity
culture
Resolve
complaints Effective systems and
effectively training in complaint
handling: Empowerment

Learn from the

recovery Conduct root cause analysis
experience
feedback
 SERVICE RECOVERY STRATEGIES

1. Fail Safe your service- Do it right the first time

2. Welcome and encourage complaints
3. Act quickly:
 Take care of problems on front line
 Empower employees
 Allow customers to solve their own problems
7. Treat Customers fairly
8. Learn from recovery experience
9. Learn from lost customers
 GUIDELINES FOR EFFECTIVE PROBLEM
RESOLUTION
1. Act fast
2. Admit mistakes but don’t be defensive
3. Show that you understand the problem from
customers point of view
4. Don’t argue with the customer
5. Acknowledge the customers feelings either with
tact or explicitly
6. Give customers the benefit of doubt
7. Clarify the steps needed to solve the problem
8. Keep customers informed of service
9. Consider compensation. Airline
10. Persevering to regain customer goodwill
CHAPTER 12:
RELATIONSHIP
MARKETING
 KEY POINTS
• It costs more to find new customers than to retain
old ones

• Grocer, Dhobhi, village doctor

• Also called CRM: customer relationship

management

• Requires that the SP keeps in touch with the

customer even after the sale is over

• HDFC, ICICI, HSBC- relationship managers

 TRANSACTIONAL MARKETING
• Selling focused
• Reward based
• Push price
• After sales support and service- Poor
• Short term thinking and acting
• Pursuit of the deal
 APPLICATION OF RM/ 3 TYPES OF
CUSTOMERS

1. The Lost- for- good customers

3. The always- a – share customers

5. The intermediate type

 MARKETING STRATEGY CONTINUUM
TRANSACTION RELATIONSHIP
MARKETING MARKETING

Consumer Consumer Industrial Services

Packaged Durables Goods Marketing
Marketing Marketing Marketing
 SIX MARKETS MODEL OF RM

Customer Markets

Influencer Markets Referral Markets

Organization

Recruitment Markets Supplier Markets

Internal Markets
CUSTOMER RETENTION THROUGH
RM: LEAKING BUCKET THEORY
SERVICE FIRM A SERVICE FIRM B
10% New Customers every 10% New Customers every
year year
5% loss of customers 10% loss of customers
95% Retention Rate 90% Retention Rate
AFTER 14 YEARS
SERVICE FIRM A SERVICE FIRM B HAS
DOUBLES ITS THE SAME
CUSTOMER BASE CUSTOMER BASE
A FIRM THAT HAS HALF THE CUSTOMER LEAKAGE THAN ITS
RIVAL WILL HAVE DOUBLE THE MARKET BASE IN 14 YEARS.
CHAPTER 13:
IMPACT OF
TECHNOLOGY ON
SERVICES
 DIFFERENT TECHNOLOGIES
• Power and Energy technology
• Physical design technology
• Materials technology
• Methods technology
• Biotechnology
• IT
 APPLYING TECHNOLOGY TO
SERVICES/ USES OF TECHNOLOGY

• People Processing
• Possession Processing
• Mental Stimulus Processing
• Information Processing
 CHAPTER 14:
INTERNATIONALIZATION
OF
SERVICES
 FACTORS INFLUENCING
GLOBALIZATION
• Change in social factors
• Changes in technology
• Changes in political and legal conditions
• Changes in the market
• Competitive advantage
 OVERSEAS MARKET ENTRY
STRATEGIES
• Exports
• Turnkey projects
• Licensing
• Franchising
• Joint ventures
• Strategic alliance
• Wholly owned subsidiaries
• Merger and acquisitions
• Piggyback
CHALLENGES IN THE GLOBAL MARKET
Legal barriers
• Discriminating laws
• Subsidies
• Restriction on entry
• Copyrights and trademarks

Cultural Barriers
• Language
• Customs
• Values and attitudes
• Lifestyle

Financial Barriers
• Changes in currency exchange rates
• Problems with logistics