Service Marketing

Session 9

Complaint Management and

Service Recovery

To be covered
Customer Complaining Behavior
Customer Responses to Effective Service
Recovery
Principles of Effective Service Recovery Systems
Service Guarantees
Methods of Root Cause Analysis

Customer Response Categories to

Service Failures
Complain
Complainto
tothe
the
service
firm
service firm

Service
ServiceEncounter
Encounter
isisDissatisfactory
Dissatisfactory

Take
Takesome
some
form
of
form ofPublic
Public
Action
Action
Take
Takesome
some
form
of
form ofPrivate
Private
Action
Action
Take
TakeNo
NoAction
Action

Complain
Complainto
toaa
third
thirdparty
party
Take
Takelegal
legalaction
action
to
seek
redress
to seek redress
Defect
Defect(switch
(switch
provider)
provider)
Negative
Negativewordwordof-mouth
of-mouth

Any
Anyone
oneor
oraacombination
combination
of
these
responses
of these responsesisis
possible
possible

Understanding Customer Responses to

Service Failure

Why do customers complain?

What proportion of unhappy customers complain?

Why dont unhappy customers complain?

Where do customers complain?

What do customers expect once they have made a

complaint?

Recipients normal reaction to

complaints

Ignore complaints

Defensiveness

Anger

Concern re loss of trade, reputation

Annoyance, time consuming, rectification costs

Hindrance- wish they would just go away!

Not believe some or all of what the customer was saying

These reactions are as a result of negative attribution blame

is being
attributed to us or our business. A complaint is evidence that, in
the customers
view, we have not met their expectations.
6

Complaint deterrent techniques

Apology only, no rectification

Blame
Promise but dont deliver
No response
Rudeness
Pass on to another department
Customer Interrogation

The Gift
If a customer is complaining, you are
being given a chance to retain that
customer

Unwrapping The Gift

Free direct communication from customer about

service failures, competitors offerings-no survey
costs
Readily available market research-Complaints
define what customers want
Opportunity to increase customer trust
Opportunity to build long term relationshipscustomers will re-purchase if they believe
complaints are welcomed
Opportunity to rectify service failures
Opportunity of engaging customers as
advocates
9

Engaging Customer as your Advocate

Customers becoming your advocates is based upon

reciprocity principle humans like to return
favours

When businesses handle customer complaints in a

respectful way and a token of atonement is offered
beyond their expectation, customers are likely to
reciprocate with positive advocacy

Token of atonement can be financial, but can also

be an apology, acknowledgement of making a
difference- recognition of their value

10

What are the elements of Complaint is

a gift strategy (1)

Complaints Policy and guidelines based on complaint

welcoming culture

Complaints data base to maximize complaints capture

Complaint handling training, including empathy and

conflict handling training- front line staff and induction
training

Target response and resolution times

Regular complaints reporting

11

What are the elements of Complaint is

a gift strategy (2)

Clearly defined Escalation path for difficult complaints

Specialist Complaints case managers

Continuous improvement focus

Unreasonable Complainant conduct management

guidelines (demands, persistence, lack of cooperation, arguments, behavior)

Complaints Analysis- root cause analysis

12

Practical Implementation of Gift

Strategy

Thank customer for contacting you

Explain why feedback is appreciated

Apologize for service failure

Take responsibility and make commitment to customer to

do all you can to rectify situation

Collect all information from customer

Correct or facilitate correction of service failure as

promptly as possible

Check customer satisfaction

Prevent future service failures of this type-root cause

analysis (5 whys, causal factor tree analysis etc)
13

What is Service Recovery

Service recovery refers to the actions a service provider
takes in response to service failure.
It is a thought-out, planned, process of returning a
dissatisfied customer to a state of satisfaction.
Service recovery differs from complaint management in
its focus on service failures and the companys
immediate reaction to it.
Complaint management is based on customer
complaints.
However, since most dissatisfied customers are
reluctant to complain, service recovery attempts to
solve problems at the service encounter before
customers complain.

Three Dimensions of Perceived Fairness in

Service Recovery Process
Complaint
ComplaintHandling
Handlingand
andService
Service
Recovery
Process
Recovery Process
Justice Dimensions of the Service Recovery
Process
Procedural
Procedural
Justice
Justice

Interactive
Interactive
Justice
Justice

Customer
CustomerSatisfaction
Satisfactionwith
with
Service
ServiceRecovery
Recovery

Outcome
Outcome
Justice
Justice

Importance of Service Recovery

Plays a crucial role in achieving customer satisfaction
Tests a firms 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

Benefits of Customer Recovery

Only 4% of dissatisfied customers complain. 96% leave

without any communication to business

Of the 96% who leave, 91% will never return

A typical dissatisfied customer will tell 8 to 10 people

about the issues with your business- significantly more in
global communications

It takes 12 positive service incidents to make up for one

negative incident

17

Benefits of Customer Recovery (contd)

7 out of 10 complaining customers will do business again

with you if resolve the complaint in their favour

Of complaining customers, 95% will do business with you

again if you resolve the complaint at the first contact

On average, a satisfied complainer will tell 5 people about

their problem and how it was solved

It costs 6 times more to attract new customers than it

does to retain current ones

Customer loyalty is worth 10 times the price of a single

purchase

18

The Service Recovery Paradox

Customers who experience a service failure that is
satisfactorily resolved may be more likely to make
future purchases than customers without problems
If second service failure occurs, the paradox
disappearscustomers expectations have been
raised and they become disillusioned
Severity and recoverability of failure (e.g., spoiled
wedding photos) may limit firms ability to delight
customer with recovery efforts
Best strategy: Do it right the first time

Components of an Effective
Service Recovery System
Do the job right the
first time

Effective Complaint
Handling

Increased Satisfaction
and Loyalty

Conduct research
Identify Service
Complaints

Resolve Complaints
Effectively

Learn from the

Recovery Experience

Close the loop via feedback

Monitor complaints
Develop Complaints as
opportunity culture

Develop effective system

and training in complaints
handling
Conduct root cause analysis

Strategies to Reduce Customer

Complaint Barriers
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 Of
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 proactiveon 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

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

Service Recovery Scenario 1

Back in March, we took a Southwest Airlines flight.. It was a
fairly lengthy flight, so I had planned on catching up on work
using the airlines WiFi. Unfortunately, things did not go as
planned.
The signup process went well. I entered my credit card number
for the $8.00 WiFi charge; however once the transaction went
through, transaction went through nothing else worked.
I looked at the guy across the aisle from me, and he was having
trouble too.
We hailed a flight attendant, and told her the WiFi was not
working. She was pleasant but began explaining basic
connection concepts. After a minute or so, we convinced her
that the two of us knew what we were doing and that the WiFi
simply wasnt working.
She went to investigate, and after another 5-10 minutes, she
returned to tell us that the WiFi could not be repaired in flight

Service Recovery Scenario 1

A few days later, I discovered a charge for $8.00 on my credit
card from Southwest Airlines; the charge had gone through!
After seeing the charge, I added call Southwest for a refund
to my To Do list. The charge was so small however, that it never
made it to the top of the list. The situation was mildly annoying,
but more important matters always got placed on top of it.
So, imagine my surprise when a few days later I received the
following email from Southwest Airlines:

Service Recovery Scenario -2

The vacationers had nothing but trouble getting from New
York to their Mexican destination. The flight took off 6 hours
late, made 2 unexpected stops, and circled for 30 minutes
before it could land. Because of all the delays and mishaps,
the plane was en route for 10 hours more than planned and
ran out of food and drinks.
It finally arrived at 2 oclock in the morning, with a landing so
rough that oxygen masks and luggage dropped from
overhead. By the time the plane pulled up to the gate, the
soured passengers were faint with hunger and convinced
that their vacation was ruined before it had even started.
One lawyer on board was already collecting names and
addresses for a class-action lawsuit.
Silivio de Bortoli, the general manager of the [Club Med]
Cancun resort and a legend throughout the organization for
his ability to satisfy customers, got word of the horrendous
flight and immediately created an antidote. He took half the
staff to the airport, where they laid out a table of snacks and

Service Recovery Scenario 2

As the guests filed through the gate, they received personal
greetings, help with their bags, a sympathetic ear, and a
chauffeured ride to the resort. Waiting for them at Club Med
was a lavish banquet, complete with mariachi band and
champagne. Moreover, the staff had rallied other guests to
wait up and greet the newcomers, and the partying
continued until sunrise.
Many guests said it was the most fun theyd had since
college.

Why Do Root Cause Analysis?

Just fix it, there is too much to do.
We dont have time to think, we need results now.
Reality - fix symptoms without regard to actual
causes
Root Cause Analysis - structured and thorough
review of problem designed to identify and verify
what is causing the symptoms

How Is Root Cause Analysis Done?

Teams identify all possible causes
The actual root causes are identified and verified
Corrective action(s) are identified to reduce or
eliminate the problem

Root Cause Tools

Cause and Effect Diagram

Scatter Diagram - prove cause-effect relationship
Control Chart - process stable?
Five Whys
Tree Diagram
Change Analysis
Barrier Analysis
Event and Causal Factor Analysis
Management Oversight & Risk Tree Analysis
(MORT)

Tree Diagram
State the problem
Causes are listed as branches to the right of the
problem
Continue to clarify causes, drawing additional
branches to the right
Repeat until each branch reaches its logical end

Training
Class
Cancelled

Tree Diagram Example

Too much work
Not enough
No reward
students signed up
Schedule not communicated Other critical priorities
No time
Trainer not
prepared

Materials not
completed

Training Dept other projects

New trainer assigned late

Turnover

Late changes

Floating due date

This projectlow priority

More info needed

Five Whys

Describe the problem in specific terms

For each likely cause ask, Why did this happen?
Continue for a minimum of five times
Show logical relationship of each response to the
one that preceded it
Stop when the team has enough information to
identify the root cause

Example of 5 WHYs analysis

Problem Statement: The pizza delivery personnel's motorbike
stopped while on his way to deliver several orders of pizza
resulting into delay!
Cost Impact: All delayed pizza were given free of charge to the
customers amounting to a total of Rs. 2400
Why 1: Why did the motorbike stop?
Answer 1: Because it ran out of petrol while on its way to deliver
pizzas!
Why 2: Why did then petrol run out?
Answer 2: Because the delivery personnel did not fuel the motorbike
that morning!
Why 3: Why didn't the personnel fuel the motorbike that morning?
Answer 3: Because the personnel did not have money to buy the petrol
Why 4: Why did the personnel not have money to buy the petrol?
Answer 4: Because he was not able to ask money from his manager!
Why 5: Why was he not able to ask money from his manager?
Answer 5: Because he came in late and was not able to find the