mkt 5207 service marketing afjal hossain assistant professor department of marketing
TRANSCRIPT
MKT 5207Service Marketing
Afjal HossainAssistant ProfessorDepartment of Marketing
Chapter 08Service Recovery
Reliability is Critical in Service but…
• In all service contexts, service failure is inevitable.
• Service failure occurs when service performance that falls below a customer’s expectations in such a way that leads to customer dissatisfaction.
• Service recovery refers to the actions taken by a firm in response to service failure.
Complaining Customers:The Tip of the Iceberg
Source: TARP Worldwide Inc., 2007.
Unhappy Customers’ Repurchase Intentions
51%
43%
19%
8%
21%
0%
10%
20%
30%
40%
50%
60%
% D
efin
itely
Will
Rep
urch
ase
CustomersWith NoProblem
SatisfiedComplainants
MollifiedComplainants
DissatisfiedComplainants
Non-Complainants
Figure 8.1
Dissatisfied Consumers’ Behavior
• The Retail Customer Dissatisfaction Study 2006 by the Verde Group found:– 48% of respondents reported that they avoided a store
because of someone else’s negative experience– for those who encountered problems, 33% said they
would “definitely not” or “probably not” return
• The exponential power of storytelling:– as people tell the story, the negativity is embellished and
grows
Service Recovery Paradox
• “A good recovery can turn angry, frustrated customers into loyal ones. ..can, in fact, create more goodwill than if things had gone smoothly in the first place.” (Hart et al.)
• HOWEVER:– only a small percent of customers complain– service recovery must be SUPERLATIVE
• only with responsiveness, redress, and empathy/courtesy• only with tangible rewards
– even though service recovery can improve satisfaction, it has not been found to increase purchase intentions or perceptions of the brand
– service recovery is expensive
Service Recovery Paradox
• The service recovery paradox is more likely to occur when:– the failure is not considered by the customer to be severe– the customer has not experienced prior failures with the
firm– the cause of the failure is viewed as unstable by the
customer– the customer perceives that the company had little control
over the cause of the failure
• Conditions must be just right in order for the recovery paradox to be present!
Customer Complaint Actions Following Service Failure
Figure 8.3
Fairness Themes in Service Recovery
Exhibit 8.4
Causes Behind Service Switching
Service Switching Behavior
• High price• Price increases• Unfair pricing• Deceptive pricing
Pricing
• Location/hours• Wait for appointment• Wait for service
Inconvenience
• Service mistakes• Billing errors• Service catastrophe
Core Service Failure
• Uncaring• Impolite• Unresponsive• Unknowledgeable
Service Encounter Failures
• Negative response• No response• Reluctant response
Response to Service Failure
• Found better service
Competition
• Cheat• Hard sell• Unsafe• Conflict of interest
Ethical Problems
• Customer moved• Provider closed
Involuntary Switching
Figure 8.4Source: Sue Keaveney, “Customer Switching Behavior in Service Industries: An Exploratory Study,” Journal of Marketing 59 (April, 1995), pp. 71-82.
Learn from R
ecovery E
xperiencesA
ctQ
uick
ly
Treat Customers Fairly
Fail-safethe Service
Cultivate Relationships
with Customers
Encourage and Track
Complaints
Provid
e Ade
quat
e
Explan
ation
s
Lear
n fro
m L
ost
Custo
mer
s
ServiceRecoveryStrategies
Service Recovery Strategies
Figure 8.5
Eight Most Common Remedies Customers Seek with Serious Problems
• Have the product repaired or service fixed• Be reimbursed for the hassle of having experienced a
problem• Receive a free product or service in the future• Explanation by the firm as to what happened• Assurance that the problem will not be repeated• A thank you for the customer’s business• An apology from the firm• An opportunity for the customer to vent his or her
frustrations to the firm
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?)
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
Benefits of Service Guarantees• A good guarantee forces the company to focus on its
customers. • An effective guarantee sets clear standards for the
organization. • A good guarantee generates immediate and relevant
feedback from customers. • When the guarantee is invoked there is an instant
opportunity to recover, thus satisfying the customer and helping retain loyalty.
• Information generated through the guarantee can be tracked and integrated into continuous improvement efforts.
• Employee morale and loyalty can be enhanced as a result of having a service guarantee in place.
• A service guarantee reduces customers’ sense of risk and builds confidence in the organization.
Why a Good Guarantee Works
• forces company to focus on customers
• sets clear standards
• generates feedback
• forces company to understand why it failed
• builds “marketing muscle”
Does everyone need a service 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
Service Guarantees
• service guarantees work for companies who are already customer-focused
• effective guarantees can be BIG deals – they put the company at risk in the eyes of the customer
• customers should be involved in the design of service guarantees
• the guarantee should be so stunning that it comes as a surprise – a WOW!! factor
• “it’s the icing on the cake, not the cake”