Service Recovery

• The Impact of Service Failure and Recovery

• How Customers Respond to Service Failures

• Service Recovery Strategies: Fixing the

Customer

• Service Recovery Strategies: Fixing the

Problem

• Service Guarantees

• Switching versus Staying Following Service

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: Data from TARP Worldwide Inc., 2007

Unhappy Customers’ Repurchase
Intentions
 The Internet Spreads the
Story of Poor Service Recovery
 The Service Recovery Paradox
• Is a customer who has experienced a
service failure and exemplary service
recovery more likely to be more
satisfied – impressed even – with the
service provider?

• Should a firm “screw up” just a little so

that it can “fix the problem” superbly?
Customer Complaint Actions
Following Service Failure
 Types of Complainers

• PASSIVES

• VOICERS

• IRATES

• ACTIVISTS
Service Recovery Strategies
Respond Quickly
 Treat Customers Fairly
• Outcome fairness
Outcome (compensation) should match the customer’s level of
dissatisfaction; equality with what other customers receive;
choices

• Procedural fairness
Fairness in terms of policies, rules, timeliness of the complaint
process; clarity, speed, no hassles; also choices: “What can we
do to compensate you…?”

• Interactional fairness
Politeness, care, and honesty on the part of the company and its
employees; rude behavior on the part of employees may be due
to lack of training and empowerment
 Service Guarantees
• Guarantee = an assurance of the fulfillment of a
condition (Webster’s Dictionary)

• For tangible products, a guarantee is often done in the

form of a warranty

• Services are often not guaranteed

 Characteristics of an Effective
Service 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
– Customers need to understand what to expect
– Employees need to understand what to do

• Easy to Invoke
– 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.
• Information generated through the guarantee can be tracked and
integrated into continuous improvement efforts.
• A service guarantee reduces customers’ sense of risk and builds
confidence in the organization.
 When to Use (or Not Use) a
Guarantee
Reasons companies might NOT want to
offer a service guarantee:
– Existing service quality is poor
– A guarantee does not fit the company’s image
– Service quality is truly uncontrollable
– Potential exists for customer abuse of the guarantee
– Costs of the guarantee outweigh the benefits
– Customers perceive little risk in the service
Causes Behind Service Switching