Chapter 13

Customer Feedback and Service Recovery

Slide ©2004 by Christopher Lovelock and Jochen Wirtz

Services Marketing 5/E

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American Customer Satisfaction Index: Selected Industry Scores, 2002
Score
(Max = 100)

100 90 80 70 60 50 40 30 20 10 85 79 80 79 76 65 62

74

71

71

66

70

% Change 0 3.7% 2002 vs 2001

1.3% 0.0% 1.3% 2.8% 0.0% 0.0% 8.2% 2.9% -2.6%
sp Ho

4.8% 3.3%

Industry:

Slide ©2004 by Christopher Lovelock and Jochen Wirtz

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Services Marketing 5/E

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Key Questions for Managers to Ask about Customer Complaining Behavior

 Why do customers complain?  What proportion of unhappy customers complain?  Why don’t unhappy customers complain?  Who is most likely to complain?  Where do customers complain?

Slide ©2004 by Christopher Lovelock and Jochen Wirtz

Services Marketing 5/E

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Courses of Action Open to a Dissatisfied Customer (Figure 13.1)
Complain to the Complain to the service firm service firm Take some form Take some form of public action of public action Service Encounter Service Encounter is Dissatisfactory is Dissatisfactory Take some form Take some form of private action of private action Take no action Take no action Complain to aa Complain to third party third party Take legal action Take legal action to seek redress to seek redress Defect (switch Defect (switch provider) provider) Negative word-ofNegative word-ofmouth mouth

Any one or aacombination of Any one or combination of these responses is possible these responses is possible
Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E

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Dimensions of Perceived Fairness in Service Recovery Process (Figure 13.2)
Complaint Handling & Service Recovery Process Justice Dimensions of the Service Recovery Process Procedural Justice Interactive Justice Outcome Justice

Customer Satisfaction with the Service Recovery
Source: Tax and Brown Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E

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Proportion of Unhappy Customers Who Buy Again Depending on the Complaint Process
100 90 80 70 60 50 40 30 20 10 0 95% 82% 70% 46% 37% 19% 9%
Customer did not complain Complaint was not resolved Complaint was resolved
Problem cost $1 - 5
Source: TARP study Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E

54%

Complaint was resolved quickly

Problem cost > $100

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Impact of Effective Service Recovery on Retention

No Problem Problem, but effectively resolved

84%

92%

Problem Unresolved
0% 10% 20% 30% 40%

46%
50% 60% 70% 80% 90% 100%

Customer Retention
Source: IBM-Rochester study Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E

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Components of an Effective Service Recovery System (Figure 13.3)

Do the Job Right the Do the Job Right the First Time First Time

+
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Slide ©2004 by Christopher Lovelock and Jochen Wirtz

Services Marketing 5/E

Strategies to Reduce Customer Complaint Barriers (Table 13.1)
Complaint Barriers for Dissatisfied Strategies to Reduce These Barriers Customers
Inconvenience  Difficult to find the right complaint procedure.  Effort, e.g., writing a letter. Make feedback easy and convenient by:  Printing Customer Service Hotline numbers, e-mail and postal addresses on all customer communications materials.

Doubtful Pay Off Reassure customers that their feedback will be taken seriously and will pay off by:  Uncertain whether any action, and what action will be taken by the firm  Having service recovery procedures in place, to address the issue the customer is and communicating this to customers. unhappy with.  Featuring service improvements that resulted from customer feedback. Unpleasantness  Complaining customers fear that they may be treated rudely,  may have to hassle, or  may feel embarrassed to complain. Make providing feedback a positive experience:  Thank customers for their feedback.  Train the frontline not to hassle and make customers feel comfortable.  Allow for anonymous feedback.

Slide ©2004 by Christopher Lovelock and Jochen Wirtz

Services Marketing 5/E

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How to Enable Effective Service Recovery

 Be proactive—on 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

Slide ©2004 by Christopher Lovelock and Jochen Wirtz

Services Marketing 5/E

13 - 10

Guidelines for Effective Problem Resolution (Management Memo 13.1)
 Act fast  Admit mistakes but don’t be defensive  Understand problem from customer’s viewpoint  Don’t argue  Acknowledge customer’s feelings  Give benefit of doubt  Clarify steps to solve problem  Keep customers informed of progress  Consider compensation  Persevere to regain goodwill

Slide ©2004 by Christopher Lovelock and Jochen Wirtz

Services Marketing 5/E

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Service Guarantees Help Promote and Achieve Service Loyalty
Force firms to focus on what customers want Set clear standards Highlights cost of service failures Require systems to get & act on, customer feedback Reduce risks of purchase and build loyalty

Slide ©2004 by Christopher Lovelock and Jochen Wirtz

Services Marketing 5/E

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Types of Service Guarantees

 Single attribute-specific guarantee – one key service
attribute is covered

 Multiattribute-specific guarantee – a few important service
attributes are covered with no exceptions

 Full-satisfaction guarantee – all service aspects covered  Combined guarantee – like the full-satisfaction, adding
explicit minimum performance standards on important attributes

Slide ©2004 by Christopher Lovelock and Jochen Wirtz

Services Marketing 5/E

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The Hampton Inn 100% Satisfaction Guarantee
(Figure 13.4)

 What are the benefits of such a
guarantee?

 Are there any downsides?

Slide ©2004 by Christopher Lovelock and Jochen Wirtz

Services Marketing 5/E

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Key Objectives of Effective Customer Feedback Systems

 Assessment and benchmarking of service quality
and performance

 Customer-driven learning and improvements  Creating a customer-oriented service culture
Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E

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Building a Customer Feedback System

 Total market surveys  Post-transaction surveys  Ongoing customer surveys  Customer advisory panels  Employee surveys/panels  Focus groups  Mystery shopping  Complaint analysis  Capture of service
operating data

Slide ©2004 by Christopher Lovelock and Jochen Wirtz

Services Marketing 5/E

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Strengths and Weakness of Key Customer Feedback Collection Tools (Table 13.3) Selection of a cocktail of effective customer feedback collection tools.
Multi-level Measurement

Collection Tools
Total Market Survey (inclu. competitors) Annual Survey on overall satisfaction Transactional Survey (process specific) Service Feedback Cards (process specific) Mystery Shopping (service testers) Unsolicited Feedback Recd (Online feedback system) Focus Group Discussions Service Reviews
Meets Requirements: Fully

Service Process Satisfaction Satisfaction

Specific Feedback

Actionable

Represen Potential -tative, for Service Reliable Recovery

First Hand Learning

Cost Effective

Moderate

Little/Not at all

Slide ©2004 by Christopher Lovelock and Jochen Wirtz

Services Marketing 5/E

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Entry Points for Unsolicited Feedback

 Employees serving customers face-to-face or by phone  Intermediaries acting for original supplier  Managers contacted by customers at head/regional office  Complaint cards mailed or placed in special box  Complaints passed to company by third-party recipients
 consumer advocates  trade organizations  legislative agencies  other customers

Slide ©2004 by Christopher Lovelock and Jochen Wirtz

Services Marketing 5/E

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