Achieving Service

Recovery and Obtaining

Customer Feedback
Customer Complaining

Services Marketing - SZABIST

Behaviour
Customer Response
Categories to Service
Failures
Complain
Complainto tothe
the
service firm
service firm
Take
Takesome
someform Complain
of Public
form
Action Complainto toaa
of Public Action third
thirdparty
party

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Take
Takesome
someform
form Take
Takelegal
legalaction
action
Service
ServiceEncounter
Encounter of Private to seek redress
of Private to seek redress
isisDissatisfactory
Dissatisfactory Action
Action
Defect
Defect(switch
(switch
provider)
provider)
Take
TakeNo
NoAction
Action
Negative
Negativeword-of-
word-of-
mouth
mouth

Any
Anyone
oneororaacombination
combinationof
of
these responses is possible
these responses is possible
 Understanding Customer
Responses to Service
Failure
Why do customers complain?
What proportion of unhappy customers complain?
Why dont unhappy customers complain?

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Who is most likely to complain?
Where do customers complain?
What do customers expect once they have made a
complaint?
Customers Often View Complaining
as Difficult and Unpleasant

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 Three Dimensions of
Perceived Fairness in Service
RecoveryComplaint
Process
ComplaintHandling
Handlingand
Recovery Process
andService
Service
Recovery Process

Justice Dimensions of the Service Recovery Process

Services Marketing - SZABIST

Procedural Interactive
Interactive Outcome
Outcome
Procedural
Justice
Justice Justice Justice
Justice Justice

Customer
CustomerSatisfaction
Satisfactionwith
with
Service
ServiceRecovery
Recovery
Customer Responses to

Services Marketing - SZABIST

Effective Service Recovery
 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

Services Marketing - SZABIST

Impacts customer loyalty and future profitability
Complaint handling should be seen as a profit center, not a
cost center
 The Service Recovery
Paradox
Customers who experience a service failure that is satisfactorily
resolved more likely to make future purchases than customers
without problems (Note: not all research supports this paradox)
If second service failure occurs, the paradox disappears
customers expectations have been raised and they become
disillusioned

Services Marketing - SZABIST

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
Principles of Effective

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Service Recovery Systems
Components of an
Effective
Service+ Recovery= System
Increased
Do the job right the Effective Complaint
Satisfaction and
first time Handling
Loyalty
(Fig 13.4)
Conduct research

Services Marketing - SZABIST

Identify Service Monitor complaints
Complaints
Develop Complaints as
opportunity culture

Resolve Complaints Develop effective system

Effectively and training in
complaints handling

Learn from the Conduct root cause analysis

Recovery Experience

Close the loop via feedback

 Strategies to Reduce
Customer
Complaint Barriers
Complaint Barriers for Dissatisfied
Customers
Strategies to Reduce These Barriers

Inconvenience Put customer service hotline numbers, e-mail

Hard to find right complaint procedure and postal addresses on all customer
Effort involved in complaining communications materials

Have service recovery procedures in place,

Doubtful Pay Off communicate this to customers
Uncertain if action will be taken by firm to
Feature service improvements that resulted
address problem
from customer feedback

Unpleasantness Thank customers for their feedback

Fear of being treated rudely Train frontline employees
Hassle, embarrassment 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

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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 the positioning of our firm?
How severe was the service failure?

Services Marketing - SZABIST

Who is the affected customer?
 Service Guarantees

Services Marketing - SZABIST

Service Guarantees Help
Promote and Achieve
Service
Force firmsLoyalty
to focus on what
customers want
Set clear standards
Highlight cost of service failures

Services Marketing - SZABIST

Require systems to get and act on
customer feedback
Reduce risks of purchase and build
loyalty
 How to Design Service
Guarantees
Unconditional
Easy to understand and communicate
Meaningful to the customer
Easy to invoke

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Easy to collect
Credible
Types of Service
Guarantees
Single attribute-specific guarantee
One key service attribute is covered
Multiattribute-specific guarantee
A few important service attributes are covered
Full-satisfaction guarantee

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All service aspects covered with no exceptions
Combined guarantee
All service aspects are covered
Explicit minimum performance standards
on important attributes
Discouraging Abuse and

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Opportunistic Behaviour
 Dealing with Customer
Fraud
Treating all customers with suspicion is likely to alienate them
TARP found only 1 to 2 percent of customer base engages in
premeditated fraudso why treat remaining 98 percent of honest
customers as potential crooks?
Insights from research on guarantee cheating
Amount of a guarantee payout had no effect on customer cheating

Services Marketing - SZABIST

Repeat-purchase intention reduced cheating intent
Customers are reluctant to cheat if service quality is high (rather
than just satisfactory)
Managerial implication
Firms can benefit from offering 100 percent money-back
guarantees
Guarantees should be offered to regular customers as part of
membership program
Excellent service firms have less to worry about than average
providers
Learning from Customer

Services Marketing - SZABIST

Feedback
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

Services Marketing - SZABIST

Customer Feedback
Collection Tools
Total market surveys
Post-transaction surveys
Ongoing customer surveys
Customer advisory panels
Employee surveys/panels
Focus groups
Mystery shopping
Complaint analysis
Capture service operating data
Entry Points for
Unsolicited Feedback
Frontline employees
Intermediaries acting for original supplier
Managers contacted by customers at head/regional

Services Marketing - SZABIST

office
Complaint cards deposited in special box or mailed
Telephone or e-mail
Complaints passed to company by third-party recipients

Disseminate the information to relevant parties to take action Immediately

Track over time
Organizing for Change
Management
and Service Leadership
Effective Marketing Lies at
the Heart of Value Creation
The Service-Profit Chain
Internal External
Operating strategy and Service
Target Market
service delivery system Concept
Loyalty 4-7
Revenue
Customers growth
Satisfaction
Productivity Service 3 2 1
Employees and Satisfaction Loyalty
Value
Output
Quality Profitability
Capability

Service
Quality
Workplace design Quality and Attractive value Lifetime value
Job design productivity Service designed Retention
Selection and development Improvements and delivered to Repeat business
Rewards and recognition yield higher meet targeted Referral
Information and communication service quality customers needs
Tools for serving customers and lower costs
 Links in the Service-Profit
Chain
1. Customer loyalty drives profitability and
growth
2. Customer satisfaction drives customer loyalty
3. Value drives customer satisfaction
4. Employee productivity and retention drive
value
5. Employee loyalty drives productivity
6. Employee satisfaction drives loyalty and
productivity
7. Internal quality drives employee satisfaction
8. Top management leadership underlies chains
success
Qualities Associated with
Service Leaders
Understands mutual dependency among
marketing, operations and human resource
functions of the firm
Has a coherent vision of what it takes to succeed
Strategies are defined and driven by a strong,
effective leadership team
Responsive to various stakeholders
Value created through customer satisfaction
Integrating Marketing,
Operations, and Human
Resources
 Reducing Interfunctional
Conflict
One challenge is to avoid creating functional silos
High-value creating enterprises should be thinking in terms
of activities, not functions
Top management needs to establish clear imperatives for
each function that defines how a specific function
contributes to the overall mission
The marketing imperative
The operations imperative
The human resources imperative
Defining the Three
Functional Imperatives
Marketing Imperative
Target right customers and build relationships
Offer solutions that meet their needs
Define quality package with competitive
advantage
Operations Imperative
Create and deliver specified service to target
customers
Adhere to consistent quality standards
Achieve high productivity to ensure acceptable
costs
Human Resource Imperative
Recruit and retain the best employees for each job
Train and motivate them to work well together
Achieve both productivity and customer
satisfaction
Creating a Leading Service
Organization
 From Losers to Leaders:
Four Levels of Service
Performance
Service Losers
Bottom of the barrel from both customer and managerial
perspectives
Customers patronize them because there is no viable
alternative
New technology introduced only under duress; uncaring
workforce
Service Nonentities
Dominated by a traditional operations mindset
Unsophisticated marketing strategies
Consumers neither seek out nor avoid them
 From Losers to Leaders: Four
Levels of Service
Performance
Service Professionals
Clear market positioning strategy
Customers within target segment(s) seek them out
Research used to measure customer satisfaction
Operations and marketing work together
Proactive, investment-oriented approach to HRM
Service Leaders
The crme da la crme of their respective industries
Names synonymous with outstanding service, customer
delight
Service delivery is seamless process organized around
customers
Employees empowered and committed to firms values and
goals
Dilberts Boss Loses Focus and His
Audience
 Moving to a Higher Level
of Performance
Firms can move either up or down the performance
ladder
Organizations that are devoted to satisfying their
current customers may miss important shifts in the
marketplace
As a result, they may face difficulties attracting
demanding new consumers with different
expectations
Companies defending their control of their competitive
edge may have encouraged competitors to find higher-
performing alternatives
Organizations with a service-oriented culture may turn
otherwise as a result of a merger or acquisition that
brings in new leaders who emphasize short-term profits
In Search of Human
Leadership
 Leading a Service
Organization
1.Involves
Creating a senseEight
of urgencyStages
to develop the impetus
for change
2. Putting together a strong enough team to direct the
process
3. Creating an appropriate vision of where the
organization needs to go
4. Communicating that new vision broadly
5. Empowering employees to act on that vision
6. Producing sufficient short-term results to create
credibility and counter cynicism
7. Building momentum and using that to tackle
tougher change problems
8. Anchoring new behaviors in organizational culture
 Leadership versus
Management
Leadership
Concerned with development of vision and strategies, and
empowerment of people to overcome obstaclesmake
vision happen
Emphasis on emotional and spiritual resources
Works through people and culture
Produces useful change, especially non-incremental change
Management
Involves keeping current situation operating through planning,
budgeting, organizing, staffing, controlling, and problem
solving
Emphasizes physical resourcesraw materials, technology,
capital
Works through hierarchy and systems
Keeps current system functioning
 Setting Direction versus
Planning
Planning
A management process, designed to produce orderly
resultsnot change
Setting direction
Involves creating visions and strategies that describe a
business, technology, or corporate culture in terms of
what it should become over long term and articulating
feasible way of achieving goal
Many of best visions and strategies combine basic insights
and translate them into realistic competitive strategy
Stretcha challenge to attain new levels of
performance and competitive advantage that might as
first seem to be beyond the organizations reach
Planning follows and complements direction setting, serving
as useful reality check and road map for strategic execution
Individual Leadership
Qualities
Possesses a special perspective
Able to believe in their employees and make
communicating with them a priority
Love of the business
Being driven by a set of core value that they
infuse into the organization
Need not be charismatic, but has to be
principled
Must have personal humility blended with
intensive professional will, ferocious resolve,
and willingness to give credit to others but take
blame themselves
Change Management
Evolution versus
Turnaround
Evolution involves continual mutations designed
to ensure the survival of the fittest
Top management must proactively evolve the focus
and strategy of the firm to take advantage of
changing conditions and the advent of new
technologies
Turnaround situations are where leaders seek to
bring distressed organizations back from the brink
of failure and set them on a healthier course
 Evolution versus
Turnaround
Hurdles that leaders face in reorienting and formulating
strategy
Cognitive hurdles
Resource hurdles
Motivational hurdles
Political hurdles
Turning around an organization that has limited resources
requires concentrating those resources where the need
and the likely payoffs are greatest
Example: William Brattons 20-year police career in Boston
and New York
A firms search for growth often involves expansioneven
diversification into new lines of business
Example: IBM
Role Modeling Desired
Behavior
Management by walking around
Provides insights to both backstage and front-stage
operations
The ability to observe and meet both employees and
customers, and opportunity to see how corporate
strategy is implemented on the front line
This approach may lead to a recognition that
changes are needed in that strategy
A risk of prominent leaders becoming too
externally focused at the risk of their internal
effectiveness
Leadership, Culture, and
Climate
Leadership traits are needed of everyone in
supervisory or managerial positions, including
those heading teams
Effective communication is essential for a leader
Organizational culture
Shares perceptions or themes regarding what is
important in the organization
Shares values about what is right or wrong
Shares understanding about what works and what
doesnt work
Shares beliefs, and assumptions about why these
things are important
Shares styles of working and relating to others
 Leadership, Culture, and
Climate
Organizational climate
The tangible surface layer on top of the organizations
underlying culture
Factors of influence:
Flexibility, responsibility, standards that people set,
perceived aptness of rewards, clarity people have about
mission and values, level of commitment to a common
purpose

Creating a new climate for service, based on

understanding of what is needed for market
success, may require
Radical rethinking of HRM activities, operational
procedures, and the firms reward and recognition
policies