Objectives for Chapter 7 : Service Recovery

• Illustrate the importance of recovery from service

failures in keeping customers & building loyalty.

• Discuss the nature of consumer complaints & why

people do & do not complain.

• Provide evidence of what customers expect & the kind

of responses they want when they complain.

• Provide strategies for effective service recovery.

• Discuss service guarantees.

Figure 7.1 Unhappy Customers’ Repurchase Intentions

Unhappy Customers Who Don’t Complain

9%
37%
Unhappy Customers Who Do Complain

Complaints Not Resolved

19%
46%

Complaints Resolved
54%
70%

Complaints Resolved Quickly

82%
95%

Percent of Customers Who Will Buy Again

Minor complaints ($1-$5 losses) Major complaints (over $100 losses)
Source: Adapted from data reported by the Technical Assistance Research Program.
Figure 7.3 Customer Complaint Action Following Service Failure
Figure 7.5 Service Recovery Strategies
We
En lcom
e co
vic u r a e an
r ge d
Se Co
e m
th pla
fe i nts
Sa
il
Fa

Act Quickly
Service
Learn from
Lost Custom

Recovery
Strategies
ers

y
air l
F
Le s
er
Re arn f om
co r o m
ve ust
ry
Ex atC
pe e
ri en Tr
ce
s
Figure 7.6
Causes Behind Service Switching

Pricing
• High Price
• Price Increases Response to Service Failure
• Unfair Pricing • Negative Response
• Deceptive Pricing • No Response
• Reluctant Response
Inconvenience
• Location/Hours Competition
• Wait for Appointment
• Wait for Service
Service • Found Better Service

Switching Ethical Problems

Core Service Failure
• Service Mistakes Behavior •
•
Cheat
Hard Sell
• Billing Errors • Unsafe
• Service Catastrophe • Conflict of Interest

Service Encounter Failures Involuntary Switching

• Uncaring
• Customer Moved
• Impolite
• Provider Closed
• Unresponsive
• Unknowledgeable

Source: Sue Keaveney, “Customer Switching Behavior in Service Industries: An Exploratory Study,” Journal of Marketing, April, 1995, pp. 71-82.
 Service Guarantees

• guarantee = an assurance of the fulfillment of a

condition (Webster’s Dictionary)

• for products, guarantee 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?)
Figure 7.7 Characteristics of an Effective Service
Guarantee
• Unconditional
• The guarantee should make its promise unconditionally - no
strings attached.
• Meaningful
• It 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
• For customers - they need to understand what to expect.
• For employees - they need to understand what to do.
• Easy to Invoke and Collect
• There should not be a lot of hoops or red tape in the way of
accessing or collecting on the guarantee.
Source: Christopher W.L. Hart, “The Power of Unconditional Guarantees,” Harvard Business Review, July-August, 1988, pp. 54-62.
Figure 7.2
The Hampton Inn 100 Percent Satisfaction
Guarantee
 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”

 Service Guarantees

What do you think????????

Does everyone need a guarantee?

 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”