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Bank Service Recovery And Employees Role in bank service delivery

McGraw-Hill McGraw-Hill

© 2000 The McGraw-Hill Companies

© 2000 The McGraw-Hill Companies

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The Impact of Bank Service Failure & Recovery

• Service recovery refers to the actions taken by an Organization in response to a service failure. Failure occurs for all kinds of reasons:
1. 2. 3. 4. The service may be unavailable when promised it may be delivered late or too slowly the outcome may be incorrect or poorly executed employees may be rude or uncaring

• All of these types of failures bring about negative feelings and responses from customers.

McGraw-Hill

© 2000 The McGraw-Hill Companies

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Cases related to service Failure and Recovery

‡ Sidely Austin and Brown & Wood law firm ‡ Club Med (Cancan Resort of Mexico) ‡ Star Bucks Coffee (Terrorist Customer!!!

McGraw-Hill

© 2000 The McGraw-Hill Companies

4 SM Unhappy Customers Repurchase Intention Major complaints over $ 100 losses Minor complaints Unhappy customers who don¶t complain Unhappy customers who do complain 9% 37% $ 1-5 losses 19% Complaints not resolved 46% 54% Complaints resolved 70% 82% Complaints resolved quickly 95% Percentage of customers who will buy again McGraw-Hill © 2000 The McGraw-Hill Companies .

HAMPTON Inn etc) McGraw-Hill © 2000 The McGraw-Hill Companies . loyalty.(TARP. HMO. bottom-line performance.5 SM Bank Service Recovery effects ‡ Research has shown that resolving customers problems effectively has a strong impact on customer satisfaction. WO-M.

Generate positive word of mouth 3. This ultimately reduces costs of failures and increases initial customer satisfaction. 4. It can increase customer satisfaction and loyalty 2. well-documented service recovery strategy also provides information that can be used to improve service as part of a continuous improvement effort. Making adjustments learned from recovery experiences. companies increase the likelihood of ³doing it right first time´.6 SM The Impact of Service Failure & Recovery An effective service recovery strategy has multiple potential Positive impacts: 1. 5. McGraw-Hill © 2000 The McGraw-Hill Companies . A well designed.

Research suggests that 50%««.7 SM The Impact of Service Failure & Recovery Negative impact of poor service recovery: Unfortunately many firms do not employ effective recovery strategies.[7 VS 25] McGraw-Hill © 2000 The McGraw-Hill Companies .Actively pursuing opportunities to openly criticize the company.2 The star bucks coffee terrorists) ‡ Repeated service failure can also have bad impact on employee ‡ This ultimately results in huge amount of costs.(See Exhibit 8. ‡ A bad service experience can make the customer ³terrorists´.

Some researchers have suggested that customers who are dissatisfied. McGraw-Hill © 2000 The McGraw-Hill Companies . may ultimately be even more satisfied and more likely to repurchase than are those who were satisfied in the first place.8 SM The Impact of Service Failure & Recovery The Recovery Paradox 1. Example: a hotel customer recovery effects. but experience a high level of excellent service recovery.

conclusion is that companies should plan to disappoint customers so they can recover and gain even greater loyalty from them as a result.9 SM The Impact of Service Failure & Recovery The Recovery Paradox 2. This idea has become known as recovery paradox. The recovery paradox is highly dependent on context and situation. but not very rational. It would appear somewhat ludicrous to encourage service failure(No guarantee that customer will be satisfied after recovery) d. The logical. Research suggests that only the highest level of service recovery results in increased customer satisfaction and loyalty. It is expensive to fix mistakes b. (Ex: Dinner reservation failure may cause failure to propose marriage to his date mate) McGraw-Hill © 2000 The McGraw-Hill Companies . This is more complex because: a. c.

customers can respond in a variety of negative ways: anger.10 SM • How Bank Customers Respond To Service Failures When there is a service failure. discontent. self-pity and anxiety Service Failure Dissatisfaction/ Negative emotions Complaint Action Non complaint Action Complain to provider Negative word of mouth Third party action Exit/Switch McGraw-Hill Stay Exit/Switch Stay © 2000 The McGraw-Hill Companies . disappointment.

In some cases they feel a social obligation to complain. McGraw-Hill © 2000 The McGraw-Hill Companies .11 SM Why Do (And Don¶t) People Complain? • People taking action believe they will and should be provided compensation for the service failure in some form. • They believe that fair treatment and good service are their due.

• Sometimes they don¶t know how to complain. McGraw-Hill © 2000 The McGraw-Hill Companies .12 SM Why Do (And Don¶t) People Complain? • People who are unlikely to take any action have opposite beliefs. • They may feel failure was somehow their fault and they don¶t deserve redress. This type of coping involves self-blame. They often see complaining as a waste of time. may engage in ³emotion focused coping´. denial and possibly seeking social support etc. don¶t believe anything positive will occur.

13 SM Why Do (And Don¶t) People Complain? • Personal relevance of failure can also influence whether people complain. medical service. • If service failure is not important. • People normally complain about services that are expensive. E.in these cases people normally don¶t complain. risky and ego involving. don¶t have critical consequences. airline travel and vice versa.g. vacation. don¶t have that much ego involvement. McGraw-Hill © 2000 The McGraw-Hill Companies .

‡ Customers may choose to complain to third parties like CAB. relatives and coworkers. giving the company the opportunity to respond immediately. private attorney etc. ‡ Some customers choose not to complain directly to the provider but rather spread negative word of mouth about the company to friends. Professional association.14 SM Types of Customer Complaint Actions ‡ A dissatisfied customer can choose to complain on the spot to the service provider. McGraw-Hill © 2000 The McGraw-Hill Companies .

Sometimes their personal values or norms argue against complaining. This group of customers is less likely to take any action because they often doubt the effectiveness of complaining. thinking the consequences will not merit the time and effort they will expend. 2. McGraw-Hill © 2000 The McGraw-Hill Companies .15 SM Types of Complainers • Research suggests that people can be grouped into four categories based on how they respond to failures: Passives: (less risky) 1.

but they are less risky to spread negative word of mouth. These customers should be viewed as the service providers best friends because they give the company a second chance. 3. 2. This group of customers actively complain to the service provider.16 SM Types of Complainers Voicers: (less risky) 1. switch to others. They tend to believe complaining has social benefits and has positive consequences. McGraw-Hill © 2000 The McGraw-Hill Companies .

17 SM Types of Complainers Irates: (Risky) 1. 3. They are unlikely to complain to third parties and they also think that complaining has social benefits. 2. They are less likely to give service provider a second chance and stead switch to a competitor. This group of customers is likely to engage in negative word of mouth to friends and relatives and to switch providers than are others. McGraw-Hill © 2000 The McGraw-Hill Companies .They are more angry with the service provider.

This group of customers actively complain to all the parties. 2.[In extreme case: They Become Terrorists] McGraw-Hill © 2000 The McGraw-Hill Companies .18 SM Types of Complainers Activists: (Very risky) 1.They have the above average propensity to complain to all dimensions. They have a very optimistic sense of the potential positive consequences of all types of complaining. Complaining fits with their personal norms. 3.

An explanation by the firm as to what happened 6.An apology to the customer 5. An opportunity for the customer to vent his frustration to the firm.An assurance that problem would not be repeated 7.Reimbursed all their money 3.19 SM Bank Customer¶s Recovery Expectations Understanding and Accountability 7 most common remedies: 1.Reimbursed part of their money Following 4 gives opportunity to communicate with customers: 4.product repaired or service fixed 2. McGraw-Hill © 2000 The McGraw-Hill Companies .

2.(Full refund or free upgraded hotel room. They expect equity in exchange (Repayment equal to sufferings) 3. future free service etc. They also appreciate when a company gives them choices in terms of compensation.20 SM When They Complain. apology. What Do Customers Expect? Fair Treatment Outcome Fairness 1.(Pizza delivery case: A $3 off for late delivery) McGraw-Hill © 2000 The McGraw-Hill Companies . Club MeD example) 4. Customers expect outcomes or compensation that match the level of their dissatisfaction. Customers may feel uncomfortable if they are overly compensated. This compensation can take the form of monetary compensation.

(Exhibit 8. Fair procedures are characterized by clarity.when the assumption seems to be they are wrong or lying until they can prove otherwise.3. Customers expect fairness in terms of policies. club Med case) McGraw-Hill © 2000 The McGraw-Hill Companies . rules and timeliness of the complaint process. They want easy access to the complaint process and want things handled quickly. 3. speed and absence of hassles. 2. Customers also feel unfair if they have to prove their case. preferably by the first person they contact. What Do Customers Expect? Procedural Fairness 1. 4.21 SM When They Complain.

2.3 Med club example: Silvio de bartoli and his stuff were gracious. Above and beyond this customers expect to be treated politely. 3. (Exh: 8. What Do Customers Expect? Interaction Fairness 1. This form of fairness can dominate the others if customers feel the company and employees have uncaring attitudes and have done little to try to resolve the problem. with care and honesty. caring and upbeat when they greeted the long delayed passengers«««) McGraw-Hill © 2000 The McGraw-Hill Companies . This may be due to lack of training and empowerment.22 SM When They Complain.

23 SM Switching Vs. Magnitude and criticality of the failure 1. The nature of the customer relationship with the firm 1. Switching may not occur immediately following service failure but may follow an accumulation of events. McGraw-Hill © 2000 The McGraw-Hill Companies . Customers attitude toward switching. Staying Following Service Recovery • Whether or not customers switch to a new provider following service failure will depend on a number of factors: 1. 1.

24 SM Bank Service Recovery Strategies Service Recovery Strategies McGraw-Hill © 2000 The McGraw-Hill Companies .

there may still may discontinuities in service quality when the service is not delivered as specified.25 SM Employees' Roles in Banking Service Delivery ‡ The assumption is that even when customer expectations is well understood (Gap1) and services have been designed and specified to conform to those expectations (Gap2). McGraw-Hill © 2000 The McGraw-Hill Companies .

26 SM ‡ ‡ ‡ ‡ ‡ Employees are the service and brand 2 cases: Singapore airlines flight Universal card services 1 Video Case Japanese Benihana Restaurant McGraw-Hill © 2000 The McGraw-Hill Companies .

27 SM Employees are the service and brand ‡ The failure to deliver services as designed and specified can result from a number of employee and human performance factors: ‡ Ineffective recruitment of service oriented employees. ‡ poor-employee-technology job fit. McGraw-Hill © 2000 The McGraw-Hill Companies . ‡ role ambiguity and role conflict among contact employees. ‡ inappropriate evaluation and compensation systems and ‡ lack of empowerment. perceived control and team work.

and provide them with the rules for behavior in the organization. ³ the pattern of shared values and beliefs that give the members of the organization meaning.28 SM • Service Culture The behavior of employees in an organization will be heavily influenced by the culture of the organization or the pervasive norms and values that shape individual and group behavior. Corporate culture has been defined as. • • McGraw-Hill © 2000 The McGraw-Hill Companies . More simply and informally culture has been defined as ³ the way we do things around here.

29 SM Bank Service Culture •Personal level understanding of culture. •Defined as ³A culture where an appreciation for good service exits. •Experts have suggested that a customer-oriented. and where giving good service to internal as well as external ultimate customers is considered as a natural way of life and one of the most important norms by everyone.´ McGraw-Hill © 2000 The McGraw-Hill Companies . service oriented organizations will have its heart a service culture.

30 SM Bank Service Culture 1. -Espoused values. -.Employees are more likely to embrace a service culture when they see management living out these values. and respect and they infuse those values into the fabric of organization. such as integrity . Exhibiting service leadership: Leaders of successful service firms tend to have similar core values. McGraw-Hill © 2000 The McGraw-Hill Companies . joy. -Enacted values.

3. IBM all found that it takes several years of consistent . Attempting to export a corporate culture to another country creates additional issues.31 SM Bank Service Culture 2. For example: Yellow roadway corporation. concerted effort to build a service culture and to shift the organization from its old patterns to new patterns of doing business. Developing a service culture: The HR and internal marketing practices can help develop a service culture overtime. McGraw-Hill © 2000 The McGraw-Hill Companies . Four seasons in Paris example. Transporting the service culture: Transporting a service culture through international business expansion is also very challenging.

32 SM The critical importance of Banking Service Employees • Often heard Quote about service organization goes like this. McGraw-Hill © 2000 The McGraw-Hill Companies .³In a service organization. if you¶re not serving the customer.front line employee and those supporting them from behind the scenes.are critical to the success of any service organization. you¶d better be serving someone who is.´ • People.

• They are the organization in the customer's eyes. child care. the contact person provides the entire single-handedly.captured in the elements of service marketing mix (human actors who play a part in service)• They are the Service: In many cases the contact employees is the service. All the employees in a law firm. or health clinic represent the firm to the client. • Even off-duty employees (flight attendants/restaurant employees on a break. • Here the offering is the employee. McGraw-Hill © 2000 The McGraw-Hill Companies . physical trainer. reflect the organization they represent.33 SM The critical importance of Banking Service Employees People. In most personal and professional services like haircutting. limousine service. and everything this individual say or do can influence the perceptions of the organization. Disney corporation for example). counseling.

.understanding. • A customer sees American express as a good provider of financial services if the employees she interacts with are knowledgeable .a automobile company • They are marketers: They physically embody the product and are walking bill boards from a promotional standpoints. Some service employees may perform more traditional selling roles (bank tellers) McGraw-Hill © 2000 The McGraw-Hill Companies . and concerned about his financial situations and goals.34 SM The critical importance of Banking Service Employees • They are the brand: An American express financial advisor. the primary image that a customer has of the firm is formed by the interactions the customer has with the employees of that firm. a southwest flight attendants. Ex: Audi.

5. adapt. auto repair personnel) Responsiveness (retail store clerks) Assurance (credibility trust and confidence may come from employees) Empathy (attention. 4. 2. flexibility help evaluate service more highly) Tangibles (appearance and dress) • McGraw-Hill © 2000 The McGraw-Hill Companies .35 SM • Service Quality Dimensions Are Driven by Employee Behaviors Customers¶ perceptions of service quality will be impacted by the customer oriented behaviors of employees. Reliability (ATM teller. The following service quality can be influenced by service employee. 3. 1. listen.

36 SM Service Quality Dimensions Are Driven by Employee Behaviors McGraw-Hill © 2000 The McGraw-Hill Companies .

McGraw-Hill © 2000 The McGraw-Hill Companies . an organization will move toward delivering service quality through people.´ • By approaching from human resource decisions and strategies from the point of views that the primary goal is to motivate and enable employees to deliver customer-oriented promises successfully.37 SM Strategies for Closing Gap 3 • A complex combination of strategies is needed to ensure that service employees are willing and able to deliver services and that they stay motivated to perform in customer-oriented. The best companies know that people are the foundation of greatness. the most urgent business challenge is finding and keeping great people. • ³When it comes to building great companies. service-minded ways.

2. an organization must: 1.38 SM Strategies for Closing Gap 3 • To build customer-oriented and serviceminded work force. Hire the right people Develop people to deliver service quality Provide needed support system Retain the best people McGraw-Hill © 2000 The McGraw-Hill Companies . 3. 4.

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