SERVICE RECOVERY

Service Recovery Defined

• Service recovery refers to the actions taken by an

organizations in response to a service failure

• Service failures bring about negative feelings and responses

from customers

• Left unfixed, failures can result in customers leaving,

spreading bad word-of-mouth and even challenging the
organization through consumer rights organizations
• Failure occur for all kinds of reasons –
– The service may be unavailable when promised
– It may be delivered late or too slowly
– The outcome may be incorrect or poorly executed
– Employee may be rude or uncaring
• This type of failures bring about negative
feelings and response from customers.
 Service Recovery Effects

• Has a strong impact on customers satisfaction, loyalty, word-

of-mouth communication

• Customers who experience service failures but who are

ultimately satisfied based on recovery efforts by the firm, tend
to be more loyal than those whose problems are not resolved

• Recovery Paradox – rare instances when an initially

dissatisfied customer experiences an excellent service
recovery. Eg: hotel front desk person upgrades his guest to a
better room at the original price on non availability of room
 Customer Response Following Service Failure

Service Failure

Take Action Do Nothing

Switch Providers Stay with Provider

Complain to Complain to Complain to

Provider Family & Friends Third Party

Switch Providers Stay with Provider

Why Do (and Don’t) People Complain?

• People complain because:

– They believe that positive consequences may occur
– They believe they will and should be provided
compensation for the service failure
– They feel a social obligation to complain – to help
others avoid similar situations
• People don’t complain because:
– Waste of their time and effort
– They don’t believe anything positive will occur
 Types of complainers
• Passives
– This group of customers are least likely to take any
action.
– They are unlikely to say anything to the provider, less
likely than others to spread negative word of mouth, and
unlikely to complain to a third party.
• Voicers
– These customers actively complain to the service
provider, but they are less likely to spread negative word
of mouth or go to third parties with their complaints.
 Types of complainers (contd.)
• Irates
– These consumers are more likely to engage in
negative word-of-mouth communication with
friends and relatives and to switch providers.
• Activists
– These consumers are characterized by above
average propensity to complain on all dimensions
 When They Complain, What Do
Customers Expect?
• Outcome Fairness
– Customers expect outcomes or compensation, that match the
level of their dissatisfaction

– Compensation in form of money, an apology, future free

services, reduced charges repairs or/ and replacements

– Equity in exchange – they want to feel that the company has

“paid” for its mistakes

• Interaction Fairness
– Customers expect to be treated politely, with care and
honesty
 Service Recovery Strategies
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Pricing
• High Price
• Price Increases
• Unfair Pricing
• misleading Pricing
Causes Behind Service Switching
Inconvenience
• Location/Hours
• Wait for Appointment
• Wait for Service

Core Service Failure

• Service Mistakes
• Billing Errors
• Service disaster

Service Encounter Failures

• Uncaring
•
•
Impolite
Unresponsive
Service
• Unknowledgeable Switching
Response to Service Failure Behavior
• Negative Response
• No Response
• Reluctant Response

Competition
• Found Better Service

Ethical Problems
• Cheat
• Unsafe

Involuntary Switching
• Customer Moved
• Provider Closed
 Service Guarantees

• guarantee = an assurance of the fulfillment of a

condition

• for products, guarantee often done in the form of

a warranty
 Characteristics of an Effective
Service Guarantee
Unconditional
 The guarantee should make its promise unconditionally -
.
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.
 Why a Good Guarantee Works

• forces company to focus on customers

• sets clear standards

• generates feedback

• forces company to understand why it failed

 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”