Transcript The Satisfaction

Chapter 13:
Achieving Service
Recovery and Obtaining
Customer Feedback
Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 13 - 1
Overview of Chapter 13
1. Customer Complaining Behavior
2. Customer Responses to Effective Service
Recovery
3. Principles of Effective Service Recovery
Systems*
4. Service Guarantees
5. Discouraging Abuse and Opportunistic Behavior
6. Learning from Customer Feedback
Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 13 - 2
1. Customer Complaining Behavior
Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 13 - 3
American Customer Satisfaction Index:
Selected Industry Scores, 2006
Score
100
(Max = 100)
90
80
83
83
81
70
75
75
75
77
74
65
77
69
60
50
40
30
20
10
% Change 0 -3.5% 2.5% 2.5% -7.4% 1.4% 0.0% -1.3% -9.7% -4.1% 11.6% -10.4%
2006 vs. 2005
Industry:
Source: www.theacsi.org,
Accessed 9.11.2006
Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 13 - 4
Customer Response Categories to
Service Failures (Fig 13.1)
Complain to the
service firm
Service Encounter
is Dissatisfactory
Take some form
of Public Action
Complain to a
third party
Take some form
of Private
Action
Take legal action
to seek redress
Defect (switch
provider)
Take No Action
Negative word-ofmouth
Any one or a combination of
these responses is possible
Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 13 - 5
Understanding Customer Responses to
Service Failure
 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?*
 What do customers expect once they have made a
complaint? (Figure 13.3)
Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 13 - 6
Customers Often View Complaining as
Difficult and Unpleasant (Fig 13.2)
Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 13 - 7
Three Dimensions of Perceived Fairness in
Service Recovery Process (Fig 13.3)
Complaint Handling and Service
Recovery Process
Justice Dimensions of the Service Recovery Process
Procedural
Justice
Interactive
Outcome
Justice
Justice
Customer Satisfaction with
Service Recovery
Source: Tax and Brown
Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 13 - 8
2. Customer Responses to
Effective Service Recovery
Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 13 - 9
Importance of Service Recovery
 Plays a crucial role in achieving customer
satisfaction
 Tests a firm’s commitment to satisfaction and
service quality
Employee training and motivation is highly
important
 Impacts customer loyalty and future profitability
Complaint handling should be seen as a profit
center, not a cost center
Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 13 - 10
How Complaint Resolution Affects
Customer Retention Rates
Percent of Unhappy
Customers Retained
100
90
80
70
60
50
40
30
20
10
0
95%
82%
70%
54%
46%
37%
19%
9%
Customer did not
complain
Complaint was
not resolved
Problem cost > $100
Complaint
was resolved
Complaint was
resolved quickly
Problem cost $1–$5
Source: Claes Fornell, Birger Wernerfelt, “A Model for Customer Complaint Management,”
Marketing Science, Vol. 7, No. 3 (Summer, 1988), pp. 287–298
Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 13 - 11
The Service Recovery Paradox
 Customers who experience a service failure that is
satisfactorily resolved may be 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
 Severity and “recoverability” of failure (e.g., spoiled
wedding photos) may limit firm’s ability to delight
customer with recovery efforts
 Best strategy: Do it right the first time
Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 13 - 12
3. Principles of Effective Service
Recovery Systems
Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 13 - 13
Components of an Effective
Service Recovery System (Fig 13.4)
Do the job right the
first time
+
Effective Complaint
Handling
Increased
Satisfaction and
Loyalty
=
Conduct research
Monitor complaints
Identify Service
Complaints
Develop “Complaints as
opportunity” culture
Resolve Complaints
Effectively
Develop effective system
and training in
complaints handling
Learn from the
Recovery Experience
Conduct root cause analysis
Close the loop via feedback
Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 13 - 14
Strategies to Reduce Customer
Complaint Barriers (Table 13.1)
Complaint Barriers for
Dissatisfied Customers
Inconvenience
 Hard to find right complaint
procedure
 Effort involved in complaining
Doubtful Pay Off
 Uncertain if action will be taken by
firm to address problem
Strategies to Reduce These Barriers
 Put customer service hotline numbers,
e-mail and postal addresses on all
customer communications materials
 Have service recovery procedures in
place, communicate this to customers
 Feature service improvements that
resulted from customer feedback
Unpleasantness
 Thank customers for their feedback
 Fear of being treated rudely
 Train frontline employees
 Hassle, embarrassment
 Allow for anonymous feedback
Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 13 - 15
How to Enable
Effective Service Recovery
 Be proactive—on the spot, before customers
complain (ex: Ritz Carlton)
 Plan recovery procedures
 Teach recovery skills to relevant personnel
 Empower personnel to use judgment and skills
to develop recovery solutions
Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 13 - 16
4. Service Guarantees
Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 13 - 17
Service Guarantees Help Promote and
Achieve Service Loyalty
 Force firms to focus on what
customers want
 Set clear standards
 Highlight cost of service failures
 Require systems to get and act
on customer feedback
 Reduce risks of purchase and
build loyalty
Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 13 - 18
The Hampton Inn
100% Satisfaction Guarantee
(Fig 13.5)
 What are benefits of such a
guarantee?
 Are there any downsides?
Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 13 - 19
Types of Service Guarantees
Table 13.2
 Single attribute-specific guarantee
 One key service attribute is covered
 Multiattribute-specific guarantee
 A few important service attributes are covered
 Full-satisfaction guarantee
 All service aspects covered with no exceptions
 Combined guarantee
 All service aspects are covered
 Explicit minimum performance standards
on important attributes
Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 13 - 20
How to Design Service Guarantees
 Unconditional
 Easy to understand and communicate
 Meaningful to the customer
 Easy to invoke
 Easy to collect
 Credible
Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 13 - 21
5. Discouraging Abuse and
Opportunistic Behavior
Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 13 - 22
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
fraud—so 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
 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
Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 13 - 23
6. Learning from Customer Feedback
Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 13 - 24
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 © 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 13 - 25
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
Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 13 - 26
Key Customer Feedback Collection Tools:
Strengths and Weakness (Table 13.3)
LEVEL OF MEASUREMENT
POTENTIAL
FOR
COLLECTION TOOLS
FIRM
SERVICE
REPRESENTATIVE
TRANSACTION
ACTIONABLE
RELIABLE
RECOVERY
SPECIFIC
PROCESS
FIRST
HAND
COST
LEARNING
EFFECTIVENESS
TOTAL MARKET SURVEY
(INCLU. COMPETITORS)
ANNUAL SURVEY ON
OVERALL SATISFACTION
TRANSACTIONAL SURVEY
SERVICE FEEDBACK
CARDS
MYSTERY SHOPPING
UNSOLICITED FEEDBACK
(e.g., COMPLAINTS)
FOCUS GROUP
DISCUSSIONS
SERVICE REVIEWS
Source: Adapted from Jochen Wirtz and Monica Tomlin, “Institutionalizing Customer-Driven Learning Through Fully Integrated Customer Feedback
Systems.” Managing Service Quality,10, no.4 (2000): p. 210.
Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 13 - 27
Entry Points for Unsolicited Feedback
 Frontline employees
 Intermediaries acting for original supplier
 Managers contacted by customers at head/regional office
 Complaint cards deposited in special box or mailed
 Telephone or e-mail
 Complaints passed to company by third-party recipients
 Consumer advocates
 Trade organizations
 Legislative agencies
Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 13 - 28