Service Failures and

Recovery Strategies

MAJOR CUSTOMER COMPLAINTS ABOUT SERVICE WORKERS

Apathy--dilligad Brush-off Coldness Condescension Robotism Rulebook Runaround

IMPORTANCE OF HUMAN RESOURCE MANAGEMENT

People provide a sustainable competitive advantage Focus should be equally based on service quality, service delivery, and employee well-being People selection should be dependent upon the organization and the market it faces different types of firms have different needs Data needs to be tracked concerning what customers want and which HR practices helps

deliver it to them

SERVICE PROVIDERS AS BOUNDARY SPANNERS

Link the organization with the outside world Primary purpose information transfer (two-way) representation primary source of differentiation for many service firms

Service provider spectrum ranges from professionals to subordinate service roles

SERVICE PROVIDERS AS BOUNDARY SPANNERS

Boundary spanners are prone to conflict

person/role conflict
self-efficacy
belief in the employees ability to perform job-related tasks grows stronger over time as self-efficacy increases employees exert more effort become more confident learn to overcome task-related obstacles

SERVICE PROVIDERS AS BOUNDARY SPANNERS

Boundary spanners are prone to conflict

person/role conflict organization/client conflict interclient conflicts

Leads to feelings of roles stress

dissatisfaction frustration turnover intention

SERVICE PROVIDERS AS BOUNDARY SPANNERS

Provider responses to reduce role stress

avoid the customer move into a people-processing mode add symbols and furniture to increase control overact the role
forces customer into subservient role

side completely with the customer

WHAT, HOW AND WHEN OF EMPOWERMENT Empowerment

turning the front-line loose encourages and rewards employees to exercise initiative and imaginations

WHAT, HOW AND WHEN OF EMPOWERMENT

Empowerment benefits
quicker response to customer needs quicker response to dissatisfied customers employees feel better about their jobs and themselves employees interact with customers with warmth and enthusiasm employees become a great source of service ideas great w-o-m advertising and customer retention

WHAT, HOW AND WHEN OF EMPOWERMENT

Empowerment costs
larger dollar investments in selection and training higher labor costs slow or inconsistent service delivery violations of fair play giveaways and bad decisions

WHAT, HOW AND WHEN OF EMPOWERMENT

Empowerment continuum
control-oriented vs. involvement oriented

1. Suggestion involvement
empowered to recommend
formal suggestion programs quality circles

WHAT, HOW AND WHEN OF EMPOWERMENT

Empowerment continuum
control-oriented vs. involvement oriented

2. Job Involvement
opening up of job content
use more skills, more freedom, and get more feedback extensive use of teams higher level decisions and reward allocation remain the responsibility of senior management

WHAT, HOW AND WHEN OF EMPOWERMENT

Empowerment continuum
control-oriented vs. involvement oriented

3. High Involvement
train people to manage themselves profit-sharing and employee ownership develop skills in teamwork, problem solving, and business operations

WHEN TO EMPOWER: A CONTINGENCY APPROACH

Contingencies:
basic business strategy
standardized vs. customized

tie to the customer

transaction vs. relationship

Technology
simple vs. complex

WHEN TO EMPOWER: A CONTINGENCY APPROACH

Contingencies:
business environment
predictable vs. unpredictable

types of people
Managers
theory X vs. theory Y

Employees
low vs. high growth and social needs low vs. high interpersonal skills

OTHER MANAGERIAL ISSUES

Implementing the partial employee (managing consumer participation)

develop customer trust promote the benefits and stimulate trial understand customer habits pretest new procedures understand the determinants of consumer behavior teach customers how to use service innovations monitor and evaluate performance

OTHER MANAGERIAL ISSUES

Managing Customers from Hell

Egocentric Edgar
appeal to his ego demonstrate action dont talk policy
rephrase: for you, I can .(policy)

dont let his ego destroy yours

OTHER MANAGERIAL ISSUES

Managing Customers from Hell

Bad-Mouth Betty
ignore her language force the issue (hang-up) use selective agreement (with some statements)

OTHER MANAGERIAL ISSUES

Managing Customers from Hell

Hysterical Harold
let him vent take it backstage take responsibility for solving the problem

OTHER MANAGERIAL ISSUES

Managing Customers from Hell

Dictatorial Dick
break up his game (fulfill his request) stick with your game
be consistent with customers tell him what you can do for him

OTHER MANAGERIAL ISSUES

Managing Customers from Hell

Freeloading Freda
give it to her dont let the 1% dictate action for the 99% who actually have problems

TYPES OF COMPLAINTS
Instrumental
expressed for the purpose of altering an undesirable state of affairs

Noninstrumental
expressed without the expectation that an undesirable state will be altered

Ostensive
outer-directed complaints

Reflexive
Inner-directed complaints

WHY DO CUSTOMERS COMPLAIN

Correct the problem Emotional release from frustration Regain some measure of control by spreading negative w-o-m Solicit sympathy test for consensus Create an impression of being more intelligent and discerning

WHY DONT CUSTOMERS COMPLAIN

Dont know who to complain to Dont think it will do any good May doubt their own subjective evaluation May accept part of the blame

May want to avoid confrontation

May lack expertise

GENERIC RESPONSES TO SERVICE FAILURES Attribution

who/what caused the problem

Evaluation
influences satisfaction rating

Behavior
behavioral responses within the encounter and beyond it

BEHAVIORAL RESPONSES
Voice
High => store manager Medium => sales clerk Low => no one associated with the store

Exit
High => never purchases again Medium => only purchases if other alternatives are not available Low => continues to shop as usual

COMPLAINING OUTCOMES

Retaliation
High => tells lots of people and attempts to physically damage the store Medium => tells a few people and created minor inconveniences Low => does not retaliate at all

TYPES OF SERVICE FAILURES

Group 1 Failures
Core service failures
slow service unavailable service other core service failures

SERVICE FAILURES: THE RESTAURANT INDUSTRY

Group 1 failure categories (44.4%)

Product defects (20.9%)
food was described as cold, soggy, raw, burnt, spoiled, or containing inanimate objects such as hair, glass, bandages, bag ties, and cardboard.

Slow/unavailable service (17.9%)

waiting excessively, not being able to find assistance

SERVICE FAILURES: THE RESTAURANT INDUSTRY

Facility problems (3.2%)
cleanliness issues such as bad smells, dirty utensils, and animate objects (e.g., insects) found on the table or in the food

Unclear policies (1.6%)

policies that were perceived as unfair by the customer, such as coupon redemption, or forms of payment

Out-of-stock conditions (.8%)

inadequate supply of menu items

TYPES OF SERVICE FAILURES

Group 2 Failures
Responses to implicit/explicit requests
special needs customer preferences customer error disruptive others

SERVICE FAILURES: THE RESTAURANT INDUSTRY

Group 2 failure categories (18.4%)

food not cooked to order (15.0%)
requested food be prepared in a particular manner and restaurant failed to meet request

seating problems (3.4%)

seating nonsmokers in smoking section and vice versa lost or disregarded reservations requests for special tables that were denied seating among unruly and disruptive customers

TYPES OF SERVICE FAILURES

Group 3 Failures
Unprompted/Unsolicited employee actions
level of attention unusual action cultural norms gestalt adverse conditions

TYPES OF SERVICE FAILURES

Group 4 Failures (Employee-reported incidents)
Problematic customer behavior
drunkeness verbal and physical abuse breaking company policies or laws uncooperative customers

SERVICE FAILURES: THE RESTAURANT INDUSTRY

Group 3 failure categories (37.2%)

inappropriate employee behavior (15.2%)
rudeness, inappropriate verbal exchanges, and poor attitudes

wrong Orders (12.6%)

delivery of the incorrect food item, either to the table, or in the case of fast food, in packaging so that the mistake was not discovered until the customer had left the premises

SERVICE FAILURES: THE RESTAURANT INDUSTRY

Group 3 failure categories (37.2%)

lost orders (7.5%)
situations in which the customers order was lost and never fulfilled

mischarged (1.9%)
being charged for items that were never sent, being charged incorrect prices for items that were ordered, and providing incorrect change

TRENDS IN COMPLAINT RESOLUTION

Complaints are more likely to be acted upon when:

complaints are made to managers formally designated complaint handlers are involved someone with a personal tie to the company is involved the complaint is about the quality of service as opposed to an employees personality

SERVICE RECOVERY

Service recovery paradox

customers are likely to evaluate a firm higher if a mistake is made and corrected than had the service been delivered correctly the first time.

SERVICE RECOVERY EVALUATION

Perceived justice needs--based on equity theory which weighs outcomes versus inputs
distributive justice
outcomes

procedural justice
process

interactional justice
the human content of the recovery process

GENERIC RECOVERY STRATEGIES (distributive justice outcomes)

Compensatory strategies
gratis discounts upgrades free ancillary service

Refunds

GENERIC RECOVERY STRATEGIES (distributive justice outcomes) Corrections Replacement strategies Apology Disregard

SERVICE FAILURES: THE RESTAURANT INDUSTRY

Recovery Strategies (frequency, retention)

Replacement (33.4%, 80.2%) Free Food (23.5%, 89.0%) Nothing (21.3%, 51.3%) Apology (7.8%, 71.4%) Correction (5.7%, 80.0%) Discount (4.3%, 87.5%) Manager Intervention (2.7%, 88.8%) Coupon (1.3%, 80.0)%

RECOVEY TACTICS

Poor responses
Fail to recognize the seriousness of the problem Fail to adequately accommodate the customer

Act as though nothing is wrong

Fail to explain why the problem occurred Leave the customer to solve the problem on his or her

own
Promise to do something and dont follow through

DEVELOPING A SERVICE RECOVERY PROGRAM

Measure the costs
calculate the lifetime value of a customer

Actively encourage complaints

Anticipate needs for recovery

Respond quickly Train employees Empower the front-line Close the loop

The Seven Steps

Measure
Listen Anticipate Act

Train
Empower Close

the Loop

Fast

HOW CAN YOU APPLY THIS PROCESS TO YOUR ORGANIZATION?

Figure 13.1 Types of Service Failures

Unavailable Slow
Yes

Group 1A Group 1B Group 1C

Group 1

Nature of failure?

Other failures

Special needs Total sample Is there a service delivery system failure? Is there an implicit/ explicit request for accomodation
Yes

Group 2A Group 2B Group 2C Group 2D

Yes

Group 2

Nature of requests/ need?

Customer preference Customer error Disruptive others

No

No

Is there an Unpromoted/ unsolicited action by employee?

No

Group 3

Nature of employee action?

Level of attention Unusual action Cultural norms Gestalt Adverse conditions

Group 3A
Group 3B Group 3C Group 3D Group 3E

Source: Mary Jo Bitner, Bernard H. Booms, and Mary Stanfield Tetreault, The Service Encounter: Diagnosing Favorable and Unfavorable Incidents, Journal of Marketing (January 1990, pp. 71-84.