Achieving Service Recovery and Obtaining Customer Feedback

Customer Complaining Behaviour

Services Marketing - SZABIST

Customer Response Categories to Service Failures

Complain to the service firm Take some form of Public Action Complain to a third party Take legal action to seek redress Defect (switch provider) Negative word-ofmouth
Services Marketing - SZABIST

Service Encounter is Dissatisfactory

Take some form of Private Action

Take No Action

Any one or a combination of these responses is possible

Understanding Customer Responses to Service Failure

Why do customers complain? What proportion of unhappy customers complain? Why dont unhappy customers complain? Who is most likely to complain? Where do customers complain? What do customers expect once they have made a complaint?

Services Marketing - SZABIST

Customers Often View Complaining as Difficult and Unpleasant

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Three Dimensions of Perceived Fairness in Service Recovery Process

Complaint Handling and Service Recovery Process
Justice Dimensions of the Service Recovery Process Procedural Justice Interactive Justice Outcome Justice
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Customer Satisfaction with

Service Recovery

Services Marketing - SZABIST

Customer Responses to Effective Service Recovery

Importance of Service Recovery

Plays a crucial role in achieving customer satisfaction Tests a firms commitment to satisfaction and service quality
Employee training and motivation is highly important Complaint handling should be seen as a profit center, not a cost center
Services Marketing - SZABIST

Impacts customer loyalty and future profitability

The Service Recovery Paradox

Customers who experience a service failure that is satisfactorily resolved more likely to make future purchases than customers without problems (Note: not all research supports this paradox) If second service failure occurs, the paradox disappearscustomers expectations have been raised and they become disillusioned Severity and recoverability of failure (e.g., spoiled wedding photos) may limit firms ability to delight customer with recovery efforts Best strategy: Do it right the first time

Services Marketing - SZABIST

Services Marketing - SZABIST

Principles of Effective Service Recovery Systems

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
Identify Service Complaints Monitor complaints Develop Complaints as opportunity culture Develop effective system and training in complaints handling Conduct root cause analysis
Services Marketing - SZABIST

Resolve Complaints Effectively

Learn from the Recovery Experience

Close the loop via feedback

Strategies to Reduce Customer Complaint Barriers

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 Thank customers for their feedback Train frontline employees Allow for anonymous feedback

Unpleasantness Fear of being treated rudely Hassle, embarrassment

How to Enable Effective Service Recovery

Be proactiveon the spot, before customers complain Plan recovery procedures Teach recovery skills to relevant personnel Empower personnel to use judgment and skills to develop recovery solutions

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How Generous Should Compensation Be?

Rules of thumb for managers to consider:
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What is the positioning of our firm? How severe was the service failure? Who is the affected customer?

Services Marketing - SZABIST

Service Guarantees

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

Services Marketing - SZABIST

How to Design Service Guarantees

Unconditional Easy to understand and communicate Meaningful to the customer Easy to invoke Easy to collect Credible

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Types of Service Guarantees

Single attribute-specific guarantee
One key service attribute is covered

Multiattribute-specific guarantee
A few important service attributes are covered All service aspects covered with no exceptions
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Full-satisfaction guarantee

Combined guarantee
All service aspects are covered Explicit minimum performance standards on important attributes

Services Marketing - SZABIST

Discouraging Abuse and Opportunistic Behaviour

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 fraudso why treat remaining 98 percent of honest customers as potential crooks?

Insights from research on guarantee cheating

Services Marketing - SZABIST

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

Learning from Customer Feedback

Services Marketing - SZABIST

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

Services Marketing - SZABIST

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

Entry Points for Unsolicited Feedback

Frontline employees
Intermediaries acting for original supplier Complaint cards deposited in special box or mailed Telephone or e-mail Complaints passed to company by third-party recipients
Services Marketing - SZABIST

Managers contacted by customers at head/regional office

Disseminate the information to relevant parties to take action Immediately Track over time

Organizing for Change Management and Service Leadership

Effective Marketing Lies at the Heart of Value Creation

The Service-Profit Chain

Internal External

Operating strategy and service delivery system

Loyalty Satisfaction Productivity Employees and Output Quality Capability Service Quality
Workplace design Job design Selection and development Rewards and recognition Information and communication Tools for serving customers

Service Concept
4-7

Target Market
Revenue growth 1

Customers Service Value 3 2 Satisfaction Loyalty

Profitability

Quality and Attractive value Lifetime value productivity Service designed Retention Improvements and delivered to Repeat business yield higher meet targeted Referral service quality customers needs and lower costs

Links in the Service-Profit Chain

1. Customer loyalty drives profitability and growth 2. Customer satisfaction drives customer loyalty 3. Value drives customer satisfaction 4. Employee productivity and retention drive value

5. Employee loyalty drives productivity

6. Employee satisfaction drives loyalty and productivity 7. Internal quality drives employee satisfaction

8. Top management leadership underlies chains success

Qualities Associated with Service Leaders

Understands mutual dependency among marketing, operations and human resource functions of the firm Has a coherent vision of what it takes to succeed Strategies are defined and driven by a strong, effective leadership team Responsive to various stakeholders Value created through customer satisfaction

Integrating Marketing, Operations, and Human Resources

Reducing Interfunctional Conflict

One challenge is to avoid creating functional silos
High-value creating enterprises should be thinking in terms of activities, not functions

Top management needs to establish clear imperatives for each function that defines how a specific function contributes to the overall mission
The marketing imperative The operations imperative The human resources imperative

Defining the Three Functional Imperatives

Marketing Imperative
Target right customers and build relationships Offer solutions that meet their needs Define quality package with competitive advantage

Operations Imperative
Create and deliver specified service to target customers Adhere to consistent quality standards Achieve high productivity to ensure acceptable costs

Human Resource Imperative

Recruit and retain the best employees for each job Train and motivate them to work well together Achieve both productivity and customer satisfaction

Creating a Leading Service Organization

From Losers to Leaders: Four Levels of Service Performance

Service Losers
Bottom of the barrel from both customer and managerial perspectives Customers patronize them because there is no viable alternative New technology introduced only under duress; uncaring workforce

Service Nonentities
Dominated by a traditional operations mindset Unsophisticated marketing strategies Consumers neither seek out nor avoid them

From Losers to Leaders: Four Levels of Service Performance

Service Professionals

Clear market positioning strategy Customers within target segment(s) seek them out Research used to measure customer satisfaction Operations and marketing work together Proactive, investment-oriented approach to HRM
The crme da la crme of their respective industries Names synonymous with outstanding service, customer delight Service delivery is seamless process organized around customers Employees empowered and committed to firms values and goals

Service Leaders

Dilberts Boss Loses Focus and His Audience

Moving to a Higher Level of Performance

Firms can move either up or down the performance ladder Organizations that are devoted to satisfying their current customers may miss important shifts in the marketplace As a result, they may face difficulties attracting demanding new consumers with different expectations Companies defending their control of their competitive edge may have encouraged competitors to find higher-performing alternatives Organizations with a service-oriented culture may turn otherwise as a result of a merger or acquisition that brings in new leaders who emphasize short-term profits

In Search of Human Leadership

Leading a Service Organization Involves Eight Stages

1. Creating a sense of urgency to develop the impetus for change 2. Putting together a strong enough team to direct the process 3. Creating an appropriate vision of where the organization needs to go 4. Communicating that new vision broadly 5. Empowering employees to act on that vision 6. Producing sufficient short-term results to create credibility and counter cynicism 7. Building momentum and using that to tackle tougher change problems 8. Anchoring new behaviors in organizational culture

Leadership versus Management

Leadership
Concerned with development of vision and strategies, and empowerment of people to overcome obstaclesmake vision happen Emphasis on emotional and spiritual resources Works through people and culture Produces useful change, especially non-incremental change

Management
Involves keeping current situation operating through planning, budgeting, organizing, staffing, controlling, and problem solving Emphasizes physical resourcesraw materials, technology, capital Works through hierarchy and systems Keeps current system functioning

Setting Direction versus Planning

Planning A management process, designed to produce orderly resultsnot change Setting direction Involves creating visions and strategies that describe a business, technology, or corporate culture in terms of what it should become over long term and articulating feasible way of achieving goal Many of best visions and strategies combine basic insights and translate them into realistic competitive strategy Stretcha challenge to attain new levels of performance and competitive advantage that might as first seem to be beyond the organizations reach Planning follows and complements direction setting, serving as useful reality check and road map for strategic execution

Individual Leadership Qualities

Possesses a special perspective Able to believe in their employees and make communicating with them a priority Love of the business Being driven by a set of core value that they infuse into the organization Need not be charismatic, but has to be principled Must have personal humility blended with intensive professional will, ferocious resolve, and willingness to give credit to others but take blame themselves

Change Management

Evolution versus Turnaround

Evolution involves continual mutations designed to ensure the survival of the fittest
Top management must proactively evolve the focus and strategy of the firm to take advantage of changing conditions and the advent of new technologies

Turnaround situations are where leaders seek to bring distressed organizations back from the brink of failure and set them on a healthier course

Evolution versus Turnaround

Hurdles that leaders face in reorienting and formulating strategy
Cognitive hurdles Resource hurdles Motivational hurdles Political hurdles

Turning around an organization that has limited resources requires concentrating those resources where the need and the likely payoffs are greatest
Example: William Brattons 20-year police career in Boston and New York

A firms search for growth often involves expansioneven diversification into new lines of business
Example: IBM

Role Modeling Desired Behavior

Management by walking around
Provides insights to both backstage and front-stage operations The ability to observe and meet both employees and customers, and opportunity to see how corporate strategy is implemented on the front line

This approach may lead to a recognition that changes are needed in that strategy A risk of prominent leaders becoming too externally focused at the risk of their internal effectiveness

Leadership, Culture, and Climate

Leadership traits are needed of everyone in supervisory or managerial positions, including those heading teams
Effective communication is essential for a leader

Organizational culture
Shares perceptions or themes regarding what is important in the organization Shares values about what is right or wrong Shares understanding about what works and what doesnt work Shares beliefs, and assumptions about why these things are important Shares styles of working and relating to others

Leadership, Culture, and Climate

Organizational climate
The tangible surface layer on top of the organizations underlying culture Factors of influence:
Flexibility, responsibility, standards that people set, perceived aptness of rewards, clarity people have about mission and values, level of commitment to a common purpose

Creating a new climate for service, based on understanding of what is needed for market success, may require
Radical rethinking of HRM activities, operational procedures, and the firms reward and recognition policies