This document discusses the importance of effective service recovery. It defines service recovery as dealing with customer problems and complaints in a timely manner to turn unhappy customers into satisfied, loyal ones. The document outlines strategies for service recovery including solving issues quickly and fairly, offering compensation, following up, and learning from recovery experiences. It also discusses why customers do and do not complain, expectations around complaint responses, and the impact of resolved versus unresolved complaints on repurchase intentions. Finally, the document covers service guarantees and characteristics of effective guarantees including being unconditional, meaningful, and easy to understand.

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BELTEI INTERNATIONALBELTEI INTERNATIONAL
UNIVERSITYUNIVERSITY
Faculty of BusinessFaculty of Business
AdministrationAdministration
Bachelor’s ProgramBachelor’s Program
Moeung Phanny
Master of Business Administration (MBA) / ( MJM )
Tel: 011 78 78 80
E-mail: phannyart@yahoo.com

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Chapter 7
SERVICE RECOVERY

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Objectives for Chapter 7:
Service Recovery
• Illustrate the importance of recovery from service
failures in building loyalty
• Discuss the nature of consumer complaints and
why people do and do not complain
• Provide evidence of what customers expect and
the kind of responses they want when they
complain
• Provide strategies for effective service recovery
• Discuss service guarantees

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Figure 7-1Figure 7-1
Unhappy Customers’
Repurchase Intentions
95%
70%
46%
37%
82%
54%
19%
9%
Complaints Resolved Quickly
Complaints Resolved
Complaints Not Resolved
Minor complaints ($1-$5 losses) Major complaints (over $100 losses)
Unhappy Customers Who Don’t Complain
Unhappy Customers Who Do Complain
Percent of Customers Who Will Buy Again
Source: Adapted from data reported by the Technical Assistance Research Program.

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What is Service Recovery
Service recovery is a procedure for dealing with customers’
problems and complaints. An effective & timely recovery
procedure will turn a complaining customer into a satisfied,
loyal customer most of the time.
It is trying to do something Right from a situation that went
wrong.
“Customers value reliability over all other dimensions.”
Parasuraman, Berry & Zeithaml. (1991)

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Figure 7-3Figure 7-3
Customer Response
Following Service Failure
Service Failure
Do NothingTake Action
Stay with ProviderSwitch Providers
Complain to
Provider
Complain to
Family & Friends
Complain to
Third Party
Stay with ProviderSwitch Providers

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What does Service Recovery involve
Solving customer’s problem quickly & fairly
Giving the customer something of value as
compensation
Keep your promise & follow up
What a customer feels about
their complaints

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Don’t know who to complain to
Don’t think it will do any good
May accept part of the blame
May want to avoid confrontation
Source: Thomason Learning, Inc. South-Western
Because of the above, organization may miss the opportunity
to learn instead of repeating the same mistakes again and
again
Why Don’t Customers give their FEEDBACK?

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Why Do Customers Complain?
Correct the problem
Emotional release from frustration
Gain some measure of compensation
Solicit sympathy
Test for consensus

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Action
No Action
Public Action
Private Action
Seek redress directly from
the firm
Take legal action
Complaint to business, private,
or governmental agencies
Stop buying the product or
boycott the seller
Warn friends about the product
and /or seller
Dissatisfaction
occurs
What happens afterthey
express
theirdissatisfaction

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What are the current processes
that your organization adopts in
serving the customer?
Customer Complaints looking
at the level of urgency, crucial
factor
What are some alternatives or
Compensations
Empowerment in decisions
Hiring & Training
Incentives
What Technology of Problem
Tracking System does you
organization adopt? – Real
time? www.qualityinaction.net
Why – Why Analysis
Voice of Customer
Fish bone Diagram (Cause & Effect)
Focus Group
Telephone interview
Feedback (Online –Offline)
Addressing the concerns, issues,
needs, values of customer
Were the Problems, concerns, issues,
needs & values of customer addressed
effectively?
What - (Details)
Why – (Big Picture)
How – (Solutions)
Continuous Improvements
Interpretations of the Effective Service Recovery System

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Figure 7-5Figure 7-5
Service Recovery Strategies
Learn from
Recovery Experiences
Treat Custom
ers
Fairly
Learnfrom
LostCustomers
Welcome and
Encourage Complaints
Fail Safe
the
Service
ActQuickly
Service
Recovery
Strategies

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Figure 7-6Figure 7-6
Causes Behind Service
Switching
Service
Switching
Behavior
• High Price
• Price Increases
• Unfair Pricing
• Deceptive Pricing
Pricing
• Location/Hours
• Wait for Appointment
• Wait for Service
Inconvenience
• Service Mistakes
• Billing Errors
• Service Catastrophe
Core Service Failure
• Uncaring
• Impolite
• Unresponsive
• Unknowledgeable
Service Encounter Failures
• Negative Response
• No Response
• Reluctant Response
Response to Service Failure
• Found Better Service
Competition
• Cheat
• Hard Sell
• Unsafe
• Conflict of Interest
Ethical Problems
• Customer Moved
• Provider Closed
Involuntary Switching
Source: Sue Keaveney
Why do we
always have
to wait ?

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• guarantee = an assurance of the fulfillment of a
condition (Webster’s Dictionary)
• for products, guarantee often done in the form of a
warranty
• services are often not guaranteed
–cannot return the service
–service experience is intangible
–(so what do you guarantee?)

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Table 7-7Table 7-7
Characteristics of an
Effective Service Guarantee
Unconditional
• The guarantee should make its promise unconditionally -
no strings attached.
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.
Source: Christopher W.L. Hart, “The Power of Unconditional Guarantees,” Harvard Business Review, July-August, 1988, pp. 54-62.

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Why a Good Guarantee
Works
• forces company to focus on customers
• sets clear standards
• generates feedback
• forces company to understand why it failed
• builds “marketing muscle”

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• Does everyone need a guarantee?
• Reasons companies do NOT offer guarantees:
– guarantee would be at odds with company’s
image
– too many uncontrollable external variables
– fears of cheating by customers
– costs of the guarantee are too high

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• 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”

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If you change your thinking, you will change
your actions.
“ A customer is the most important visitor of our premises. He is
not dependent on us, we are dependent on him. He is not an
interruption in our work; he is the purpose of it. He is not an
outsider in our business, he is part of it. We are not doing him a
favor by serving him; he is doing us a favor by giving us an
opportunity to do so.”
Mahatma Gandhi

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THANK YOU FOR YOUR
ATTENTION !
Any question?