A presentation for Marketing Specialization Students to get acquaint with Service failure and recovery to make strong relationship with customers.

1. 8-1
Service Recovery
 The Impact of Service Failure and Recovery
 How Customers Respond to Service Failures
 Customers’ Recovery Expectations
 Switching versus Staying Following Service
Recovery
 Service Recovery Strategies
 Service Guarantees
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2. 8-2
Reliability is Critical in Service
but…
 In all service contexts, service failure is
inevitable.
 Service failure occurs when service
performance that falls below a customer’s
expectations in such a way that leads to
customer dissatisfaction.
 Service recovery refers to the actions
taken by a firm in response to service
failure.
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3. 8-3
Complaining Customers:
The Tip of the Iceberg
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4. 8-4
Customer Complaint Actions Following
Service Failure
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5. 8-5
Types of Complainer
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Passives : least
likely to take any
action
Voicers: service
provider’s best friends
as they complaint
directly to service
provider.
Irates: less likely to
give second chance
to the existing service
provider and engage
in spreading negative
word of
communication and
prefer to switch to
competitor
Activists: Are above
average propensity on
all dimensions and
having a very optimistic
sense of the potential
positive consequences
of all types of
complaining.

6. 8-6
CUSTOMER’S RECOVERY
EXPECTATIONS
 Understanding and Accountability
 Fair Treatment
◦ Outcome Fairness
◦ Procedural Fairness
◦ Interaction Fairness
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7. 8-7
Fairness Themes in Service
Recovery
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8. 8-8
Service Recovery Paradox
 “A good recovery can turn angry, frustrated
customers into loyal ones. ..can, in fact,
create more goodwill than if things had
gone smoothly in the first place.” (Hart et
al.)
 HOWEVER:
◦ only a small percent of customers complain
◦ service recovery must be SUPERLATIVE
 only with responsiveness, redress, and
empathy/courtesy
 only with tangible rewards
◦ even though service recovery can improve
satisfaction, it has not been found to increase
purchase intentions or perceptions of the brand
◦ service recovery is expensive
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9. 8-9
Service Recovery Paradox
 The service recovery paradox is more likely
to occur when:
◦ the failure is not considered by the customer to
be severe
◦ the customer has not experienced prior failures
with the firm
◦ the cause of the failure is viewed as unstable by
the customer
◦ the customer perceives that the company had
little control over the cause of the failure
 Conditions must be just right in order for the
recovery paradox to be present!
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10. 8-10
Causes Behind Service
Switching
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11. 8-11
Service Recovery Strategies
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Make the Service fail- Safe
Encourage and track complaints
Act Quickly: Take care of Problems on the Front Line, Empower
Employees, Allow Customers to Solve Their Own problems
Provide Adequate Explanations
Treat Customers Fairly
Cultivate relationships with
customers
Learn from Recovery Experiences
Learn from Lost Customers

12. 8-12
Eight Most Common Remedies
Customers Seek with Serious
Problems
 Have the product repaired or service fixed
 Be reimbursed for the hassle of having
experienced a problem
 Receive a free product or service in the
future
 Explanation by the firm as to what
happened
 Assurance that the problem will not be
repeated
 A thank you for the customer’s business
 An apology from the firm
 An opportunity for the customer to vent his
or her frustrations to the firm
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13. 8-13
Service Guarantees
 guarantee = an assurance of the fulfillment of a
condition (Webster’s Dictionary)
 in a business context, a guarantee is a pledge or
assurance that a product offered by a firm will
perform as promised and, if not, then some form of
reparation will be undertaken by the firm
 for tangible products, a guarantee is 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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15. 8-15
Characteristics of an Effective
Service Guarantee
 Unconditional
◦ the guarantee should make its promise unconditionally – no
strings attached
 Meaningful
◦ the firm 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
◦ customers need to understand what to expect
◦ employees need to understand what to do
 Easy to Invoke and Collect
◦ the firm should eliminate hoops or red tape in the way of
accessing or collecting on the guarantee
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16. 8-16
Benefits of Service
Guarantees
 A good guarantee forces the company to focus on
its customers.
 An effective guarantee sets clear standards for the
organization.
 A good guarantee generates immediate and
relevant feedback from customers.
 When the guarantee is invoked there is an instant
opportunity to recover, thus satisfying the customer
and helping retain loyalty.
 Information generated through the guarantee can
be tracked and integrated into continuous
improvement efforts.
 Employee morale and loyalty can be enhanced as
a result of having a service guarantee in place.
 A service guarantee reduces customers’ sense of
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17. 8-17
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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18. 8-18
Does everyone need a service
guarantee?
 Reasons companies might NOT want
to offer a service guarantee:
◦ existing service quality is poor
◦ guarantee does not fit the company’s
image
◦ too many uncontrollable external
variables
◦ fears of cheating or abuse by customers
◦ costs of the guarantee outweigh the
benefits
◦ customers perceive little risk in the service
◦ customers perceive little variability in8/4/2020 18

19. 8-19
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”
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