Service Recovery

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SERVICE
RECOVERY

Service Guarantees
‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ What should be guaranteed? Is a service guarantee appropriate in an educational setting? How should such a guarantee be written? How should such a guarantee would be administered and paid out? What is appropriate compensation? What are the advantages of providing a guarantee to students? What are the advantages of providing a guarantee to the instructor? What are the advantages of providing a guarantee to the university? What are the disadvantages of providing such a guarantee? Why is it that universities typically do not offer such guarantees?

Unconditional Guarantee

‡ Guarantee a customer can invoke for any reason

Bugs Burger Bug Killers Guarantee
‡ You don¶t owe one penny until all pests on your premise have been eradicated ‡ If a guest spots a pest on your premises, the exterminator will pay for the guest¶s meal or room, send a letter of apology and pay for a future meal or stay.

Good Service Guarantee
‡ The guarantee shd. Be unconditional ‡ The guarantee shd. Be easy to understand and easy to communicate. ‡ The guarantee shd. Be easy to invoke ‡ Customers shd. Find it easy and quick to collect payments ‡ The compensation given to customers shd. Be meaningful to them.

Service recovery program
‡ Develop a service recovery program ‡ Encourage customers to complain ‡ Data from service failures needs to be used to reduce service problems ‡ Firm needs to allocate resources to the service recovery process.

Impact of Service Failure and Recovery
‡ Service Recovery ± Actions taken by an organization in response to a service failure. ‡ Failures occur ±
± ± ± ± Service was unavailable when it was promised It may be delivered late or too slowly The outcome may be incorrect or poorly executed Employees may be rude or uncaring

Resolving customer problems effectively
‡ Has a strong impact on
± Customer satisfaction ± Loyalty ± Bottom-line performance

Recovery Paradox
‡ Companies should plan to disappoint customers so that they can recover and gain even greater loyalty from them as a result. ‡ More complex than it may seem ±
± It is expensive to fix mistakes ± It is absurd to encourage service failures ± Only under very highest levels of customers¶ service recovery ratings increased satisfaction and loyalty was observed.

Recovery Paradox

Customer Complaint Actions Following Service Failure

Types of Complainers
‡ Passives
± Gp of customers least likely to take any action

‡ Voicers
± Actively complain to the service providers, but are less likely to spread negative WOM and third party complaining.

‡ Irates
± Likely to engage in negative WOM and switch providers. Less active in complaining to provider and unlikely to complain to third-party.

‡ Activists
± Above avg. tendency to complain on all dimensions

When they complain what do customers expect?
‡ Customers expect fair treatment
± Outcome fairness ± Procedural fairness ± Interactional fairness

Outcome fairness
‡ Outcomes or compensation, that match the level of their dissatisfaction.
± ± ± ± ± ± Actual monetary compensation An apology Future free services Reduced charges Repairs Replacements

Procedural fairness
‡ Along with fair compensation, customers expect fairness in terms of policies, rules and timeliness of complaint process.
± ± ± ± Easy access to complaint process Things to be handled quickly First-contact person solvable Adaptability in procedures

Interaction fairness
‡ Customers expect to be treated
± Politely ± With care and ± Honesty

Service Recovery Strategies
‡ ‡ ‡ ‡ ‡ ‡ ‡ Welcome and Encourage Complaints Act Quickly Treat Customers Fairly Learn from Recovery Experiences Learn from Lost Customers Fail Safe the Service

Causes Behind Service Switching
Pricing ‡ High Price ‡ Price Increases ‡ Unfair Pricing ‡ Deceptive Pricing Inconvenience ‡ Location/Hours ‡ Wait for Appointment ‡ Wait for Service Core Service Failure ‡ Service Mistakes ‡ Billing Errors ‡ Service Catastrophe Service Encounter Failures ‡ Uncaring ‡ Impolite ‡ Unresponsive ‡ Unknowledgeable Response to Service Failure ‡ Negative Response ‡ No Response ‡ Reluctant Response Competition ‡ Found Better Service Ethical Problems ‡ Cheat ‡ Hard Sell ‡ Unsafe ‡ Conflict of Interest Involuntary Switching ‡ Customer Moved ‡ Provider Closed

Service Switching Behavior

Source: Sue Keaveney, ³Customer Switching Behavior in Service Industries: An Exploratory Study,´ Journal of Marketing, April, 1995, pp. 71-82.

Service Guarantees
‡ 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?)

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, ³The Power of Unconditional Guarantees,´ Harvard Business Review, July-August, 1988, pp. 54-62.

Service Guarantees
‡ 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

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 ‡ ³It¶s the icing on the cake, not the cake´

S e eG u rvic arante e
B uines327± S e e M arke s s rvic s ting D r. D w ayneD . G re le I ns c r m r, tru to F all S e ete 1 m s r 999
If you are dissatisfied with the instructor¶s performance you are entitled to receive your money back.

-- T e s-rm
1. The student must be a ³good customer´ and not abuse the product. 2. This guarantee covers the instructor's performance. The instructor is not responsible for occurrences outside his control. Such events include, but are not limited to, udent illness, personal emergencies, or financial hardship that st may require the student to withdraw from the class or the university. Likewise, the activities of other students are not guaranteed. 3. This guarantee does not apply to the studen satisfaction with his/her final course grade. t¶s 4. A student invoking the guarantee will receive his/her earned grade and credit for the course. 5. The guarantee may be invoked by submitting, in person, a written request to the instructor or to Randall Byers C. (Chair, Department of Business). Students who wish to remain anonymous to the instructor may do so. Offer void after February 1, 2000

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