Service Recovery & Service Guarantees

1. Service Recovery &Service Guarantees Presented By- Anubhav Sohila

2. Customer Response Categories to Service Failures

3. Types of Complainers • Passive- least likely to take any action. • Voicers- actively complain to the service provider, but are less likely to spread negative WOM, to switch patronage, or to go to third parties. • Irates- more likely toengage into negative WOM & to Switch providers. • Activists- above average propensity to complain on all dimensions.

4. Causes Behind Service Switching Service Switching Behavior

5. “ One of the surest signs of a bad or declining relationship is the absence of complaints from the customer. Nobody is ever that satisfied, especially not over an extended period of time” “ To err is human; to recover, divine”

6. Strategies to Reduce Customer Complaint Barriers

7. Guidelines for Dealing with Complaining Customers • Understand the source of the anger • Apologise • Sympathise & Empathise • Accept 100% Responsibility • Prepare to help

8. Service Recovery • The systematic efforts by a firm to correct a problem following a service failure & retain a customers goodwill. • Thus, the true test of a firms commitment to satisfaction & service quality isn’t in the advertising promises but in the way it responds when things go wrong for the customer. • It is therefore critical for firms to have effective recovery strategies because even a single service problem can destroy a customers confidence in a firm.

9. “the effort an organisation expends to win back customers goodwill once it has been lost due to service failure”- (Fisk, Grove et al 2000) “refers to actions taken by an organisation in response to some service failures” (Zeithaml & Bitner, 2003) “any situation where something has gone wrong, irrespective of responsibility” (Palmer, 2001)

10. Three Dimensions of Perceived Fairness in Service Recovery Process- Stephen Tax & Stephen Brown Complaint Handling & Service Recovery Process Procedural Justice Interactive Justice Outcome Justice Customer Satisfaction with the Service Recovery

11. Procedural Justice Policies & rules that any customer will have to go through in order to seek fairness. Customer expects the firm to assume responsibility, followed by a convenient & responsive recovery process. • Interactive Justice Behavior of firms service recovery employees towards the customers. The recovery effort must be perceived as Genuine, Honest & Polite. • Outcome Justice Compensation a customer receives as a result of the losses & inconveniences incurred because of service failure & also for the time, effort & energy spent during the entire process. Company’s punishment should fit the crime.

12. Service Recover Paradox • With a highly effective service recovery, a service failure offers a chance to achieve higher satisfaction ratings from customers than if the failure had never happened. • A good recovery can turn angry and frustrated customers into loyal customers. In fact it can create even more goodwill than if things had gone smoothly in the first place.

13. 84% 92% 46% 0% 60% 10% 20% 30% 40% 50% 70% 80% 90% 100% Impact of Effective Service Recovery on Retention No Problem Problem, but effectively resolved Problem Unresolved Customer Retention Source: IBM-Rochester study

14. Customer comes out delighted from a service recovery also depends on the severity & recoverability of the failure. • No one can replace a ruined holiday, or an injury caused by some service equipment etc; thus some studies have challenged the existence of the service recovery paradox. • The best strategy is to do it right the first time only. • “ Service recovery is turning a service failure into an opportunity you wish you never had.” • It is critical that service recovery be well executed, but failures cannot be tolerated.

15. Issues in Service Recovery Customer satisfaction • Develops into an attitude about a product, services or a firm, which in turn guides consumer behaviour, brand loyalty and WOM • Satisfaction occurs at the point where experience matches expectation. If the experience is not what’s expected, customers are likely to complain. Costs of Service Recovery • Costs to customer include monetary, psychological, emotional and costs of inconvenience. • Costs to firm include monetary, cost of lost customers, cost of negative WOM and costs associated with setting up recovery strategy.

16. Welcome & Encourage Complaints Act Quickly Fail-safe the Service Service Recovery Learn from Lost Customers Treat Customers Fairly Learn form Recovery Experiences Service Recovery Strategies

17. Components of an Effective Service Recovery System Do the Job Right the First Time Increased Satisfaction & Loyalty Effective Complaint Handling • Conduct Research • Monitor Complaints • Develop “Complaints • as opportunity” • Culture Identify Service complaints Resolve Complaints Effectively • Develop Effective • System & Training • Complaints Handling Learn from the Recovery Experience • Conduct Root-Cause • Analysis Close the loop via Feedback

18. Service Guarantees • A service guarantee is a statement that clarifies what the customers can expect from a service, and what the company will do to rectify the situation if the service does not meet expectations. • Guarantee clearly states the level at which the service should be delivered, & indicates the costs of failing to do so. • Some of these influences include learning from service failures, setting standards for service delivery for both employees and customers, serving as a competitive advantage, and increasing satisfaction and retention of customers.

19. The Power of Service Guarantees-by Christopher Hart • Focuses on what customer wants & expects in each element of service. • Sets clearly what the company stands for, to its customers & employees. • Developing system for generating customer feedback & acting on it. • Helps in understanding why they failed & encouraging them to identify & overcome potential fail points. • Builds “marketing muscle” by reducing the risk of the purchase decisions & building long-term loyalty.

20. When to use (or not use) a Guarantee • Existing service quality in the company is poor • A guarantee does not fit the company’s image • Service quality is truly uncontrollable • Potential exists for customer abuse of the guarantee • Cost of the guarantee outweigh the benefits • Customers perceive little risk in the service • Customers perceive little variability in service quality among competitors

21. Types of Service Guarantees

22. Design Service Guarantees • Service Guarantee works for companies who are already customer focused. • Effective guarantee 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 guarantee. • 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.

23. Benefits “The guarantee counts most in services” • It forces: • Provision of error free service due to promise • Focus on knowing what the customer really wants • Increases volume of customers and lifetime value to firm • Reduces risk therefore: • Encourages purchase • Positive word of mouth • Customer loyalty • Reduced price sensitivity to service • Internally: • Sets performance standards • Boosts employee performance & morale • Examination of service delivery failure points • Generates reliable data through payouts • Guards against over promises • Honest communication between firm and customer

24. How to Make Your Customers Satisfy Researchers- Chen-Hsien Lin, Cheng-Te Lin, I-Hua Lin.

25. Positive correlation exists between Customer Satisfactions & Repurchase Intentions • The purpose of the study was to investigate the relationships between hotel guests socio-demographic characteristics & perceptions of - • Service Failure • Service recovery strategies in service failure situation • Behavioral intentions, as applied to the hotel industry in Orlando, Florida, U.S.A. • Several statistical measures, like frequency distribution, reliability estimates, correlation analysis, & multiple regression analysis were used.

27. Findings showed that all dimensions of service recovery strategies were a significant explanatory variable of behavioral intentions. • Hotels should pay more attention on the length of stay of hotel guests, longer the stay more time to experience the service failure & service recovery strategies provided by the hotels. • Similar survey was also conducted in Tourism industry, retail banking along with hospitality.

28. As Businesses typically lose 50% of their customer base every 5yrs, & the cost of gaining new customers is approx 5 times that of retaining present ones. • Service failure can be identified through customers & service providers using following causes: • An improper service provider response to a service delivery system, • An ineffective response of the service provider to customer requests, • Unwanted service provider actions, • Inappropriate customer behavior.

29. Service recovery involves those actions designed to resolve problems, alter negative attitudes of dissatisfied customers & to ultimately retain these customers. • It has two dimensions: • Technical- what customers actually obtain from the hotel as part of efforts to recovery • Functional- How this process is accomplished

30. Examples

31. We'll do whatever it takes to make our guests feel welcome, relaxed, and completely comfortable. Achieved $11million in additional annual revenue & the highest customer retention rate in their industry . Hampton Inn We love having you here.

32. Amazon.com: Customer Service Champion • Topped BusinessWeek's 2009 annual list of customer service champs. • “If there's one reason we have done better than of our peers in the Internet space over the last six years, it is because we have focused like a laser on customer experience, and that really does matter, I think, in any business. It certainly matters online, where word of mouth is so very, very powerful.“ - Jeffrey P. Bezos, founder and CEO of Amazon.com.

33. Singapore Airlines • SIA continues to get service quality right. They have consistently been one of the most profitable airlines in the world. • SIA strive to maintain consistency in service excellence that meets the needs of every customer (maintaining the difficult balance between standardisation and customisation); • a simultaneous focus on service excellence and costs/profits, pushed right out to the front line staff.

34. Travelocity Book with confidence knowing that you’ve gotten the best price out there. That’s because if you find a lower price online for the item you booked with us, we’ll match that lower price.Here’s how it works: • You check online rates and let us know if you find something less expensive • For hotel and vacation packages, you can notify us anytime until the day before you check in • For all other products, you must notify us within 24 hours of booking • We will refund difference in price, plus give you $50 off your future travels We look out for you all trip long with the best service guarantee in the industry. Everything about your booking will be right, or we'll work with our partners to make it right, right away. • After you book • Before you go • During your travels

35. The Ritz-Carlton • Ritz-Carlton, begins each day with a “lineup.” During lineup, the employees review guest experiences, resolve issues, and discuss ways to improve service & this is not done in isolation. Employees of all chains will hear about these stories, too. They call it telling “wow stories.” • Here’s one excellent customer-service story: • One family staying at the Ritz-Carlton, Bali, had carried specialized eggs and milk for their son who suffered from food allergies. Upon arrival, they saw that the eggs had broken and the milk had soured. The Ritz-Carlton manager and dining staff searched the town but could not find the appropriate items. But the executive chef at this particular resort remembered a store in Singapore that sold them. He contacted his mother-in-law, and asked that she buy the products and fly to Bali to deliver them, which she agreed to do. Of course the family was delighted.

36. Service Failures & Recovery StrategiesThe Restaurant Industry

37. 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. • 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

38. Out-of-stock conditions (.8%) • inadequate supply of menu items 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 Group 3 failure categories (37.2%) • inappropriate employee behavior (15.2%) • rudeness, inappropriate verbal exchanges, and poor attitudes

39. 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 • lost orders (7.5%) • situations in which the customer’s 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

40. 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%)

41. Conclusion • Service firms are unable to implement service recovery strategies if they are not informed of their shortcomings, therefore customers must be encouraged to complain. • Service recovery is the key to customer satisfaction and achieving this should be a primary goal for service organisations • Service recovery strategies play a crucial role in customer satisfaction. • Service guarantees are an incentive and a vehicle for bringing customer complaints to the organisation.

42. Hey Thanks !!