Services Marketing CHAPTER – 5 Service Encounters, Service Failure and Recovery Service Recovery Strategies Most companies have to learn the importance of excellent service recovery for disappointed customers and practice them. This in reality is a combination of several different strategies that need to work together, as given below in the presentation

1. CHAPTER – 5
SERVICE ENCOUNTERS,
SERVICE FAILURE AND
RECOVERY
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2. Service Recovery Strategies
 Most companies have to learn the importance of
excellent service recovery for disappointed
customers and practice them.
 This in reality is a combination of several
different strategies that need to work together,
as given below :
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3. Make Services Failsafe –
Do it Right for the First Time
 The first rule of the service quality is to do it
right the very first time. Thus, in one go several
objectives can be achieved :
(1) service recovery is saved,
(2) the customers get what they expect,
(3) compensating for the errors can be avoided,
and
(4) cost of repetition is saved. So it’s the most
important dimension of service quality.
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4. Do it Right for the First Time
 It’s important for a firm to create a culture of
zero defect to ensure doing it right the first time.
 Within this culture every one understands the
importance of reliability, and the relationship
value of a customer.
 The managers and the employees aim to satisfy
every customer and look for the ways to improve
the service.
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5. Encourage Complaints
and Track Them
 A critical component for the service recovery is
to encourage complaints and document them.
Firms can use a no. of ways to achieve the above
goal.
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6. Customer Research
Customer research is very useful here, like :
 survey,
 critical incidents study,
 lost customer research, etc.
In addition to these, now-a-days, these are also
used:
 e-mail,
 toll-free no.,
 software applications for sorting and analysis
of complaints, etc.
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7. Act Quickly
 Customers want a quick response in case of a
complaint.
 If a firm welcomes or even encourages
complains, then it must be prepared for quick
response.
 It needs a system, procedures, and also ever
ready employees.
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8. Take Care of Problems on the
Frontline
 Normally, customers want the person who hears
their complaints should resolve it whether it’s
registered in person, over phone or via the
internet.
 So firms fix their responsibilities of resolving as
binding on them.
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9. Empower Employees
 Employees must be trained and empowered
to solve problems as they occur.
 A problem if not solved can quickly escalate
leading to undesirable extreme or drastic
action.
 Some times employees can anticipate the
problems and take care to solve immediately.
 Service employees have a specific and real
need for necessary service recovery
training.
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10. Recovery Then & There
 Customers want the recovery to be then and
there, and this calls for the employees to have
skills and authority, and motivation and
incentives for effective recovery.
 These include :
 (1) hearing customers’ problems,
 (2) taking initiative,
 (3) identifying solutions,
 (4) improving, and
 (5) bending the rules for time to time.
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11. Allow Customers to Solve their own
Problems
 Another way to handle the customer problems is
to allow the customers themselves to solve their
problems thro’ a built-in system.
 This can be done best by technology, where the
customers directly access the company’s
systems. This gives quick answers, information
etc. to the customers.
 Ex., a courier tracking system, the IRCTC ticket
booking and ticket tracking system.
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12. Provide Adequate Explanations
 In many cases of service failures, customers try
to understand why the failure occurred.
 Research shows that if a service recovery is not
successful, giving adequate explanation can
substantially reduce further dissatisfaction.
 For an explanation to be adequate, it must have
two qualities :
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13. Provide Adequate Explanations
 The content must be appropriate – supported by
relevant facts, figures, and sufficient
information.
 The delivery must be appropriate – how the
explanation is delivered, the style of delivery
etc.
 Style includes : honesty, sincerity, credibility,
knowledgeability, and NOT being manipulative.
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14. Treat Customers Fairly
 In responding quickly, fairness in treating each
customer is very critical and important.
Customers expect to be treated fairly in three
counts. They are :
1. In terms of the outcome they receive,
2. The process by which the service recovery
takes place,
3. The interpersonal treatment they receive.
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15. Cultivate Relationship with Customers
 Customer relationship is the key focus area
today, and there are several benefits of it.
 One additional benefit for the service
marketer is that if the firm fails in service
delivery, those customers who have a strong
relationship with the firm are often more
forgiving, and also are more cooperative in
the firm’s service recovery effort.
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16. Cultivate Relationship with
Customers
 Researches show that the presence of rapport
between customers and employees provide
several benefits like :
 Increased post-failure satisfaction,
 Increased loyalty intentions,
 Decreased negative word-of-mouth
communication,
 Lower service recovery expectation,
 Demand less immediate compensation for a
failure.
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17. Learn from Recovery Experiences
 The problem-resolution situation is very valuable
for the improvement of service quality delivery
and future reference.
 This is a very reliable source of diagnostic,
prescriptive, information for improving customer
services.
 Managers often learn from these situations
about problem areas, system / process related
flaws, problem fixing methods.
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18. Learn from Recovery
Experiences
 Hence the term “learning from the past
experiences”.
 By conducting the root cause analysis, the firms
can identify the source of problems and modify
the process, sometimes eliminating almost
completely the need for recovery.
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19. Learn from the Lost Customers
 Some of the dissatisfied customers leave the
company and patronage another.
 Here, if the firm finds out what went wrong that
lead to such a losing proposition, then it may
work out the strategy to prevent such situations.
 This is called “learning from lost customers”.
 There are several methods in MR to discover the
reasons of leaving or defect. This kind of MR is
very difficult and painful and sometimes also
wasteful.
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20. Learn from the Lost Customers
 This type of in-depth analysis often requires
series of “why” questions, “tell us more”
questions, “what went wrong” questions, which
will bring out the actual, core and immediate
reasons for a customer’s defection.
 On the other hand while conducting this kind of
MR the focus must be on profitable customers
and not just any customer who has defected – in
this case the result will be misleading and the
whole MR process may be a wasteful
expenditure.
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21. Service Guarantees
 A guarantee is a specific type of recovery
system.
 A guarantee is a pledge, assurance or
commitment that a product or service
offered by a firm will perform or satisfy as
promise, and if not, some sort of
compensation will be undertaken by the firm.
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22. Service Guarantees
 In a product the performance is guaranteed,
and in services the satisfaction, the
expectation or the experience is guaranteed.
 Now, more and more companies are finding
guarantees as an excellent service recovery
strategy because of the tremendous benefits
the firms derive out of these guarantees.
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23. Benefits of Service Guarantees
 Service firms are realising that guarantees
can serve not only as a strategic marketing
tool, but also as a means to define, cultivate,
and maintain quality throughout the
organisation.
 Some of the numerous benefits are given
below :
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24. A good guarantee forces the
company to focus on its customers –
 To develop a meaningful guarantee, the firm
must know what is important to its customers,
and what they expect and value.
 In most cases the satisfaction is guaranteed.
But for the guarantee to work effectively, the
firms must understand what “satisfaction”
means to customers in terms of quality, value,
expectation, convenience, etc.
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25. An effective guarantee sets clear
standards for the firm –
 It prompts the company to define clearly what it
expects of its employees, and to communicate
this to them.
 The guarantee gives employees service oriented
goals, which can quickly orient the employees’
behaviours to customer strategies.
 (Ex., “We will make it right or give your money
back” lets the employees precisely what they
should do if a customer complains).
 It also makes it clear to the employees that
doing it right for the customers is a critical
company goal.
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26. A good guarantee generates
immediate and relevant feedback
from customers –
 It provides an incentive for the customers to
complain and thereby provides more relevant
feedback to the firm regarding their services.
 This guarantee also tells the customers that
they have the right to complain any service
failure.
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27. When the guarantee is invoked there is an
instant opportunity to recover –
 thus satisfying the customer and helping to
retain customer loyalty.
 Information generated thro’ the guarantee can
be traced and integrated into continuous or
ongoing improvement efforts.
 A feedback link between customers and service
operations decisions can be strengthened thro’
the guarantee.
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28. For customers, the guarantee
reduces their sense of risk –
 and builds confidence in the company. Because
services are intangible, and often highly
personal, or ego-involving, customers seek
information, cues, hints that will help reduce
their sense of uncertainty.
 Studies show that guarantees reduce risk and
increase positive and favourable evaluation of
the service prior to purchase.
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29. Finally, the bottom line for the company is
that an effective guarantee can affect
 profitability thro’ building customer awareness,
 loyalty thro’ positive word of mouth,
 reduction of costs thro’ service improvements,
 reduction in service expenses,
 reduce costs of employee turn over thro’
creating a more positive service culture.
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30. Thank You
END of SM Chapter – 5
© Himansu S M / 12-08-2010
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