Achieving Service Recovery and
Obtaining Customer Feedback
Lovelock: Chapter 13

Introduction
Service Recovery occurs when an organization or service
provider is able to solve a customer problem, make
restitution, and regain trust following a breakdown in service
delivery.
Service Breakdowns happen whenever the product or service
delivered fails to meet customer expectations.

Service Breakdowns
Product or service failed
Promise not kept
Deadline missed
Service not adequate
Provider lacks knowledge or skills
Customer inconvenienced
Customer gets runaround
Unprofessional treatment

Causes of Breakdowns (Organizational Factors)
Human resources
Organization and structure
Processes and procedures
Product and service design and delivery
Internal communications
Technological support systems
Standards

Causes of Breakdowns (Employee Factors)
Communication skills
Knowledge
Attitude
Technical skills

Causes of Breakdown (Customer Factor)
Failure to use information correctly
Failure to follow through

Defining Service Delivery
Service recovery has been defined by many authors as :
“the effort an organization 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 organization in response to some
service failures” (Zeithaml & Bitner, 2003)
“any situation where something has gone wrong, irrespective of
responsibility” (Palmer, 2001)

History of Service Recovery
1970’s and 1980’s service recovery was the plan for dealing with
telecommunications problems or recovering particular services.
Companies adopted systems that produced ‘zero defects’, to
produce a high quality service and a cost effective production
line approach.
In the late 1970s marketers began to recognize the importance
of service recovery for different areas of business and specific
service problems.
However the idea of zero defects in services is simply an
unattainable goal.
Use of the word ‘recovery’ originated from British Airways
‘Putting the Customer First Campaign’ in the late 1990s

Issues in Service Recovery
The role of service recovery in the event of a service failure is
recognized as “doing the service very right the second time”
(Brown, Cowles et al. 1996).
In order to understand service recovery, it is necessary to
understand how the customer experiences the service and the
impact of the service encounter on customer satisfaction.
Effective service recovery can improve the image of the firm and
reduce perceived risk to the customer.

Issues in Service Recovery
Customer satisfaction
Develops into an attitude about a product, services or a firm, which
in turn guides consumer behavior, 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.

Customer Response Following Service Failure
Service Failure
Take Action Do Nothing
Switch Provider Stay with Provider
Complain to Complain to Complain to Third
Provider Family & Friends Party
Switch Provider Stay with Provider

Customer Complaint Behavior
Propensity for customers not to complain
Complaints often don’t identify the root of the problem
Complaints often don’t reach management.
Satisfying complaining customers can increase brand loyalty
Increase in ease of access to firms can increase complaints
Likelihood of complaining is directly related to the severity of the
problem
Complainers tend to be the heaviest users of the service
Dissatisfied customers spread negative WOM.

Understanding Customer Responses to Service Failure
Why do customers complain?
To obtain restitution or compensation
To vent their anger
To help to improve the service
For altruistic reasons

Customer Responses to Effective Service Recovery
Customers who complain give the firms a chance to correct
problems, restore relationships with the complainer, and
improve future satisfaction.
Customer complaint iceberg

Impact of Effective Service Recovery on Customer Loyalty
When complaints are resolved, there is a much higher chance
that the customers involved with remain loyal.
TARP research found that:
For a major complaint, if the company lent a patient ear, but could
not solve the problems, even then the retention rate increased from
9% to 19%.
If the complaint was solved satisfactorily, this retention rate jumped
to 54%.
When the problem was solved on the spot, the same rate
skyrocketed to 82%.
Complaint handling - a profit center and not a cost center

Service Recovery Paradox

Service Recovery and Strategy
Recovery must be considered as part of the overall strategy for
identifying and responding to customers expectations, while at
the same time empowering staff and providing a platform for
maintaining long-term relationships with customers.
Recognizing that current customers are a valuable asset
base, managers need to develop effective procedures for service
recovery following unsatisfactory experiences.

Service Recovery Strategies
Service
Recovery
Strategies

Service Guarantees

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?)

Service Guarantee
A large number of firms offer customers a service guarantee –
promising that if service delivery fails to meet predefined
standards, the customer will be entitled to one or more forms of
compensation, such as an easy-to-claim replacement, refund or
credit.
Some firms put conditions on these guarantees, while others
offer them unconditionally.

Service Guarantee defined
“Customers value reliability over all other dimensions”
Statement explaining the service the customer may expect (the
promise) and what the company will do if it fails to deliver (the
payout).
Promise of consistency compared to other services
Cover customer costs
Repeat business
Assure customers subsequent service will be higher quality =>
change attitudes

Designing Service Guarantees
Hart mentions that service guarantees should meet the following
criteria:
Unconditional
Easy to understand and communicate
Meaningful to the customer
Easy to invoke
Easy to collect
Credible

Learning from Customer Feedback

Learning from Customer Feedback
As Darwin had said:
“it is not the strongest species that survive, nor the most
intelligent, but the ones most responsive to changes”
We need to learn and change in order to survive in this cut-
throat competitive world.

Customer Feedback Systems
Specific objectives of effective customer feedback systems
usually fall into the 3 main categories:
Assessment and benchmarking of service quality and performance
How satisfied are our customers?
Customer-driven learning and improvements
What makes our customers happy or unhappy?
Creating a customer-oriented service culture
Focusing the organization on customer needs and customer
satisfaction, and rallying the entire organization towards a service
quality culture

Using Customer Feedback Collection Tools
Total market surveys, Annual surveys
Tells us how satisfied customers are, but not why they are happy or
unhappy
Transactional surveys
More in-depth, and more detailed – gives us more actionable
feedback
Service feedback cards
Customers fill them out after completion of a particular service
process

Using Customer Feedback Collection Tools
Mystery Shopping
Determine whether front-line staff are displaying desired behaviors
Unsolicited customer feedback
Detailed customer complaint and compliment letters, recorded
phone conversations, direct feedback from employees, etc.
Focus group discussions and service reviews
FGDs and service reviews give great specific insights on potential
service improvements and ideas.

Prevention Strategies
Think like a customer
Pamper customers
Respect customers
Focus customers
Exceed expectations

Roadblocks to Service Recovery
Not listening
Lack of respect
Poor/inadequate communication
Inadequate or outdated materials/ equipment
Lack of training
Work conflicts

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

Customer Classification
Companies realize that they cannot make everybody
happy, every time.
They might decide to classify the customers, and concentrate on
a particular group that is most beneficial for the company.
Short-term customers Long-term customers
Profitable Butterflies True Friends
Unprofitable Strangers Barnacles

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 organizations
Service recovery strategies play a crucial role in customer
satisfaction
Service guarantees are an incentive and a vehicle for bringing
customer complaints to the organization.