The document discusses customer feedback and service recovery, including why customers complain, how to resolve complaints effectively, strategies to reduce barriers to customer complaints, and tools for building an effective customer feedback system including surveys, focus groups, and unsolicited feedback entry points. It also examines dimensions of fairness in the service recovery process and how effective recovery impacts customer retention.

1. Chapter 13
Customer Feedback and
Service Recovery

2. American Customer Satisfaction Index:
Selected Industry Scores, 2002
Score 100
(Max = 100)
90 85
79 80 79
80 74 76
71 71 70
70 66 65 62
60
50
40
30
20
10
% Change 0
3.7% 1.3% 0.0% 1.3% 2.8% 0.0% 0.0% 8.2% 2.9% -2.6% 4.8% 3.3%
2002 vs 2001
Industry:

3. Key Questions for Managers to Ask
about Customer Complaining Behavior
• Why do customers complain?
• What proportion of unhappy customers
complain?
• Why don’t unhappy customers complain?
• Who is most likely to complain?
• Where do customers complain?

4. Courses of Action Open to a
Dissatisfied Customer (Figure 13.1)
Complain to the
service firm
Take some form of Complain to a third
public action party
Take legal action to
Service Encounter is Take some form of
seek redress
Dissatisfactory private action
Defect (switch
provider)
Take no action
Negative word-of-
mouth
Any one or a combination of these
responses is possible

5. Dimensions of Perceived Fairness in
Service Recovery Process (Figure 13.2)
Complaint Handling & Service Recovery
Process
Justice Dimensions of the Service Recovery Process
Interactive Outcome
Procedural Justice
Justice Justice
Customer Satisfaction with the
Service Recovery
Source: Tax and Brown

6. Proportion of Unhappy Customers
Who Buy Again Depending on the
Complaint Process
100 95%
90 82%
80 70%
70
60 54%
46%
50
37%
40
30 19%
20 9%
10
0
Customer did not Complaint was Complaint Complaint was
complain not resolved was resolved resolved quickly
Problem cost > $100 Problem cost $1 - 5
Source: TARP study

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

8. Components of an Effective Service
Recovery System (Figure 13.3)
Do the Job Right the Effective Complaint Increased Satisfaction
Do the Job Right the
First Time
First Time + Effective Complaint
Handling
Handling = Increased Satisfaction
and Loyalty
and Loyalty
 Conduct Research
 Conduct Research
Identify Service  Monitor Complaints
 Monitor Complaints
Identify Service
Complaints
Complaints  Develop “Complaints
 Develop “Complaints
as Opportunity”
as Opportunity”
Culture
Culture
Resolve Complaints
Resolve Complaints  Develop Effective
Effectively  Develop Effective
Effectively System and Training in
System and Training in
Complaints Handling
Complaints Handling
Learn from the
Learn from the  Conduct Root Cause
 Conduct Root Cause
Recovery Experience
Recovery Experience Analysis
Analysis
Close the Loop via Feedback

9. Strategies to Reduce Customer
Complaint Barriers (Table 13.1)
Complaint Barriers for Strategies to Reduce These Barriers
Dissatisfied Customers
Inconvenience Make feedback easy and convenient by:
 Difficult to find the right complaint  Printing Customer Service Hotline
procedure. numbers, e-mail and postal addresses on
 Effort, e.g., writing a letter. all customer communications materials.
Doubtful Pay Off Reassure customers that their feedback will
 Uncertain whether any action, and be taken seriously and will pay off by:
what action will be taken by the  Having service recovery procedures in
firm to address the issue the place, and communicating this to
customer is unhappy with. customers.
 Featuring service improvements that
resulted from customer feedback.
Unpleasantness Make providing feedback a positive
 Complaining customers fear that experience:
they may be treated rudely,  Thank customers for their feedback.
 may have to hassle, or  Train the frontline not to hassle and make
 may feel embarrassed to complain. customers feel comfortable.
 Allow for anonymous feedback.

10. How to Enable Effective Service
Recovery
• Be proactive—on the spot, before customers
complain
• Plan recovery procedures
• Teach recovery skills to relevant personnel
• Empower personnel to use judgment and skills to
develop recovery solutions

11. Guidelines for Effective
Problem Resolution (Management Memo 13.1)
 Act fast  Give benefit of doubt
 Admit mistakes but don’t be  Clarify steps to solve problem
defensive  Keep customers informed of
 Understand problem from progress
customer’s viewpoint  Consider compensation
 Don’t argue  Persevere to regain goodwill
 Acknowledge customer’s
feelings

12. Service Guarantees Help Promote
and Achieve Service Loyalty
 Force firms to focus on what
customers want
 Set clear standards
 Highlights cost of service
failures
 Require systems to get & act
on, customer feedback
 Reduce risks of purchase and
build loyalty

13. Types of Service Guarantees
• Single attribute-specific guarantee – one key
service attribute is covered
• Multiattribute-specific guarantee – a few
important service attributes are covered
• Full-satisfaction guarantee – all service aspects
covered with no exceptions
• Combined guarantee – like the full-
satisfaction, adding explicit minimum
performance standards on important attributes

14. The Hampton Inn 100%
Satisfaction Guarantee (Figure 13.4)
• What are the benefits of such a
guarantee?
• Are there any downsides?

15. Key Objectives of Effective
Customer Feedback Systems
• Assessment and benchmarking of service quality and
performance
• Customer-driven learning and improvements
• Creating a customer-oriented service culture

16. Building a Customer Feedback
System
• Total market surveys
• Post-transaction
surveys
• Ongoing customer
surveys
• Customer advisory
panels
• Employee
surveys/panels

17. Strengths and Weakness of Key Customer Feedback Collection
Tools (Table 13.3)
Selection of a cocktail of effective customer feedback collection tools.
Multi-level Measurement Represen- Potential for
Action- First Hand Cost
Collection Tools Service Process Specific able
tative, Reli Service
Learning Effective
Satisfaction Satisfaction Feedback able Recovery
Total Market Survey (inclu.
competitors)
Annual Survey on overall
satisfaction
Transactional Survey (process
specific)
Service Feedback Cards (process
specific)
Mystery Shopping
(service testers)
Unsolicited Feedback Recd
(Online feedback system)
Focus Group Discussions
Service Reviews
Meets Requirements: Fully Moderate Little/Not at all

18. Entry Points for Unsolicited
Feedback
• Employees serving customers face-to-face or
by phone
• Intermediaries acting for original supplier
• Managers contacted by customers at
head/regional office
• Complaint cards mailed or placed in special box
• Complaints passed to company by third-party
recipients