Chapter
Chapter 7-1
Service Recovery 7
The Impact of Service Failure and Recovery
How Customers Respond to Service Failures
Service Recovery Strategies: Fixing the Customer
Service Recovery Strategies: Fixing the Problem
Service Guarantees
Switching versus Staying Following Service
Recovery
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Chapter 7-2
Objectives for Chapter 7:
Service Recovery
Illustrate the importance of recovery from service failures in
keeping customers and building loyalty.
Discuss the nature of consumer complaints and why people do
and do not complain.
Provide evidence of what customers expect and the kind of
responses they want when they do complain.
Present strategies for effective service recovery, including ways
to “fix the customer” after a service failure and to “fix the
problem.”
Discuss service guarantees—what they are, the benefits of
guarantees, and when to use them—as a particular type of
service recovery strategy.
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Chapter 7-3
Reliability is Critical in Service but…
In all service contexts, service failure is inevitable.
Service failure occurs when service performance
that falls below a customer’s expectations in such
a way that leads to customer dissatisfaction.
Service recovery refers to the actions taken by a
firm in response to service failure to improve the
situation for the customer.
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Chapter 7-4
Complaining Customers: The Tip of the
Iceberg (Figure 7.1)
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Chapter 7-5
Unhappy Customers’ Repurchase
Intentions
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Chapter 7-6
The Internet Spreads the Story of
Poor Service Recovery (Exhibit 7.1)
© 2009 Big Break Enterprises/Dave Carroll
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Chapter 7-7
The Service Recovery Paradox
(Exhibit 7.2)
Is a customer who has experienced a service
failure and exemplary service recovery more likely
to be more satisfied – impressed even – with the
service provider?
Should a firm “screw up” just a little so that it can
“fix the problem” superbly?
What are the problems with such an approach?
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Chapter 7-8
Customer Complaint Actions Following
Service Failure (Figure 7.3)
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Chapter 7-9
Types of Complainers
Passives: least likely to take any action, say
anything to the provider, spread negative WOM, or
complain to a third party; doubtful of the
effectiveness of complaining
Voicers: actively complain to the provider, but not
likely to spread negative WOM; believe in the
positive consequences of complaining - the service
provider’s best friends!
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Chapter 7-10
Types of Complainers
Irates: more likely to engage in negative WOM to
friends and relatives and to switch providers;
average in complaints to provider; unlikely to
complain to third parties; more angry, less likely to
give provider a second chance
Activists: above average propensity to complain
on all levels; more likely to complain to a third
party; feel most alienated from the marketplace
compared to other groups; in extreme cases can
become “terrorists”
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Chapter 7-11
Service Recovery Strategies
(Figure 7.4)
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Chapter 7-12
Fixing the Customer
When customers take the time to complain,
they generally have high expectations.
They expect the company to respond quickly
and to be accountable.
They expect to be compensated for their grief
and for the hassle of being inconvenienced.
They expect to be treated nicely in the process!
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Chapter 7-13
Respond Quickly
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Chapter 7-14
Provide Appropriate Communication
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Chapter 7-15
Top 12 Remedies Customers Seek
(Table 7.1)
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Chapter 7-16
Treat Customers Fairly
Outcome fairness
Outcome (compensation) should match the customer’s level of
dissatisfaction; equality with what other customers receive; choices
Procedural fairness
Fairness in terms of policies, rules, timeliness of the complaint
process; clarity, speed, no hassles; also choices: “What can we do
to compensate you…?”
Interactional fairness
Politeness, care, and honesty on the part of the company and its
employees; rude behavior on the part of employees may be due to
lack of training and empowerment
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Chapter 7-17
Fixing the Problem
After “fixing the customer” the company should
address the actual problem that created the poor
service delivery in the first place.
If the problem is likely to recur for other customers,
then the service delivery process may need to be
fixed, too.
Strategies for fixing the problem include:
encouraging and tracking complaints
learning from recovery experiences and from lost
customers
making the service fail-safe
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Chapter 7-18
Service Guarantees
In a business context, a guarantee is a pledge or
assurance that a product offered by a firm will perform as
promised and, if not, then some form of reparation will be
undertaken by the firm
For tangible products, a guarantee is 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?)
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Chapter 7-19
Characteristics of an Effective
Service Guarantee
Limited Restrictions and Exclusions
The guarantee should make its promise free of “if, and or but”
conditions or exclusions associated with many legal documents.
Meaningful
The firm should guarantee elements of the service that are
important to the customer
The payout should cover fully the customer’s dissatisfaction
Easy to Understand
Customers need to understand what to expect
Employees need to understand what to do
Easy to Invoke
The firm should eliminate hoops or red tape in the way of accessing
or collecting on the guarantee
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Chapter 7-20
The Hampton Inn Service Guarantee
(Figure 7.6)
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Chapter 7-21
Benefits of Service Guarantees
A good guarantee forces the company to focus on its
customers.
An effective guarantee sets clear standards for the
organization.
A good guarantee generates immediate and relevant
feedback from customers.
When the guarantee is invoked there is an instant
opportunity to recover.
Information generated through the guarantee can be
tracked and integrated into continuous improvement efforts.
A service guarantee reduces customers’ sense of risk and
builds confidence in the organization.
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Chapter 7-22
When to Use (or Not Use) a Guarantee
Reasons companies might NOT want to
offer a service guarantee:
Existing service quality is poor
A guarantee does not fit the company’s image
Service quality is truly uncontrollable
Potential exists for customer abuse of the
guarantee
Costs of the guarantee outweigh the benefits
Customers perceive little risk in the service
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Chapter 7-23
Causes Behind Service Switching
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