Measuring the Effectiveness of
Customer Service –
Service Recovery
Chapter 9
Cost of Failure

Average company will lose half its customers every five
years

It can cost five times more to buy new customers than
retain existing ones.

The average customer with a poor experience will tell 11
people. They will talk about it for twenty three years

13% of customers with an unresolved complaint will tell
more than 20 people.

As many as 90% of complainers will return to your business
if their complaint is resolved.

For every complaint received, the average company has 26
unhappy customers who never complain.
Source: TARP Data - Technical Assistance Research Programs
Benefits of Recovery

Reducing customer defections (when a
customer does not return) can boost profits by
25-85%.

In 73% of cases, the organization made no
attempt to persuade dissatisfied customers to
stay; even though 35% said that a simple
apology would have prevented them from
moving to the competition.

Source: NOP London based market research organization
Cost of Failure - Relationships
and Loyalty

Keep in mind that the seriousness of the matter is
important. The more serious the failure, the more likely
the customer is to switch to another company, no matter
what recovery effort the company makes.

A strong employee-customer relationship can have a
mediating effect on satisfaction and thus on the intention
to stay or defect.

The perception of the customer is the reality!
Customer retention
requires managers and staff to
have:
 Positive
attitude toward problem solving
 Seeing complaints as opportunities to create stronger
loyalty

But not necessarily a “customer is always right” mentality
because…..(see next slide)
The Key issue in customer
disputes is…
 NOT
 How
who is right or wrong, but rather
all parties can cooperate to solve the
customer’s concerns
Key skills in recovery
 Feel
the customer’s pain (empathize)
 Do all that is possible to resolve the problem
 Offer “symbolic atonement”-something extra to
appease the customer. Examples at the bottom of
pg 135.
ATTITUDE is critical
 Abrasiveness
is counterproductive
 Assertiveness is better for problem resolution

“assertive” means being pleasantly direct
Getting It Right
The First Time:
Reducing The Frequency
And Impact Of Failures

Leadership in maintaining strong customer focus
 Feedback/complaint management
 Continuous improvement
 Benchmarks-for example, if customers have been complaining
about long wait times to be seated set a goal related to that.
Would your business want 80% of the customers to be happy with
their seating? 90%? More? Would there be a different kind of
benchmark that could be set?
 Service guarantees-could they be guaranteed seating within 10
minutes or they get a free meal? What are other ideas?
Failures Do Happen…

No matter how rigorous the procedures and
employee training are, or how advanced the
technology, zero defects is an unattainable goal.

Plan for your failures and learn from them.
Planning and learning are the cornerstones of
Service Recovery…

99.9% is Good Enough
So what is Service Recovery?


It is the actions the company takes in
response to service failure.
It should be a management philosophy that
holds customer satisfaction as a primary
concern. And not only to satisfy our
customers, but to WOW them.
The Service Recovery Paradox

A service recovery that exceeds expectations
results in higher customer satisfaction than the
satisfaction level of customers who never report a
failure.
To Build an Effective and
Proactive Recovery System:







Measure costs of effective service recovery
Break customer silence
Anticipate needs for recovery
Act fast
Train employees
Empower the front line
Close the customer feedback loop
Figure 7.3
Empowerment–Service Recovery Relationship
Key ingredients to effective service
recovery:
 Acknowledge
the problem or failure
 Explain the reason(s) for the failure when possible
 Empathize, with a sincere expression of feeling for the
customer’s inconvenience
 Apologize if needed by using the customer’s name and being
specific about what he/she is complaining about
 Solve the problem as quickly as possible-speed is crucial
 Compensate the customer appropriately
 Thank the customer
 Provide extra value
 Follow-up
How to Handle Irate
Customers
 Sample
customer service video
Ways to Strengthen Service
OrientationInternal Customer

Employees should never complain




within earshot of customers
to customers about other employees
Employees should strive to build bridges between
departments.
Let employees become “customers” for a day. Meet
afterwards and learn what they discovered so that
everyone can learn from the experience.
Metrics
We have to measure first to see how we’re doing and
then improve upon that. We use “metrics” and
“benchmarking” for this.
What Are Metrics?
Metrics are a collection of tools used for
benchmarking (or setting the standard) for:



Organizational performance
Divisional performance
Personal performance over a period of time
What are some examples of metrics?
If you need data, it can be
obtained from




internal or external sources (customers or
employees)
primary or secondary sources (inside or outside
your business)
Using qualitative or quantitative measures
Or combining different types of data