Complaint Handling and
Service Recovery
Think of a time when, as a customer, you had
a particularly satisfying (or dissatisfying)
interaction with service provider.
• When did the incident happen?
• What specific circumstances led up to this
situation?
• Exactly what did the employee (or firm) say or do?
• What resulted that made you feel the interaction
was satisfying or (or dissatisfying)?
• What could or should have been done differently?
Complaints
• Customers have a low
propensity to complain.
• Only about 4 % of
customers with problems
report those problems as
complaints.
• It is not important whether
or not a service failure
actually occurred, but
rather, if it was perceived
by the customer to have
occurred.
Impact of Service Failure
The average
customer who
experiences a
service failure
tells nine or ten
others about the
failure.
Customer Response
Following Service Failure
Service Failure
Take Action
Do Nothing
Switch Providers
Complain to
Provider
Complain to
Family & Friends
Switch Providers
Complain to
Third Party
Stay with Provider
Stay with Provider
Entry Points for Complaints
• 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
– consumer advocates
– trade organizations
– legislative agencies
– other customers
Components of an
Effective Service Recovery System
Do the Job Right
the First Time
Effective Complaint
Handling
Identify Service
Complaints
-Conduct Research
-Monitor Complaints
-Develop Complaints as
Opportunity Culture
Resolve Complaints
Effectively
Develop Effective
Systems and Training
in Complaints Handling
Learn from
Recovery
Feedback
Increased Satisfaction
and Loyalty
Conduct Root Cause
Analysis
Act
Quickly
Service Recovery Strategies
Fail-safe
the Service
Service
Recovery
Strategies
Treat Customers
Fairly
Learn from Recovery
Experiences
Pricing
•
•
•
•
High Price
Price Increases
Unfair Pricing
Deceptive Pricing
Inconvenience
• Location/Hours
• Wait for Appointment
• Wait for Service
Causes Behind
Service Switching
Core Service Failure
• Service Mistakes
• Billing Errors
• Service Catastrophe
Service Encounter Failures
•
•
•
•
Uncaring
Impolite
Unresponsive
Unknowledgeable
Response to Service Failure
• Negative Response
• No Response
• Reluctant Response
Service
Switching
Behavior
Competition
• Found Better Service
Ethical Problems
•
•
•
•
Cheat
Hard Sell
Unsafe
Conflict of Interest
Involuntary Switching
• Customer Moved
• Provider Closed
Source: Sue Keaveney
Unhappy Customers’ Repurchase Intentions
Unhappy Customers Who Don’t Complain
9%
Unhappy Customers Who Do Complain
Complaints Not Resolved
Complaints Resolved
19%
54%
82%
Complaints Resolved Quickly
Percent of customers who will buy again
after a major complaint (over $100 in
losses)
Source: Adapted from data reported by the Technical Assistance Research Program.
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 Guarantees Help Promote
and Achieve Service Loyalty
• Force firms to focus on what
customers want
• Set clear standards
• Compensation highlights
cost of service failures
• Require systems to get, act
on, customer feedback
• Reduce risks of purchase
and build loyalty
• Builds “marketing muscle”
Characteristics of an
Effective Service Guarantee
Unconditional
 The guarantee should make its promise unconditionally - no
strings attached.
Meaningful
 It should guarantee elements of the service that are important
to the customer.
 The payout should cover fully the customer's dissatisfaction.
Easy to Understand and Communicate
 For customers - they need to understand what to expect.
 For employees - they need to understand what to do.
Easy to Invoke and Collect
 There should not be a lot of hoops or red tape in the way of
accessing or collecting on the guarantee.
Reasons companies
do NOT offer guarantees:
Reasons companies do NOT offer
guarantees:
– too many uncontrollable external variables
– fears of cheating by customers
– costs of the guarantee are too high
Over-compensating concerns?
• Service providers should probably
be more concerned about
under-compensating
complaining customers
than over-compensating them.
• Track the customers who are given
compensation for reported complaints.
Service Guarantees
• service guarantees work for companies who are
already customer-focused
• effective guarantees can be BIG deals - they put
the company at risk in the eyes of the customer
• customers should be involved in the design of
service guarantees
• the guarantee should be so stunning that it comes
as a surprise -- a WOW!! factor
• “it’s the icing on the cake, not the cake”
Recovery
• Service providers need
to decide on policy for
service recovery.
• Will all customers with a
particular type of
problem be given the
same service recovery?
Recovery
Do
•
•
•
•
•
•
Acknowledge problem
Apologize
Take responsibility
Explain causes
Lay out options
Compensate/
upgrade
Don’t
• Ignore customer
• Blame customer
• Leave customer
to “fend for
him/herself”
• Downgrade
• Act as if nothing
is wrong
• Pass the buck
Early Communication
Early Recovery
• The service company must
decide when and how to
appropriately open communication
with customers in the service process.
• Communication with the customer throughout the
service delivery process can decrease the magnitude
and expense of service failures
• Failure to communicate early in the service process
can allow small customer concerns to grow into large
problems.
• If complaints are resolved in a timely manner, 95% of
the time the customer will return.
Ways to Increase
Customer Communication
• Actively solicit
feedback.
• Offer a channel of
communication that
is open to
customers through
the service process.
Retaining Customers
When Things Go Wrong
• Track and anticipate recovery opportunitiesThe customer who complains is your friend?
• Take care of customer problems on the front
line.
• Solve problems quickly.
• Empower the front line to solve
problems.
• Learn from service recovery.
Effective Recovery Skills
•
•
•
•
Hear the customer’s problems.
Improvise
Bend the rules from time-to-time
Employees must have the
authority, usually within certain
defined limits, to solve the
customer’s immediate problem.
When service customers
have been disappointed on
the first try,
doing it right the
second time is
essential to
maintaining customer
loyalty
OOPS!
Service Recovery
Discussion
Develop guidelines for an effective
complaint handling policy for a service
organization in the industry you selected
to study this session.
Summary of Guidelines for
Effective Problem Resolution
• Act fast
• Give benefit of doubt
• Admit mistakes but
don’t be defensive
• Clarify steps to solve
problem
• Understand problem
from customer’s
viewpoint
• Keep customers
informed of progress
• Don’t argue
• Consider
compensation
• Acknowledge
customer’s feelings
• Persevere to regain
goodwill