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Customer Complaining Behavior

Customer Responses to Effective Service Recovery

Principles of Effective Service Recovery Systems

Service Guarantees

Discouraging Abusive and Opportunistic Customer Behavior

Services Marketing

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Customer Complaining Behavior

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Customer Response Categories to Service Failures

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Understanding Customer Responses to Service Failure

Why do customers complain?

Obtain compensation

Vent their anger

Help to improve the service

Altruistic reasons

What proportion of unhappy customers complain?

Why don’t unhappy customers complain?

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Understanding Customer Responses to Service Failure

Who is most likely to complain?

Where do customers complain?

What do customers expect once they have made a complaint?

Procedural, interactional, and outcome justice

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Three Dimensions of Perceived Fairness in Service Recovery

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Customer Responses to Effective Service Recovery

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Service Recovery

Service Recovery

Plays a crucial role in achieving customer satisfaction by testing a firm’s commitment to satisfaction and service quality

Impacts customer loyalty and future profitability

Severity and “recoverability” of failure (e.g., spoiled wedding photos) may limit firm’s ability to delight customer with recovery efforts

Service Recovery Paradox: Customers who experience a service failure that is satisfactorily resolved may be more likely to make future purchases than customers without problems

If second service failure occurs, the paradox disappears

Best Strategy: Do it Right the First Time

Services Marketing

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Principles of Effective

Service Recovery Systems

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Components of an Effective Service Recovery System

Do the job right the first time

Effective Complaint Handling

Identify Service Complaints

Resolve Complaints Effectively

Learn from the Recovery Experience

Increased Satisfaction and Loyalty

Conduct research

Monitor complaints

Develop “Complaints as Opportunity” culture

Develop effective system and training in complaint handling

Conduct root cause analysis

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Close the loop via feedback

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Strategies to Reduce Customer Complaint Barriers

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How to Enable Effective Service Recovery

Methods: (See Service Perspectives 13.1)

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

Rules of Thumb for Adequate Compensation:

What is positioning of our firm?

How severe was the service failure?

Who is the affected customer?

Services Marketing

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Service Guarantees

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Service Guarantees Help Promote and Achieve Service Loyalty

Force firms to focus on what customers want

Set clear standards

Highlight cost of service failures

Help firm identify and overcome fail points

Reduce the risk of purchase decision and build long-term loyalty

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How to Design Service Guarantees

Unconditional

Easy to understand and communicate

Meaningful to the customer

Easy to invoke

Easy to collect on

Credible

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Types of Service Guarantees

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Single attribute-specific guarantee

Explicit minimum performance standard on one important attribute is guaranteed (e.g., delivery by noon the next day)

Multi-attribute-specific guarantee

Explicit minimum performance standard on a few important attributes is guaranteed

Full-satisfaction guarantee

All service aspects are guaranteed to be delivered to the full satisfaction of the customer with no exceptions or conditions attached

Combined guarantee

All service aspects are guaranteed (as for full-satisfaction guarantee)

Explicit minimum performance standards on important attributes are guaranteed (as for multi-attribute-specific guarantee)

Is it Always Suitable to Introduce a Guarantee?

It may not be appropriate to introduce guarantees when

Companies have a strong reputation for service excellence

Company does not have good quality level

Quality cannot be controlled because of external forces

Consumers see little financial, personal, or physiological risk associated with the purchase

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How to handle customer complaints

Act Fast.

Acknowledge the customer’s feelings.

Don’t argue with customers.

Show that you understand the problem from each customer’s point of view.

Clarify the truth and sort out the cause.

Give customers the benefit of the doubt.

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How to handle customer complaints

Propose the steps needed to solve the problem.

Keep customers informed of progress.

Consider compensation.

Persevere to regain customer goodwill.

Check the service delivery system and pursue eminence.

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Discouraging Abusive and Opportunistic Customer Behavior

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Addressing the Challenge of Jaycustomers

Jaycustomer: A customer who behaves in a thoughtless or abusive fashion, causing problems for the firm, its employees, and other customers

More potential for mischief in service businesses, especially when many customers are present

No organization wants an ongoing relationship with an abusive customer

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Seven Types of Jaycustomers

The Cheat:

Thinks of various ways to cheat the firm

The Thief

No intention of paying — sets out to steal or pay less

Services lend themselves to clever schemes to avoid payment

e.g., bypassing electricity meters, circumventing TV cables, riding free on public transportation

Firms must take preventive actions against thieves, but make allowances for honest but absent-minded customers

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Seven Types of Jaycustomers

The Rulebreaker

Rules guide customers safely through the service encounter

Government agencies may impose rules for health and safety reasons

Some rules protect other customers from dangerous behavior

e.g., ski patrollers issue warnings to reckless skiers by attaching orange stickers on their lift tickets

Ensure company rules are necessary, should not be too much or inflexible

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Seven Types of Jaycustomers

The Belligerent

Shouts loudly, maybe mouthing insults, threats, and curses

Service personnel are often abused even when they are not to be blamed

Confrontations between customers and service employees can easily escalate

Firms should ensure employees have skills to deal with difficult situations

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Seven Types Of Jaycustomers

Family Feuders

People who get into arguments with other customers – often members of their own family

The Vandal

Service vandalism includes pouring soft drinks into bank cash machines, slashing bus seats, breaking hotel furniture

Sources: bored and drunk young people, and unhappy customers who feel mistreated by service providers take revenge

Prevention is the best cure

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Seven Types Of Jaycustomers

The Deadbeat

Customers who fail to pay (as distinct from “thieves” who never intended to pay in the first place)

Preventive action is better than cure — e.g., insisting on prepayment; asking for credit card number when order is taken

Customers may have good reasons for not paying

If the client’s problems are only temporary ones, consider long- term value of maintaining the relationship

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Consequences of Dysfunctional Customer Behavior

Employees:

Mood or temper negatively affected

Long-term psychological damage

Staff morale will fall, affecting productivity

Other Customers:

Positive – rally to support an employee who is perceived to be abused

Negative – Contagious bad behavior might escalate the situation

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Dealing with Customer Fraud

Treating all customers with suspicion is likely to alienate them

TARP found only 1-2% of customer base engages in premeditated fraud— so why treat remaining 98% of honest customers as potential crooks?

But, records need to be kept to investigate repeat claimers

Insights from research on guarantee cheating:

Amount of a guarantee payout had no effect on customer cheating

Repeat-purchase intention reduced cheating intent

Customers are reluctant to cheat if service quality is high

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Summary

When customers are dissatisfied, they can

Take some form of public action, private action, or no action

Firms then need to understand customer complaining behaviors and motivations to handle the complaint along the three dimensions of fairness

Effective service recovery can lead to customer loyalty via the service recovery paradox

It does not always hold true—better to get it right the first time

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Summary

Guiding principles for effective service recovery include

Make it easy for customers to give feedback

Enable effective service recovery

Focusing on how generous compensation should be

Dealing with complaining customer

Service guarantees are power tools in delivering satisfaction but discretion should be used

To discourage abuse and opportunistic behavior, we need to deal with customer fraud

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