Services Marketing - Service Encounter Failure & Recovery

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Services Marketing
CHAPTER – 5
Service Encounters, Service Failure and Recovery
Service Recovery Strategies
Most companies have to learn the importance of excellent service recovery for disappointed customers and practice them.
This in reality is a combination of several different strategies that need to work together, as given below in the presentation

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Services Marketing - Service Encounter Failure & Recovery

  1. 1. CHAPTER – 5 SERVICE ENCOUNTERS, SERVICE FAILURE AND RECOVERY 1
  2. 2. Service Recovery Strategies  Most companies have to learn the importance of excellent service recovery for disappointed customers and practice them.  This in reality is a combination of several different strategies that need to work together, as given below : 2
  3. 3. Make Services Failsafe – Do it Right for the First Time  The first rule of the service quality is to do it right the very first time. Thus, in one go several objectives can be achieved : (1) service recovery is saved, (2) the customers get what they expect, (3) compensating for the errors can be avoided, and (4) cost of repetition is saved. So it’s the most important dimension of service quality. 3
  4. 4. Do it Right for the First Time  It’s important for a firm to create a culture of zero defect to ensure doing it right the first time.  Within this culture every one understands the importance of reliability, and the relationship value of a customer.  The managers and the employees aim to satisfy every customer and look for the ways to improve the service. 4
  5. 5. Encourage Complaints and Track Them  A critical component for the service recovery is to encourage complaints and document them. Firms can use a no. of ways to achieve the above goal. 5
  6. 6. Customer Research Customer research is very useful here, like :  survey,  critical incidents study,  lost customer research, etc. In addition to these, now-a-days, these are also used:  e-mail,  toll-free no.,  software applications for sorting and analysis of complaints, etc. 6
  7. 7. Act Quickly  Customers want a quick response in case of a complaint.  If a firm welcomes or even encourages complains, then it must be prepared for quick response.  It needs a system, procedures, and also ever ready employees. 7
  8. 8. Take Care of Problems on the Frontline  Normally, customers want the person who hears their complaints should resolve it whether it’s registered in person, over phone or via the internet.  So firms fix their responsibilities of resolving as binding on them. 8
  9. 9. Empower Employees  Employees must be trained and empowered to solve problems as they occur.  A problem if not solved can quickly escalate leading to undesirable extreme or drastic action.  Some times employees can anticipate the problems and take care to solve immediately.  Service employees have a specific and real need for necessary service recovery training. 9
  10. 10. Recovery Then & There  Customers want the recovery to be then and there, and this calls for the employees to have skills and authority, and motivation and incentives for effective recovery.  These include :  (1) hearing customers’ problems,  (2) taking initiative,  (3) identifying solutions,  (4) improving, and  (5) bending the rules for time to time. 10
  11. 11. Allow Customers to Solve their own Problems  Another way to handle the customer problems is to allow the customers themselves to solve their problems thro’ a built-in system.  This can be done best by technology, where the customers directly access the company’s systems. This gives quick answers, information etc. to the customers.  Ex., a courier tracking system, the IRCTC ticket booking and ticket tracking system. 11
  12. 12. Provide Adequate Explanations  In many cases of service failures, customers try to understand why the failure occurred.  Research shows that if a service recovery is not successful, giving adequate explanation can substantially reduce further dissatisfaction.  For an explanation to be adequate, it must have two qualities : 12
  13. 13. Provide Adequate Explanations  The content must be appropriate – supported by relevant facts, figures, and sufficient information.  The delivery must be appropriate – how the explanation is delivered, the style of delivery etc.  Style includes : honesty, sincerity, credibility, knowledgeability, and NOT being manipulative. 13
  14. 14. Treat Customers Fairly  In responding quickly, fairness in treating each customer is very critical and important. Customers expect to be treated fairly in three counts. They are : 1. In terms of the outcome they receive, 2. The process by which the service recovery takes place, 3. The interpersonal treatment they receive. 14
  15. 15. Cultivate Relationship with Customers  Customer relationship is the key focus area today, and there are several benefits of it.  One additional benefit for the service marketer is that if the firm fails in service delivery, those customers who have a strong relationship with the firm are often more forgiving, and also are more cooperative in the firm’s service recovery effort. 15
  16. 16. Cultivate Relationship with Customers  Researches show that the presence of rapport between customers and employees provide several benefits like :  Increased post-failure satisfaction,  Increased loyalty intentions,  Decreased negative word-of-mouth communication,  Lower service recovery expectation,  Demand less immediate compensation for a failure. 16
  17. 17. Learn from Recovery Experiences  The problem-resolution situation is very valuable for the improvement of service quality delivery and future reference.  This is a very reliable source of diagnostic, prescriptive, information for improving customer services.  Managers often learn from these situations about problem areas, system / process related flaws, problem fixing methods. 17
  18. 18. Learn from Recovery Experiences  Hence the term “learning from the past experiences”.  By conducting the root cause analysis, the firms can identify the source of problems and modify the process, sometimes eliminating almost completely the need for recovery. 18
  19. 19. Learn from the Lost Customers  Some of the dissatisfied customers leave the company and patronage another.  Here, if the firm finds out what went wrong that lead to such a losing proposition, then it may work out the strategy to prevent such situations.  This is called “learning from lost customers”.  There are several methods in MR to discover the reasons of leaving or defect. This kind of MR is very difficult and painful and sometimes also wasteful. 19
  20. 20. Learn from the Lost Customers  This type of in-depth analysis often requires series of “why” questions, “tell us more” questions, “what went wrong” questions, which will bring out the actual, core and immediate reasons for a customer’s defection.  On the other hand while conducting this kind of MR the focus must be on profitable customers and not just any customer who has defected – in this case the result will be misleading and the whole MR process may be a wasteful expenditure. 20
  21. 21. Service Guarantees  A guarantee is a specific type of recovery system.  A guarantee is a pledge, assurance or commitment that a product or service offered by a firm will perform or satisfy as promise, and if not, some sort of compensation will be undertaken by the firm. 21
  22. 22. Service Guarantees  In a product the performance is guaranteed, and in services the satisfaction, the expectation or the experience is guaranteed.  Now, more and more companies are finding guarantees as an excellent service recovery strategy because of the tremendous benefits the firms derive out of these guarantees. 22
  23. 23. Benefits of Service Guarantees  Service firms are realising that guarantees can serve not only as a strategic marketing tool, but also as a means to define, cultivate, and maintain quality throughout the organisation.  Some of the numerous benefits are given below : 23
  24. 24. A good guarantee forces the company to focus on its customers –  To develop a meaningful guarantee, the firm must know what is important to its customers, and what they expect and value.  In most cases the satisfaction is guaranteed. But for the guarantee to work effectively, the firms must understand what “satisfaction” means to customers in terms of quality, value, expectation, convenience, etc. 24
  25. 25. An effective guarantee sets clear standards for the firm –  It prompts the company to define clearly what it expects of its employees, and to communicate this to them.  The guarantee gives employees service oriented goals, which can quickly orient the employees’ behaviours to customer strategies.  (Ex., “We will make it right or give your money back” lets the employees precisely what they should do if a customer complains).  It also makes it clear to the employees that doing it right for the customers is a critical company goal. 25
  26. 26. A good guarantee generates immediate and relevant feedback from customers –  It provides an incentive for the customers to complain and thereby provides more relevant feedback to the firm regarding their services.  This guarantee also tells the customers that they have the right to complain any service failure. 26
  27. 27. When the guarantee is invoked there is an instant opportunity to recover –  thus satisfying the customer and helping to retain customer loyalty.  Information generated thro’ the guarantee can be traced and integrated into continuous or ongoing improvement efforts.  A feedback link between customers and service operations decisions can be strengthened thro’ the guarantee. 27
  28. 28. For customers, the guarantee reduces their sense of risk –  and builds confidence in the company. Because services are intangible, and often highly personal, or ego-involving, customers seek information, cues, hints that will help reduce their sense of uncertainty.  Studies show that guarantees reduce risk and increase positive and favourable evaluation of the service prior to purchase. 28
  29. 29. Finally, the bottom line for the company is that an effective guarantee can affect  profitability thro’ building customer awareness,  loyalty thro’ positive word of mouth,  reduction of costs thro’ service improvements,  reduction in service expenses,  reduce costs of employee turn over thro’ creating a more positive service culture. 29
  30. 30. Thank You END of SM Chapter – 5 © Himansu S M / 12-08-2010 30

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