This document discusses the importance of developing a strong customer service culture within an organization. It emphasizes that leadership plays a key role in shaping the service culture by communicating what is valued through their words and actions. When failures do occur, the document outlines best practices for service recovery, such as apologizing, acting quickly to resolve the problem, showing empathy, and following up to ensure customer satisfaction. It also examines why some organizations provide poor customer service, tracing it to a "cycle of failure" where cost-cutting leads to dissatisfied employees who then deliver poor quality service. Breaking this cycle requires investing in training, better compensation, and focusing on long-term customer loyalty rather than short-term profits.

1. Chapter 11: Regaining Customer Confidence Through Customer Service and Service Recovery Customer service refers to all customer-provider interactions other than proactive selling and the core product delivery offering that facilitate the organization’s relationship with its customers.

2. Developing a CustomerService Culture Service Culture – a culture where an appreciation for good service exists, and where giving good service to internal as well as ultimate, external customers is considered a natural way of life and one of the most important norms by everyone; good culture is the norm Behavior of employees heavily influenced by the culture of that organization

3. Service Culture Leadership and Service Culture – culture is employees perception of what management really believes; Employees understand what is important in the organization through the daily experiences they have with organizational leaders. What do leaders say and do? How do they treat others? – How does this impact culture?

4. Service Culture Implications: In many service settings, employees interact with customers with no management present. In such instances, the firm must rely on its service culture to influence employee thoughts, feelings, and behaviors. Customer service is a major corporate asset. One significant function of customer service is to enable the organization to recover from failures that caused customer dissatisfaction and complaints.

5. Service Recovery Service recovery is the effort an organization expends to win back customer goodwill once it has been lost due to service failure. Actions taken in response to service failure

6. The Need for Service Recovery The High Cost of Lost Customers Losing customers is expensive When Is Service Recovery Needed? Each point at which the customers encounter the service organization may influence their perception of the service’s excellence (the moment of truth)

7. The Need for Service Recovery Other Means of Identifying Recovery Needs Welcome and Encourage Complaints – complaints should be anticipated, encouraged, and tracked. Fail-Safe the Service – Do It Right the First Time.

8. The Need forService Recovery (cont’d) A moment of truth is any contact point with a service organization that the customer uses to evaluate the service delivery. Service encounters as “moments of truth”

9. The Service Encounter is the “moment of truth” occurs any time the customer interacts with the firm can potentially be critical in determining customer satisfaction and loyalty types of encounters: remote encounters, phone encounters, face-to-face encounters is an opportunity to: build trust reinforce quality build brand identity increase loyalty

10. A Service Encounter Cascadefor a Hotel Visit Check-In Bellboy Takes to Room Restaurant Meal Request Wake-Up Call Checkout

11. Sources of Pleasure and Displeasure in Service Encounters Recovery: Adaptability: employee response to service delivery system failure employee response to customer needs and requests Spontaneity: Coping: unprompted and unsolicited employee actions and attitudes employee response to problem customers

12. Recovery – Employee Response to Service Delivery System Failures They lost my room reservation but the manager gave me the V.P. suite for the same price. We had made advance reservations at the hotel. When we arrived we found we had no room – no explanation, no apologies, and no assistance in finding another hotel. Do: Acknowledge problem; Explain causes; Apologize; Compensate/upgrade; Lay out options; Take responsibility Don’t: Ignore customer; Blame customer; Act as if nothing is wrong; “Pass the buck”

13. Adaptability – Employee Response to Customer Needs and Requests My car broke down. All area hotels were full. One understood my situation and offered to rent me a bed set up in a small banquet room. Despite our repeated requests, the hotel staff would not deal with the noisy people partying in the hall at 3 a.m. Do: Recognize the seriousness of the need; Anticipate; Attempt to accommodate; Adjust the system; Explain rules/policies Don’t: Ignore; Promise, but fail to follow through; Show unwillingness to try; Embarrass the customer; Avoid responsibility

14. Sponteneity – Unprompted and Unsolicited Employee Actions The hotel staff greeted our team with a “Welcome UCA Bears” banner in the hotel lobby. The person at the front desk was paying more attention to the TV than to the hotel guests. Do: Take time; Be attentive; Anticipate needs; Listen; Provide information Don’t: Exhibit impatience; Ignore; Yell/laugh/swear; Discriminate

15. Coping – Employee Response to Problem Customers Flight attendant asked the unruly, intoxicated passenger if he would be driving when the plane landed and offered him coffee. He accepted the coffee and became quieter and friendlier The co-pilot was called and asked the man to sit down and leave the others alone, but the man refused. The co-pilot then “decked” the man, knocking him into his seat. Do: Take time; Be attentive; Anticipate needs; Listen; Provide information Don’t: Exhibit impatience; Ignore; Yell/laugh/swear; Discriminate

16. Service Recovery What do you do when you receive poor service?

17. Response to Failures If the service failure is really important, if it has critical consequences for the customer, or if the customer has much ego involvement in the service experience, he is more likely to complain.

18. Why Do Customers Complain? Obtain restitution or compensation Vent their anger Help to improve the service For altruistic reasons

19. Why Don’t Unhappy Customers Complain? Time/Effort/Uncertainty Unpleasant experience Role perceptions and social norms

20. Unhappy Customers’ Repurchase Intentions Unhappy Customers Who Don’t Complain 9% Unhappy Customers Who Do Complain 19% Complaints Not Resolved 54% Complaints Resolved 82% Complaints Resolved Quickly Percent of Customers Who Will Buy Again after a Major complaint (over $100 losses)

21. Recovery Paradox When customer complaints are resolved quickly, the percentage of customers that will repurchase is high. Therefore should the company intentionally fail the customer, only to recover quickly?

22. Recovery Paradox Recovery paradox: service failures should be encouraged Fallacy of Recovery Paradox Fixing mistakes is expensive Service failure may be too much to be overcome by any recovery effort Best strategy: Do it right the first time

23. Customers’ Recovery Expectations An apology An explanation as to what happened An assurance problem would not be repeated An opportunity for customer to vent his frustrations If firm does nothing about service failure, 86 percent of customers are dissatisfied. If firm provides apology, percentage of dissatisfied customers drops to 20 percent

24. When They Complain, What Do Customers Expect? Outcome fairness: outcomes, or compensation should match the level of their dissatisfaction: “Their refusal to refund our money or make up for inconvenience and cold food was inexcusable”

25. When They Complain, What Do Customers Expect? Procedural fairness: fairness in terms of policies, rules, and timeliness to the complaint process: “They should have assisted me with the problem instead of giving me a phone number to call”

26. When They Complain, What Do Customers Expect? Interactional fairness: the interpersonal treatment received during the complaint process “The receptionist was very rude; she made it seem like the doctor’s time was important but mine was not.”

27. Steps to Service Recovery Apology Urgent Reinstatement – act quickly; make effort correct the problem; shows customer satisfaction is important to the organization. Empathy – make effort to understand why customer is disappointed; listening and empathy skills. Symbolic Atonement – tangible compensation: free dessert, ticket for future flight, room upgrade. Follow-up – telephone call, letter, email; was recovery effort appreciated? Customer’s low regard for organization changed?

28. Why do they give Poor Service? Re-Visiting Cycle of Failure Service industries search for productivity: short-term profits, cut costs Simplify work routines Hire workers as cheaply as possible Jobs: repetitive, requires little or no training Fast-food, department stores

29. Why do they give Poor Service? Cycle of Failure (cont.) Low skill levels Emphasis on rules, not service Use technology for quality control Bored employees who lack ability to respond to customer problems Become dissatisfied, poor service attitude

30. Why do they give Poor Service? Cycle of Failure (outcome) Low service quality, high employee turnover. Weak profit margins The cycle repeats itself with hiring more low-paid employees to work in an unrewarding atmosphere

31. Cycle of Failure, Low Morale = Service Sabatoge (Hostility) Routinized = ingrained in the culture “Many customers are rude or difficult, not even polite like you or I. Getting your own back evens the score. There are lots of things that you do that no one but you will ever know – smaller portions, dodgy wine, a bad beer – all that and you serve with a smile! Sweet revenge! -- Waiter

32. Cycle of Failure, Low Morale = Service Sabatoge (Hostility) Routinized = ingrained in the culture “Managers always ask for more than is fair and customers have always want something for nothing. Getting back at them is natural – it’s always happened, nothing new in that.” -- Front-of-House Operator

33. Cycle of Failure, Low Morale = Service Sabatoge (Hostility) Intermittent = individual response “I don’t often work with them but the night shift here really gets to me. They are always complaining. So to get back at them, just occasionally, I put a spanner in the works – accidently on purpose I misread their food orders, slow the service down – nothing heavy” Senior Chef

34. Poor Service? – Cycle of Mediocrity Rigid rules, focus on standardization, operational efficiencies, Salary/promotions based on longevity Success measured by absence of mistakes rather than productivity and outstanding customer service Employees reluctant to leave Bureaucratic hassles, lack of service flexibility, customer resentment

35. Poor Service? – Cycle of Mediocrity Customer resentment = hostility toward service employees who feel trapped in their jobs and are powerless to improve the situation. Employees protect themselves through indifference, play by strict rules, counter rudeness with rudeness. Cycle: Unhappy customers complain to helpless employees, generating greater defensiveness on part of employees.

36. Cycle of Success Take long-term view of financial performance Investing in people (focused recruitment, intensive training, better wages) Employee satisfaction = customer satisfaction, loyalty Higher profit margins

37. Challenge Gap 1: Not Knowing What Customers Expect (Insufficient Marketing Research). Gap 2 – Not selecting the right service designs and standards. Gap 3 – Not delivering to service standards. Gap 4 – Not matching performance to promises (Overpromise). Which gap do you think is hardest to close? Why?

38. Challenge If firms can get away with poor service, they will. True or False? If employees know that excellent service is valued and expected, and rewarded, they will respond. True or False?