Managing Service Recovery Through Crisis or Service Failure

Congratulations, we have reached the final topic! In this course we have focused on various strategies that service organisations can implement to better connect and provide for their customers, for the mutual benefit of both the customer and the organisation. However, what happens when things go wrong? Service organisations are evaluated not only on what they do well but also, and possibly more critically, for how they respond when things go wrong.

Welcome to Topic 11: Managing Service Recovery Through Crisis or Service Failure. In this topic, you will learn about:

• Courses of action open to a dissatisfied customer
• Factors influencing complaint behaviour
• The principles of an effective service recovery system
• Techniques for identifying the root cause of service failure.

In this topic, we explore strategies for when things inevitably go wrong. Customers are far more likely to remember a bad experience than a good experience. So, it is incredibly important to have strategies in place to mitigate these service failures and rebuild rapport with the customer. The ability to recover and respond to such difficulties can help to rebuild trust with your customers and the broader community. Failure to do so can have devastating impacts.

These relate to the Subject Learning Outcomes:

1. Discuss the key concepts, principles and unique challenges of services marketing in relation to the extended marketing mix.
2. Describe the tools and models managers might employ to increase customers’ perceptions of service quality and value through a crisis or service failure.

Welcome to your pre-seminar learning tasks for this week. Please ensure you complete these prior to attending your scheduled seminar with your lecturer.

Click on each of the following headings to read more about what is required for each of your pre-seminar learning tasks.

Customer response to service failures

Things inevitably go wrong at times. People make mistakes, accidents happen, miscommunication occurs or products and offerings do not live up to customer expectations. However, in the unique context of service, we do not have the luxury of manufacturing systems to ensure consistent quality across our products.

Humans are inherently at the centre of many service offerings. With this comes the potential for human error, on top of the natural variability of service delivery between different service staff or even the same staff member on a good day versus a bad day! When this happens, the service organisation must try to correct these wrongs to maintain customer satisfaction. Customer satisfaction is not based solely on receiving a perfect and flawless service but on how the organisation fixes their mistakes (Lovelock et al. 2014).

Lovelock et al. (2014, p. 406) outline four (4) main courses of action taken by unsatisfied customers:

1. Do nothing. However, the service provider’s reputation is diminished in the customer’s eyes and they will consider defecting if the problem recurs.
2. Complain in some form to the service organisation.
3. Take some kind of overt action with a third party. For example, complain to a consumer claims tribunal or even launch legal action to obtain redress.
4. Defect and simply not patronise this organisation again. They may also persuade friends and family to do likewise through negative word of mouth.

While all of these actions might seem negative, service organisations are urged to view complaints as an opportunity. Complaints are unsolicited, specific and timely feedback, providing you with the ability to understand where you went wrong, as opposed to customers who do nothing or defect, where no information is received (Xero n.d.).

Complaints are also direct communication between the customer and the organisation, and therefore an opportunity to resolve any issues and rebuild customer satisfaction and hopefully avoid escalation involving third parties. In fact, situations where the organisation goes above and beyond to rectify the service failure can result in a service recovery paradox whereby the customer ultimately experiences even higher satisfaction than if they had never experienced the service failure.

Watch the following video, A Visual look at service recovery paradox, to learn more about this phenomenon.

Consumer complaint behaviour

Customers are often reluctant or feel uncomfortable complaining to the service organisation, leaving their issues unresolved. They are more likely to complain about their dissatisfaction with other people – friends, family, colleagues, even strangers on the internet – spreading negative word of mouth (Business Queensland 2020). Common reasons for customers not complaining include it being too much trouble, a lack of time and believing that the organisation won’t do anything in response (Lovelock et al. 2014).

Interestingly, social media platforms such as Facebook and Twitter, have become a dominant space where customers vent their frustrations to the organisation (and in the presence of that organisation’s other current and potential customers!) (Suciu 2020). This public domain creates greater accountability because others can see the dialogue between the organisation and disgruntled customer in real time. Therefore, it is even more important for the service organisation to provide a positive and timely response to appease the customer as well as demonstrate their effectiveness of complaint management to onlookers.

Please watch the following video, How to handle complaints on social media, for further insights on handling complaints on social media platforms.

Why customers complain

Customers engage in complaining behaviours for two (2) key purposes (Lovelock et al. 2014):

1. To seek compensation/recover economic loss. For example, expecting a discount, refund, repeat of the service.
2. To rebuild self-esteem. In other words, negative experiences can make customers feel that their fundamental human needs (respect, fairness, self-esteem, security or belonging) have been violated. Thus, they complain to seek acknowledgement and remorse from the organisation for this violation.

Service recovery

Once a customer has reported a service failure, the service organisation needs to provide an appropriate response. This is referred to as service recovery – “actions taken by the organisation to put things right for the customer following a service (core or supplementary) failure” (Lovelock et al. 2014, p. 418).

Customer evaluation of service recovery

Customers evaluate service recovery from three (3) perspectives of justice (Lovelock et al. 2014):

1. Procedural justice
2. Interactional justice
3. Distributive justice.

Procedural justice

The perspective of procedural justice or fairness is related to the policies and processes that govern the complaints process. Does the service organisation have proper systems for handling complaints? How quickly do they respond? What policies do they have and are they perceived as fair? Do the policies focus on ensuring customers receive good quality service, or do they aim to push responsibility for failure away from the organisation?

Interactional justice

The perspective of interactional justice is centred around the behaviours and responses from the service firm throughout the complaint resolution process. Was the service employee friendly, open and genuinely concerned with helping the customer with their complaint? Were they apologetic, or defensive or accusatory? Did they put in sufficient effort to resolve the issue?

Distributive justice

The perspective of outcome or distributive justice focuses on the resolution or compensation offered as a result of the complaint. Was the customer offered a refund, discount or credit towards a future service?

Developing an effective service recovery process

We have established that complaints are important to the service organisation. However, it is likely that many of us have had an experience of making a complaint and not receiving a great response. Perhaps the organisation took a long time to respond, or they were not helpful or left the complaint unresolved. Experiences such as these tend to happen because organisations often do not have the culture or level of commitment towards treating complaints as opportunities.

According to Lovelock et al. (2014), the two (2) most important components of service recovery are:

1. Managerial commitment
2. Appropriate guidelines and processes.

Managerial commitment and culture

Top management commitment is a key component of ensuring successful service recovery. This involves various behaviours, from a commitment to training staff to handle complaints effectively, to having the right software and systems to facilitate complaint submissions and tracking resolution progress. The next step is to develop a ‘complaints as opportunities’ culture, where complaints are not only tolerated, but celebrated.

Domino’s is an interesting example of a ‘complaints as opportunities’ culture. Watch the video, Domino's® Pizza Turnaround, to learn more about their process and see an excellent demonstration of using complaints to guide improvements.

McDonalds (McCafé) also promotes a ‘complaints as opportunities’ culture with the McCafe "It's good to complain" ad encouraging customers to return their coffee for a replacement if they are not satisfied with the quality.

Guidelines and processes

Training employees to properly respond to service complaints adds efficiency and professionalism to the service recovery process. This includes training on the organisational processes and protocols in place for service failure and training in relevant soft skills, including active listening and displaying empathy.

In addition, empowering frontline service staff to respond immediately to a complaint (rather than escalating it to a manager or submitting it to a complaints team) can diffuse any initial negativity and solve problems quickly, especially when the complaint occurs during the service delivery process rather than afterwards. However, in more complex contexts where an immediate resolution is not feasible, it is important to display ownership of complaints with dedicated complaints teams and systems to ensure complaints are managed consistently, with professionalism and are not dealt with on an ad hoc basis.

Service recovery tactics

Lovelock et al. (2014) describe nine (9) practical guidelines for implementing an effective service recovery process:

1. Act fast. Establish a response timeframe policy (for example, within 24 hours), and make the service recovery process efficient:
   • empower service staff to resolve the problem themselves
   • try to avoid the customer having to transfer or escalate the problem to others for resolution.
2. Apologise but don’t be defensive. It can be easy to take service failure criticisms personally, especially in small service organisations. However, try not to focus on being defensive because it can be interpreted as avoiding responsibility or trying to hide something.
3. Show you understand the problem from the customer’s point of view. Display empathy to understand why the customer has made the complaint.
4. Don’t argue with the customer. The point should be to diffuse, rather than fuel the situation and the customer.
5. Acknowledge the customer’s feelings. Service failure can conjure strong emotions, especially when a customer feels that a basic human need (as mentioned previously) has been violated.
6. Give customers the benefit of the doubt. Do not accuse the customer of lying or being deceitful, as this will very quickly escalate the problem. In the cases service failure accusations where significant money/cost is involved, it is appropriate to have investigations and processes to confirm or prove the nature of the service failure. However, the customer still should not be made to feel that their complaints are not believed, or their honesty or integrity is being questioned.
7. Clarify the steps needed to solve the problem. If service recovery cannot happen immediately, be as specific as possible about what steps need to be taken and their likely timeframes.
8. Keep customers informed of progress. Reassure the customer that their complaint is being managed and has not been forgotten or overlooked, particularly if there are multiple steps in the process.
9. Consider compensation. Consider the value of the service failure as well as the inconvenience caused. In other words, include the time lost due to service failure and the time and effort required during the complaints process as part of the service failure.

Watch the following short video, Handling customer complaints: Defusing frustration, for further insights into implementing an effective service recovery process.

Learning from experience and preventing problem recurrence

If the same service failures occur repeatedly, it highlights an important area for attention and service improvement. Lovelock et al. (2014) discuss several methods for mapping the service experience to help pinpoint service failures and areas for improvement, including:

1. Blueprinting
2. Control charts
3. Fishbone diagrams.

Service blueprints, in particular, have been discussed in previous topics as part of understanding the customer journey, service experience, and relationships between service staff, managers and departments. The pre-seminar reading, Using systems thinking to design better services by Laurie (2016), describes system design and the idea that blueprints are often used without a diagnostic lens – they show relationships and processes but aren’t used to go that extra step to help identify systemic issues or diagnosing problems with the current customer experience. If we can incorporate customer complaints and feedback into tools like service blueprints, this can help us to identify weak points and explore possible solutions.

In summary, mistakes will inevitably happen in the delivery of service. When they do, it is important to have responses in place to mitigate service failures and recover (and even surpass) previous customer satisfaction with the service organisation. Having an appropriate mindset and culture of viewing complaints as opportunities, efficient processes in place to implement service recovery as well as the ability to learn from these mistakes and incorporate the feedback into service design improvements, will all contribute to service failures being less frequent and more efficient to combat if and when these errors do occur.

Welcome to your seminar for this topic. Your lecturer will start a video stream during your scheduled class time. You can access your scheduled class by clicking on ‘Live Sessions’ found within your navigation bar and locating the relevant day/class or by clicking on the following link and then clicking 'Join' to enter the class.

Click here to access your seminar.

The following learning tasks will be completed during the seminar with your lecturer. Should you be unable to attend, you will be able to watch the recording, which can be found via the following link or by navigating to the class through ‘Live Sessions’ via your navigation bar.

Click here to access the recording. (Please note: this will be available shortly after the live session has ended.)

In-seminar learning tasks

The in-seminar learning tasks identified below will be completed during the scheduled seminar. Your lecturer will guide you through these tasks. Click on each of the following headings to read more about the requirements for each of your in-seminar learning tasks.

Welcome to your post-seminar learning task for this week. Please ensure you complete these after attending your scheduled seminar with your lecturer. Your lecturer will advise you if this is to be completed during your consultation session. Click on the following heading to read more about the requirements for your post-seminar learning task.

Each week you will have a consultation session, which will be facilitated by your lecturer. You can join in and work with your peers on activities relating to this subject. These session times and activities will be communicated to you by your lecturer each week. Your lecturer will start a video stream during your scheduled class time. You can access your scheduled class by clicking on ‘Live Sessions’ found within your navigation bar and locating the relevant day/class or by clicking on the following link and then clicking 'Join' to enter the class.

Click here to access your consultation session.

Should you be unable to attend, you will be able to watch the recording, which can be found via the following link or by navigating to the class through ‘Live Sessions’ via your navigation bar.

Click here to access the recording. (Please note: this will be available shortly after the live session has ended).

For those who want to go the extra mile, here are some additional useful resources:

• Khamitov, M, Grégoire, Y & Suri, A 2020, ‘A systematic review of brand transgression, service failure recovery and product-harm crisis: Integration and guiding insights’, Journal of the Academy of Marketing Science, 48(3):519-542.
• Van Vaerenbergh, Y & Orsingher, C 2016, ‘Service recovery: An integrative framework and research agenda’, Academy of Management Perspectives, 30(3):328-346.

References

• Business Queensland 2020, Customer complaint behaviour, Queensland Government, https://www.business.qld.gov.au/running-business/consumer-laws/customer-service/complaints/behaviour
• Domino’s Pizza 2009, Domino's^® Pizza turnaround, streaming video, YouTube, https://www.youtube.com/watch?v=AH5R56jILag
• Laurie, M 2016, Using systems thinking to design better services, Medium, https://medium.com/@mikelaurie/using-systems-thinking-to-design-better-services-905b62ca10b7
• Lovelock, C, Patterson, P & Wirtz, J 2014, Services marketing, 6th edn., Pearson Australia.
• McDonaldsAUS 2011, McCafe "It's good to complain", streaming video, YouTube, https://www.youtube.com/watch?v=vzLPlCwXMes
• Shareef Mahdavi - The PX Movement 2020, A visual look at service recovery paradox, streaming video, YouTube, https://www.youtube.com/watch?v=82uD3O97YUY
• Skillsoft YouTube 2018, Handling customer complaints: Defusing frustration, streaming video, YouTube, https://www.youtube.com/watch?v=WphIXqTp_es
• Sleeping Giant Media 2019, How to handle complaints on social media, streaming video, YouTube, https://youtu.be/BXKAVOR_bn8
• Suciu, P 2020, Social media’s ‘callout culture’ continues to improve customer service, Forbes, https://www.forbes.com/sites/petersuciu/2020/01/08/social-medias-callout-culture-continues-to-improve-customer-service/?sh=40e3982f6d99
• Xero n.d., How to handle customer complaints, Xero Small Business Guides, https://www.xero.com/au/resources/small-business-guides/business-management/handle-customer-complaints/