Service Failure and Recovery

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Service Failure and Recovery

• Neeli Bendapudi
• May 16, 2005

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The Company can influence expectations
via AdvertisingKevin M and Saturn CSR Sales
Promotion Mark S and Amazon Tangibles Mine and
Speedway/Amul and Old Navy Price Bill and
Turbo Tax/ Rachelle and SW Personnel Kavita and
Heritage apts Aaron and St Aaron and
Statler arms
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Top 10 Service Complaints
10. Misplaced priorities Colleen and
OBMV Jennifer and AE Outfitters 9. Auto pilot
Bharatwaj and BMV 8. I just work here. Vijay
and Kroger 7. Dont ask, dont tell Keith and
Student insurance 6. Keep you guessingIan and
Brooks Brothers
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Top 10 Service Complaints

• 5. Big wait. Ryan and Continental /Anil and
  Health center
• 4. Big chill. Mike H. and AOL
• 3. Red Alert. Jessica and Stauffs
• 2. Broken promises. Poornima and United
• Adam L and the plumber!
• True lies. Jeremy and MAG

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The Profitable Art of Service RecoveryorTo Err
is Human To Recover, Divine.

• And
• Learning from Failure
• or
• Fixing both the Car and the Customer.

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Mistakes are inevitable, especially in
services with a high human component.

• Though errors are inevitable, dissatisfied
• customers are not!
• Using recovery to discover root causes of failure
  
• The service recovery paradox.and the limits
• to it!
• The link to employee satisfaction and loyalty

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The Seven Steps on the Road to Service Recovery
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1. The service system as a gymnast.

• Flexibility and grace in getting up after a fall!
• But, first, identify failures!
• Setting performance standards
• Stephanie and Earthlink
• Suzanne and Chicago cabs

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• Communicate importance of recovery to
• enhance vigilance
• ECHO, Run to a problem

Sunita and Pella
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• Next, try to anticipate failures and Need
• for Recovery
• New products or services
• Uncontrollable factors
• Inexperienced employees
• David W and Ordering checks

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2. Measurement precedes management.

• What are the costs and benefits?
• CARESS the customer.
• The Problem-Impact Tree approach
• Think about Getting Customers Back
• versus Fixing Problems.

Lanson and McDonalds
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What is the customer worth?
Lifetime value of the customer Indirect effects
of W-O-M Trading up Honda Civic Honda
Accord Honda Acura
Ana and Dollar Rent-a-car
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Problem Impact Tree
Frequency of complaint versus seriousness Impa
ct Low High Low Frequency High
Ignore Consider Improvements Very
important to some Consider SOLVE Improvement
s NOW!!! Small effects may add up
Diane and Wendys
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All guests
No problem Have problem
Report Dont problem report
Problem Not resolved resolved
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All guests (100)
No problem Have problem (75) (25)
Report Dont problem(50) report (50)
Problem Not resolved resolved (70) (30)
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Relationship to Satisfaction (AB)
All guests
No problem Have problem (95)
Report Dont problem report (75)
Problem Not resolved resolved (90) (50)
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Relationship to Repurchase Intention
All guests
No problem Have problem (95)
Report Dont problem report (80)
Problem Not resolved resolved (90) (60)
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The value of recovery---using lifetime value
Assume lifetime value of customer200 Value of
no problem2000.95190 Value with
problem 200 weighted average retention
200 (.5x.7x.9)(.5x.3x.6)(.5x.8) 200
(.805)161 It is worth 29 to avoid the problem!
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Value of resolving a problem complaint made
Expected value when resolved 200
0.9180 Expected value when not
resolved 200 0.60120 It is worth 60 to
resolve the problem.
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What do we gain if the customer complains?
Value of customer with unreported problem 200
.80 160 Value of customer with reported
problem (.70 .90200) (.30.60200) 162 I
n this case, not much more value. Why? Percentage
of unresolved complaints Focus on resolving
complaints not increasing
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3. Break the silence, aggressively
How many complain? Why so few? How can
you make it easier for consumers to
complain? Pro-activity Training Access
Video Point booths Rewards!
Jane and Williams Sonoma
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4. Act Fast and Effectively
The longer the fix takes, the higher
the expectations Focus on fairness Outcome
Procedure Interaction
Greg W and Macys?
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5. Train and empower frontline Hiring and
training are critical Safe zones and standards
Recovery must be personalized Recovery must
be quick Recovery at the first point of contact
(or soonest)
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6. Close the loop Get the information into
the system Communicate with the customer What
happened, why, how problems will be addressed
and prevented Improve the System. Chronic
problem versus chronic complainer
Manish and Columbus PD
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7. Recovery Paradox
For customers.. For employees. What are
the limits to this paradox?
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1. Speed with a human face 2. Tease out
complaints 3. No-blame culture 4. Create
closure 5. Pro-active top-level involvement 6.
Complaints as strategic input 7. Centralized and
decentralized 8. Focus on communication and
improvement
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9. Internal complaints system 10. Surveys
targeted on problems and resolutions 11.
Focusing staff on benefits of complaints 12.
Senior management attention to costs and
benefits of recovery
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And now, for compliments!