Service Failures and

Recovery Strategies

100
90
80
70
60
50
40
30
20
10
0

Proportion of Unhappy
95%
82%
Customers Who Buy70%
Again
54%
Depending on
the
Complaint
46%
37%
Process
19%

9%
Customer did not
complain

Complaint was
not resolved

Problem cost > $100

Complaint
was resolved

Complaint was
resolved quickly

Problem cost $1 - 5
Source: TARP study

Impact of Effective Service

Recovery
No
Problem
on Retention
84%
Problem,
but effectively
resolved

92%

Problem
Unresolved

46%
0%

10%

20%

30%

40%

50%

60%

70%

Customer Retention
Source: IBM-Rochester study

80%

90% 100%

Service Recovery Paradox

customers are likely to evaluate a firm higher if

a mistake is made and corrected than had the

service been delivered correctly the first time.

Types of Service Failures

Unavailable
Slow
Group 1

Yes

Nature of
failure?

Other failures

Special needs
Total
sample

Is there
a service
delivery
system
failure?

Group 2

Yes

Nature
of requests/
need?

Customer preference
Customer error
Disruptive others

No

Group 1A
Group 1B
Group 1C

Group 2A
Group 2B
Group 2C
Group 2D

Is there
an implicit/
explicit
request for
accomodation

No

Is there an
Unpromoted/
unsolicited
action by
employee?

Yes

Group 3

Nature of
employee
action?

Level of attention
Unusual action
Cultural norms

No

Gestalt
Adverse conditions
Source: Mary Jo Bitner, Bernard H. Booms, and Mary Stanfield Tetreault, The Service Encounter:
Diagnosing Favorable and Unfavorable Incidents, Journal of Marketing (January 1990, pp. 71-84.

Group 3A
Group 3B
Group 3C
Group 3D
Group 3E

TYPES OF SERVICE FAILURES

Group 1 Failures
Core service failures

slow service
unavailable service
other core service failures

TYPES OF SERVICE FAILURES

Group 2 Failures
Responses to implicit/explicit requests

special needs
customer preferences
customer error
disruptive others

TYPES OF SERVICE FAILURES

Group 3 Failures
Unprompted/Unsolicited employee actions

level of attention
unusual action
cultural norms
gestalt
adverse conditions

TYPES OF SERVICE FAILURES

(new category)

Group 4 Failures (Employee-reported

incidents)
Problematic customer behavior

drunkeness
verbal and physical abuse
breaking company policies or laws
uncooperative customers

Types of Complainers
Passives
Voicers
Irates
Activists

WHY DO CUSTOMERS COMPLAIN?

Correct the problem
Emotional release from frustration
Regain some measure of control by
spreading negative w-o-m
Solicit sympathy
Test for consensus
Create an impression of being more
intelligent and discerning

WHY DONT CUSTOMERS COMPLAIN?

Dont know who to complain to

Dont think it will do any good

May doubt their own subjective evaluation

May accept part of the blame

May want to avoid confrontation

May lack expertise

COMPLAINING OUTCOMES

Retaliation
High => tells lots of people and attempts to

physically damage the store

Medium => tells a few people and created

minor inconveniences
Low => does not retaliate at all

TRENDS IN COMPLAINT RESOLUTION

Complaints are more likely to be acted upon

when:
complaints are made to managers
formally designated complaint handlers are

involved
someone with a personal tie to the company is
involved
the complaint is about the quality of service as
opposed to an employees personality

DEVELOPING A SERVICE RECOVERY

PROGRAM

Measure the costs

calculate the lifetime value of a customer

Actively encourage complaints

Anticipate needs for recovery

Respond quickly

Train employees

Empower the front-line

Close the loop

Components of an Effective
Service Recovery System

Strategies to Reduce Customer Complaint

Barriers
Complaint Barriers for
Dissatisfied Customers

Strategies to Reduce These Barriers

Inconvenience
Difficult to find the right complaint
procedure.
Effort, e.g., writing a letter.

Make feedback easy and convenient by:

Printing Customer Service Hotline numbers,
e-mail and postal addresses on all
customer communications materials.

Doubtful Pay Off

Uncertain whether any action, and
what action will be taken by the
firm to address the issue the
customer is unhappy with.

Reassure customers that their feedback will be

taken seriously and will pay off by:
Having service recovery procedures in
place, and communicating this to
customers.
Featuring service improvements that
resulted from customer feedback.

Unpleasantness
Complaining customers fear that
they may be treated rudely,
may have to hassle, or
may feel embarrassed to complain.

Make providing feedback a positive

experience:
Thank customers for their feedback.
Train the frontline not to hassle and make
customers feel comfortable.
Allow for anonymous feedback.

Slide 2004 by Christopher Lovelock and Jochen Wirtz

Services Marketing 5/E

13 - 17

Dimensions of Perceived Fairness in Service

Recovery Process
Complaint
ComplaintHandling
Handling&&Service
Service
Recovery
Process
Recovery Process
Justice Dimensions of the Service Recovery Process
Procedural
Procedural
Justice
Justice

Interactive
Interactive
Justice
Justice

Outcome
Outcome
Justice
Justice

Customer
CustomerSatisfaction
Satisfactionwith
withthe
the
Service
ServiceRecovery
Recovery
Source: Tax and Brown
Slide 2004 by Christopher Lovelock and Jochen Wirtz

Services Marketing 5/E

13 - 18

SERVICE RECOVERY EVALUATION

Perceived justice needs--based on equity

theory which weighs outcomes versus inputs
distributive justice

outcomes

procedural justice

process

interactional justice

the human content of the recovery process

TYPICAL RECOVERY STRATEGIES

(distributive justice outcomes)

Compensatory strategies
gratis
discounts
upgrades
free ancillary service

Refunds

TYPICAL RECOVERY STRATEGIES

(distributive justice outcomes)
Corrections
Replacement strategies
Apology
Disregard

RECOVERY TACTICS

Poor responses

Fail to recognize the seriousness of the problem

Fail to adequately accommodate the customer

Act as though nothing is wrong

Fail to explain why the problem occurred

Leave the customer to solve the problem on his or her own

Promise to do something and dont follow through

FAIL SAFE THE

SERVICE

WELCOME &
ENCOURAGE
COMPLAINS

ACT

LEARN FROM
LOST
CUSTOMERS

SERVICE
RECOVERY
STRATEGIES

QUICKLY

LEARN FROM

TREAT

RECOVERY

CUSTOMERS

EXPERIENCES

FAIRLY

SERVICE FAILURES
& RECOVERY STRATEGIES:
THE RESTAURANT INDUSTRY

SERVICE FAILURES:
THE RESTAURANT INDUSTRY

Group 1 failure categories (44.4%)

Product defects (20.9%)

food was described as cold, soggy, raw, burnt,

spoiled, or containing inanimate objects such as hair,
glass, bandages, bag ties, and cardboard.

Slow/unavailable service (17.9%)

waiting excessively, not being able to find assistance

SERVICE FAILURES:
THE RESTAURANT INDUSTRY
Facility problems (3.2%)

cleanliness issues such as bad smells, dirty utensils,

and animate objects (e.g., insects) found on the table
or in the food

Unclear policies (1.6%)

policies that were perceived as unfair by the customer,

such as coupon redemption, or forms of payment

Out-of-stock conditions (.8%)

inadequate supply of menu items

SERVICE FAILURES:
THE RESTAURANT INDUSTRY

Group 2 failure categories (18.4%)

food not cooked to order (15.0%)

requested food be prepared in a particular manner and

restaurant failed to meet request

seating problems (3.4%)

seating nonsmokers in smoking section and vice versa

lost or disregarded reservations
requests for special tables that were denied
seating among unruly and disruptive customers

SERVICE FAILURES:
THE RESTAURANT INDUSTRY
Group 3 failure categories (37.2%)
inappropriate employee behavior (15.2%)

rudeness, inappropriate verbal exchanges, and poor

attitudes

wrong Orders (12.6%)

delivery of the incorrect food item, either to the table, or in

the case of fast food, in packaging so that the mistake was
not discovered until the customer had left the premises

SERVICE FAILURES:
THE RESTAURANT INDUSTRY
Group 3 failure categories (37.2%)
lost orders (7.5%)

situations in which the customers order was lost and

never fulfilled

mischarged (1.9%)

being charged for items that were never sent, being

charged incorrect prices for items that were ordered,
and providing incorrect change

SERVICE FAILURES:
THE RESTAURANT INDUSTRY

Recovery Strategies (frequency, retention)

Replacement

(33.4%, 80.2%)
Free Food (23.5%, 89.0%)
Nothing (21.3%, 51.3%)
Apology (7.8%, 71.4%)
Correction (5.7%, 80.0%)
Discount (4.3%, 87.5%)
Manager Intervention (2.7%, 88.8%)
Coupon (1.3%, 80.0)%