Complaint Handling & Service Recovery PDF

CHAPTER SIX Complaint Handing and Service Recovery 6.1 Service Failures Service failures refer to a condition when the consumer does not receive the services as promised by the seller. Failures may just happen, and, these may happen in any large or a small organisation. Serv...

CHAPTER SIX Complaint Handing and Service Recovery 6.1 Service Failures Service failures refer to a condition when the consumer does not receive the services as promised by the seller. Failures may just happen, and, these may happen in any large or a small organisation. Service failures may occur when a consumer does not get the delivery of the service as was promised during the service transaction; when the delivery of the service is delayed or it is too slow to be delivered; the service may not be able to deliver the core benefit due to which the service was sought to be purchased at the first place; or the employees delivering the service or confronting the consumer sounds rude or uncaring. Whatever be the reason of service failure it leaves a negative experience and in turn a negative image of the Service organization. Not all dissatisfied consumers may complain to the organization about a service failure. Few dissatisfied consumers may instead spread a negative word of mouth about the service by sharing their negative experience amongst their social circles. On the contrary, there may be some consumers who may prefer to take to the legal route to get them compensated for any service failure. Therefore, it is extremely important to ensure no service failure should occur in service delivery and if it does, it should be instantly recovered to please the consumer. If the service failure is recovered and the level of service delivery is more than the expectations of the consumers, the consumer will be highly satisfied. This once dissatisfied consumer is likely to be more loyal and likely to repurchase the service and even highly likely to recommend it to others. 6.2 Consumer’s Reaction to Service Failures In case of a service failure, the consumer may react in a number of ways. A dissatisfied consumer may not take any action in the event of a service failure. If he chooses to take some action it may be of various types. i) Complain to the Service provider– In case of an action to be initiated by the consumer, in the case of a service failure, the most frequent will be to reach up to the authorities of the service provider and complain to them on the spot. This is an ideal situation for the service provider to Service MKG/ Chapter Six/ Compiled by Worku A.(Dr.) Page 1 respond immediately and do the damage control. This is the situation in which a higher level of service may satisfy the consumer and avoid losing him and also control any negative word of mouth. ii) Spread negative word of mouth– There may be a consumer, who instead of complaining about a service failure, chose to speak bad about the services to his friends nad peers, spreading a negative image of the Service provider. Such a situation is potentially very harmful for the service organization as the firm may not even get to know the root cause of the problem yet face a hostile attitude towards its services. iii) Take no action but stop doing business with the service provider– There may be few consumers who may not react following a service failure. They may not complain or speak negative about the service provider. But they may decide never to do business with the service provider again in future. Such a consumer remains silent and does not speak about his negative experience either to the organisation or to the peers, and may simply decide to switch to the competitive Brand. But the service provider looses him as a consumer in future. iv) Consumer expectations– In case the service provider is not able to satisfy the consumers as per the service delivery standards expected by the consumer, it is a case of service failure. In such a situation, a dissatisfied consumer expects a decent apology from the service personnel along with an attempt of delivering what was promised with due personal attention. These expectations exist even when the consumer is not verbally complaining. Managers need to be aware that the impact of a defection can go far beyond the loss of that person‘s future revenue stream. Angry customers often tell many other people about their problems. The web has made life more difficult for companies that provide poor service, because unhappy customers can now reach thousands of people by posting complaints on bulletin boards or setting up web sites to publicize their bad experiences with specific organizations. 6.3 Consumer Complaining Behavior Consumer complaining behavior (CCB) is a broad term that describes the actions a consumer takes when they have a negative experience with a product or service. It can include a range of Service MKG/ Chapter Six/ Compiled by Worku A.(Dr.) Page 2 responses, and is important for businesses to understand because it can impact customer satisfaction and loyalty. Customer complaint behavior (CCB) is defined as an action that is associated with the evaluation of the consumer experience with the consumption of the product. The product consumption outcome may be positive or negative depending upon the quality of the product and the needs of the consumer. Some factors that can influence consumer complaining behavior include:  Perceived likelihood of success: Whether a consumer believes they can get a fair settlement and be treated with respect  Exit barriers: Whether there are any barriers to the consumer leaving the company  Attractiveness of alternatives: How appealing other options are to the consumer  Magnitude of dissatisfaction: How serious the consumer's problem is Some research suggests that the primary reason consumers complain is poor customer service, such as slow or rude service. However, social media can also be a way for consumers to share negative word-of-mouth, which can impact a brand's perception and future sales. 6.3.1 Types of customer complaints Here are seven common types of complaints to help you understand how to resolve them effectively: 1. Product or service A customer may make a complaint if they have problems with a company's product or service. For example, a customer may explain that a product arrived broken or that the product functions differently than they expected. When this happens, it's important to document the customer's concerns thoroughly. This documentation can help your company determine whether to change its products or services to improve the quality. After documenting the complaint, ask questions to determine the source of the problem. You can ask the customer to show you the problem with the product to ensure they're using it correctly. If they're misusing the product, you can politely show them how to use it correctly to meet their needs. If the product is broken, most companies have policies to replace the item at no cost or offer the customer a refund. Follow your company's policy to resolve the issue for the customer. Service MKG/ Chapter Six/ Compiled by Worku A.(Dr.) Page 3 2. Wait time This type of complaint may occur when a customer makes a call to a company, such as a call center, and experiences long hold times. It may also occur when a customer has to wait in line for service, such as waiting for a table at a restaurant. If a customer makes a complaint about the wait time, it's important to let them know you understand their time is valuable. Apologize to the customer for their wait and, if possible, provide an explanation for the wait time. Long wait times often indicate that a company can improve its operations to serve customers more efficiently. If your business consistently has long wait times, consider ways you can improve operations to reduce those times for the customer. For example, you may consider scheduling more staff members during peak times of the week. Finding a long-term solution for wait times can be a good way to improve customer satisfaction with the business. 3. Delivery Delivery complaints may occur when a company changes the expected delivery date of a product. It's common for online businesses, which ship their products to customers in the mail. Sometimes, the mail carrier may be the cause of the delivery delay, rather than the business. When this happens, you can look up the tracking details for the package and assure the customer it's on the way to them. If you notice the carrier may have lost the package, make sure to get in touch with the carrier to resolve the issue. If the business causes the delivery change or delay, apologize to the customer for the inconvenience. Explain why the business may have shipped the package later than expected. For example, if you had an influx of orders over the holiday season, tell the customer you had more orders than expected. You can also offer an incentive to the customer, such as a coupon, to apologize for the delay. 4. Personnel A personnel complaint may occur when a customer feels unhappy about their interaction with someone in the company. If a customer makes a personnel complaint, ask the customer to describe their interaction with the employee. If they're unsure of the name of the employee, ask them to provide a description of the person based on their interaction or conversation. Acknowledge the customer's frustration and apologize to them for the situation. Let them know you plan to speak with the employee about the issue. If you're a customer service representative, you can let your manager know about the complaint so they can speak with the employee about Service MKG/ Chapter Six/ Compiled by Worku A.(Dr.) Page 4 the interaction. If you're a manager, have an honest conversation with the employee to understand the situation from their point of view. You can arrange additional training for the employee in customer service or a related area to help prevent the situation from occurring again. 5. Online This type of complaint occurs when a customer provides feedback publicly on an online forum or social media site. Because many people may see the complaint, it's important to resolve the customer's issue as quickly as possible. When you see this feedback online, reach out to the person directly to ask if you can discuss their concerns. Ask for the customer's contact information and provide your own, including your name, phone number and email, to let them know you want to resolve the issue. When you speak with the customer, listen to their concerns carefully to understand the complaint. Take the appropriate steps to resolve the issue if you know how to fix the problem. If you're unable to handle the customer's request, you can forward the complaint to a manager and let the customer know you're working on the issue. After you resolve the complaint, you can politely ask the customer to remove their complaint. Often, customers may feel encouraged after speaking with someone and decide to take down the complaint on their own. 6. Continual Continual complaints occur when one customer provides the same feedback more than once or if multiple customers provide the same feedback. When you receive these complaints, it's important to resolve them quickly to maintain trust with customers. Ask relevant questions to determine the source of the problem and come up with a resolution. For example, if multiple people say that a product arrived with missing parts, you can bring the issue to the attention of a manager, who can stop the product from being sold until the company resolves the issue. Continual complaints often provide an opportunity for a business to improve its products, services or operations. Use this continual feedback to identify ways you can make changes to better meet the needs of customers. Making these changes can show customers you listen closely to their feedback and want to provide an excellent customer experience, which can help you maintain customer loyalty and improve the company's reputation. Service MKG/ Chapter Six/ Compiled by Worku A.(Dr.) Page 5 7. Communication Complaints related to communication may occur when there's a misunderstanding between the customer and the business. This misunderstanding may happen when a customer speaks with an employee or when a customer misinterprets a company's messaging, such as an advertisement. When communication complaints occur, it's important to acknowledge the source of the misunderstanding so you can find an appropriate solution. If the company communicated unclearly with the customer, apologize to the customer and explain what led to the misunderstanding. Offer the customer some compensation, such as a refund or a coupon. If the customer misunderstood the communication, be respectful and calmly explain the misunderstanding without faulting the customer. Work to find a compromise that satisfies the customer's concerns, such as providing a partial refund. Often, this compromise can show the customer that a company values their business and wants to provide a positive experience for them. 6.3.2 Importance of handling customer complaints carefully Customers are essential to your business. As the ones purchasing your products or services, they collectively have a direct impact on whether your business grows or fails. This is especially true if your business operates in a highly competitive industry. If a customer has a negative experience with your company, they may not hesitate to take their business elsewhere. When customers voice complaints, they often feel that their expectations haven’t been met in their interactions with your business. Whether they had a problem with the product they received or a negative interaction with one of your employees, the submission of a customer complaint indicates a gap between a customer’s expectations and their actual experience. It’s more important than ever to handle customer complaints carefully, as customers have a lot of power in the digital world. If a customer complaint isn’t properly addressed, this could lead to the customer writing a negative review of your business online or posting about their negative experience on social media. Once online, a customer’s negative feedback can be seen by hundreds or thousands of potential customers, and this can drive away business and hurt your brand’s reputation. Service MKG/ Chapter Six/ Compiled by Worku A.(Dr.) Page 6 While no business owner wants to receive customer complaints, these complaints can actually present an opportunity for your company. First of all, when customers complain directly to you, they typically don’t abandon your brand entirely but rather give you a chance to rectify the situation. Providing the customer with an effective solution can make them even more loyal than they were before. Additionally, receiving negative feedback from customers can help you identify the root cause of the problem and find ways to improve your business going forward. Customer complaints are feedback from purchasers about their issues with a company's products, services or operations. This feedback provides an opportunity for businesses to provide excellent customer service by addressing the complaint and offering a solution. It's important to resolve complaints because it can:  Create a better customer experience: Resolving complaints can help you understand the customers' needs and how to meet them, which can create a better customer experience.  Improve a company's reputation: When you work to resolve customer complaints, it shows customers you understand their concerns and take them seriously, which can improve a company's reputation.  Boost customer retention rates: Effectively addressing customer complaints can lead to increased customer loyalty, which can boost a company's customer retention rate. 6.3.3 Making it easier for customers to complain How can managers make it easier for unhappy customers to complain about service failures? Many companies have improved their complaint collection procedures: By adding special toll/fee free phone lines, Prominently displayed customer comment cards and video or computer terminals for recording complaints. Some go even further, Training their staff to ask customers if everything is satisfactory and to intervene if a customer is obviously discontented of course just collecting complaints doesn‘t necessarily help resolve them. Service MKG/ Chapter Six/ Compiled by Worku A.(Dr.) Page 7 6.3.4 Steps for handling customer complaints When a customer complains, determining the appropriate response can be harder than it sounds. Nevertheless, it’s important to train your customer service team so that they can handle common customer complaints and make sure issues are resolved quickly and effectively. Here are the steps below to learn how to handle customer complaints in a way that leaves customers feeling satisfied. 1. Listen to the customer If a customer has complained, it means that they want their unique problem to be heard. Brushing off a customer complaint or failing to fully understand the problem can make the situation worse. So train the customer service reps at your company in active listening techniques that allow customers to feel heard and seen by your organization. 2. Show empathy Empathy is a key part of resolving any customer-facing problem or confrontation. Practicing empathy means stepping into the customer’s shoes and trying to see a problem from their point of view–why are they upset? And what actions would resolve the issue from their perspective? Not only can showing empathy help you identify a solution to a problem, but it can also make the job of your customer service reps easier. Using empathy statements and attempting to relate to the customer often helps in calming everyone down. If a dissatisfied customer senses that you genuinely understand their frustration and care about their problem, then they’ll likely be more willing to work with you toward a solution. 3. Apologize When dealing with unhappy customers, an apology can go a long way. If you made a mistake or didn’t deliver on a particular promise, sincerely apologize to the customer who’s complaining and acknowledge the validity of their situation. At the same time, offering an apology can be beneficial even in situations where you don’t feel like you were wrong. An apology allows you to defuse the situation and move closer to finding a resolution. Service MKG/ Chapter Six/ Compiled by Worku A.(Dr.) Page 8 4. Ask thorough questions After listening to a customer’s complaint, make sure to ask any relevant questions in order to better understand the situation. With more information to work with, your customer service representatives will have an easier time finding a suitable solution to the problem and providing great customer care. 5. Loop in necessary parties Communication is the key to success when solving just about any problem. Keeping your team in the loop can enable you to resolve customer complaints more quickly. Additionally, communicating a customer complaint to your team can prevent the mistake or miscommunication that prompted the complaint from happening again. 6. Find a swift solution Perhaps the most important part of handling customer complaints is finding a resolution–and quickly. No unhappy customer wants to wait around for days or weeks as you come up with a solution for their problem. Instead, prepare your customer service team with guidelines on go-to solutions for common customer complaints and limitations on what they can offer customers in a given situation. 7. Follow up Following up on a customer complaint can be a great way to engage with your audience and show that you care. In many cases, following up on a customer complaint takes the form of sending out a customer satisfaction survey. In this survey, the customer can rate their level of satisfaction with their customer service experience, which can in turn provide you with valuable data and insight. Following up with customer complaints will help you stand out from the competition by demonstrating excellent customer service. 8. Create a record From the time a customer complaint is first submitted to the moment it gets resolved, record your interactions with the customer. Recording customer interactions can provide you with information that helps improve your products, services, and overall customer experience. At the Service MKG/ Chapter Six/ Compiled by Worku A.(Dr.) Page 9 same time, having a record of communication with a particular customer can provide your customer service reps with context if that customer makes another complaint in the future. 6.4. Service Recovery Service Recovery refers to the attempt of the service provider to manage the service failure causing dissatisfaction to the consumer and ensure quality service delivery. Witnessing a service failure is a very frequent incident in most of the services due to controllable or uncontrollable factors. However, handling such a failure so that the customer is not lost is more crucial. It must be noted that a service recovery action may be initiated not only after a consumer complaint but also by the service personnel themselves, if they feel that they have failed at any level in offering the quality service. Service recovery refers to the actions and processes a business or organization employs to address and resolve customer complaints, issues, or problems that arise during or after the delivery of a product or service. A service recovery aims to restore customer satisfaction, loyalty, and trust, even when something has gone wrong in the customer experience. Service recovery is an umbrella term for systematic efforts by a firm to correct a problem following a service failure and to retain a customer‘s goodwill. Service recovery efforts play a crucial role in achieving (or restoring) customer satisfaction. In every organization, things may occur that have a negative impact on its relationships with customers. Effective service recovery requires thoughtful procedures for resolving problems and handling disgruntled customers. It is critical for firms to have effective recovery strategies, because even a single service problem can destroy a customer‘s confidence in a firm under the following conditions: The failure is totally outrageous/ offensive (for instance, blatant dishonesty on the part of the supplier). The problem fits a pattern of failure rather than being an isolated incident. The recovery efforts are weak, serving to compound the original problem rather than correct it The real difficulty for employees is that they often lack the authority and the tools to resolve. Customer problems, especially when it comes to arranging alternatives at the company‘s expense or authorizing compensation on the spot. When complaints are made after the fact, the options Service MKG/ Chapter Six/ Compiled by Worku A.(Dr.) Page 10 for recovery are more limited. In this case, the firm can apologize, repeat the service to achieve the desired solution or offer some other form of compensation. 6.4.1 The service recovery paradox The service recovery paradox (SRP) is a customer service phenomenon where a customer's satisfaction with a company increases after a service failure is resolved: This happens when a company responds to a service failure quickly, empathetically, and effectively, often exceeding customer expectations. The customer's post-recovery satisfaction is then higher than their satisfaction level before the service failure. Occasionally some businesses have customers who are initially dissatisfied with a service experience and then experience a high level of excellent service recovery, seemingly leading them to be even more satisfied and more likely to repurchase than if no problem had occurred at all. That is, customers appear to be more satisfied after they experience a service failure and a subsequent good recovery than they otherwise would have been! To illustrate, consider a hotel customer who arrives to check in and finds that no room is available of the size reserved and the price quoted. In an effort to recover, the hotel front desk person immediately upgrades this guest to a better room at the original price. The customer, thrilled with this upgrading, reports that: she is extremely satisfied with this experience, she is even more impressed with the hotel than she was before, and she vows to be loyal in the future. Although such extreme instances are relatively rare, this idea—that an initially disappointed customer who has experienced good service recovery (after a service failure) might be even more satisfied and loyal as a result—has been labeled the Service Recovery Paradox. Service MKG/ Chapter Six/ Compiled by Worku A.(Dr.) Page 11  Figure 6.1 Service Recovery Paradox 6.4.2 Importance of Implementing a Service Recovery Strategy Research done by Sales force reveals that if the company’s customer service is excellent, 78% of consumers will do business with them again – even after a mistake. This is why successful businesses have a service recovery strategy as part of their overall customer service strategy. Let’s explore some of the benefits of creating and implementing a service recovery plan: 1. Repairing Customer Relationships – When customers encounter problems or have negative experiences with a product or service, their initial dissatisfaction can lead to frustration, disappointment, and, potentially, a decision to take their business elsewhere. Effective service recovery efforts can help repair the relationship with the customer, ensuring they continue to do business with the organization. 2. Increasing Customer Retention – Acquiring new customers is typically more costly and time-consuming than retaining existing ones. Service recovery is a means of maintaining valuable customers who may otherwise be lost due to a bad experience. Loyal customers tend to make repeat purchases and can become advocates for the business. Service MKG/ Chapter Six/ Compiled by Worku A.(Dr.) Page 12 3. Enhancing Business Reputation – In today’s digital age, customers have a powerful voice through online reviews, social media, and word-of-mouth. Unresolved customer complaints can quickly spread and damage a company’s reputation. Conversely, effective service recovery can lead to positive reviews and recommendations, improving the organization’s image. 4. Learning and Continuous Improvement – Service recovery allows organizations to learn from their mistakes and identify areas to improve their products, services, or processes. By addressing the root causes of problems, businesses can prevent similar issues from occurring in the future. Providing relevant customer service training across all departments can help reduce the number of service mishaps or failures. 5. Gaining a Competitive Advantage – Businesses that excel in service recovery can gain a competitive edge. Customers are more likely to choose companies that are known for resolving issues promptly and to their satisfaction. This can help differentiate a business in a crowded market. 6. Expanding Customer Feedback – Service recovery often involves gathering customer feedback about their experiences. This feedback can be invaluable in identifying recurring problems and strategically improving business operations. 7. Adhering to Legal and Regulatory Compliance – In some industries, effective service recovery is not just a matter of customer satisfaction but also a legal or regulatory requirement. Failure to address specific issues can result in legal consequences or fines. 8. Boosting Employee Morale – Employees trained in and empowered to participate in service recovery methods that genuinely make a difference in retaining customers will have higher job satisfaction. This can lead to improved employee morale and a more motivated workforce. In today’s world, service recovery is not just an option but a necessity for businesses that aim to succeed. It is a powerful tool that can help retain customers, safeguard an organization’s reputation, and enhance the quality of products and services. By demonstrating a solid commitment to customer satisfaction and taking prompt and effective action to address any problems, you can continue to earn the trust and loyalty of your customers for the long haul. Service MKG/ Chapter Six/ Compiled by Worku A.(Dr.) Page 13 6.4.3 Strategies of Service Recovery Service recovery is not just a onetime action or to resolve one service failure. It is a step by step process of resolving the customer’s issues. 1) Fail-safe the service: When a service is provided perfectly the first time itself then the question of service recovery does not arise. The training and systems must be so designed that every task is performed perfectly. Zero defect service must be a goal and this ensures there are no failures. There must be advance planning so that employees know how to react in event of service failures. The employees must be aware of solutions in event of a problem rather than panic in such a situation. The employees must be regularly trained to handle customer service issues. 2) Welcome and encourage complaints: If the customer encounters a problem but does not complain and switches to another retailer, we have a serious service problem. However hard the retailers try, failures will occur. Therefore, it is essential to encourage customers to complain. It should be easy for the customer to complain and the retailer should create enough channels for this such as helpline numbers, drop boxes, websites, customer satisfaction surveys etc. The employees too must quickly recognize signs of customer dissatisfaction. 3) Act quickly: The complaint must be resolved at the earliest. Quick responses may require support of good systems and procedures within the organisation. It may also be necessary to empower the employees to take some decisions themselves in order to resolve complaints speedily. For example, if a product is to be repaired for which some expenses have to be borne the employee must have the authority to incur that expenditure. 4) Treat customers fairly: Customers must be treated fairly as outlined in the section above– whereby outcome fairness, procedural fairness and interaction fairness must be adhered to. 5) Learn from recovery experiences: A smart retail organisation will learn from its mistakes and ensure that they do not recur. For this all service issues must be documented and analyzed to understand the root causes. These causes must be addressed at the earliest. 6) Learn from lost customers: It is vital to understand why customers have switched to other retailers, what are the service failures etc. Service MKG/ Chapter Six/ Compiled by Worku A.(Dr.) Page 14 A database of all customers must be maintained in order to conduct regular surveys and unearth reasons for the switching behavior. There can be several causes including High prices Inconvenience – long waiting period/working hours/location etc. Service failures- service mistakes Service encounter failures- unresponsive behavior/not having knowledge Competitors service is superior Ethical problems - cheating Poor response to service failure Service MKG/ Chapter Six/ Compiled by Worku A.(Dr.) Page 15