Service recovery refers to the actions taken by an organization in response to a service failure. Failures occur for all kinds of reasons – the service may be unavailable when promised it may be delivered late or too slowly, the outcome may be incorrect or poorly executed, or employees may be rude or uncaring. All of these types of failures bring about negative feelings and responses from customers. Left unfixed, they can result in customers leaving, telling other customers about their negative experiences, and even challenging the organization through customer rights organizations or legal channels. Research has shown that resolving customer problem effectively has a strong impact on customer satisfaction, loyalty, and bottom- line performance. That is, customer who experience service failures, but ultimately satisfied based on recovery efforts by the firm will be more loyal than those whose problems are not resolved.
Those who complain and have their problems resolved quickly are much more likely to come again than those whose complaints are not resolved. Those who never complain are least likely to come.
Hampton Inns directly realized the benefits of effective service recovery through their service guarantee. They achieve $11 million in additional annual revenue and the highest customer retention rate in their industry after implementing the 100% customer satisfaction guarantee shown in the figure. The guarantee reimburses service recovery and customer retention strategy. An effective service recovery strategy has multiple potential impacts. It can increase customer satisfaction and loyalty and generate positive word of mouth. A well – designed, well documented service recovery strategy also provides information that can be use to improve service recovery strategy also provides information that can be used to improve service recovery experiences; companies increase the likelihood of “doing it right the first time”. In turn, this reduces costs of failures and increases initial customer satisfaction.
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