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Untitled
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- 1The impact of service failure and recoveryService Failure: a service performance that falls below a customer’s expectations to lead to dissatisfaction.
Service Recovery: actions taken in response to service failure.
Causes of failure:
- Service unavailable when promised;
- Delivered too late, too slowly;
- Incorrect or poorly executed;
Why important?
45% customers who have a problem say something 1 in 5 report to headquarter
When left unresolved, customers could leave, tell others, find revenge using other avenues. - 2Outcomes of service failuresThe effectiveness of service recovery can lead to different outcomes:
- Non-complainers are more likely to repurchase than dissatisfied complainers.
- Non-complainers are least likely to return and make a purchase.
Service recovery paradox: an initially disappointed customer who receives good service recovery might become even more loyal and satisfied as a result. - 3Customers’ types of response to service failuresA customer who experiences failures can respond in a variety of ways:
Types of Customers:
o Passive / Non-complainer:
- Threat to success because firm can’t correct the issue;
o Voicers:
- Actively complain, less likely to spread negative word of mouth
o Irates:
- Negative word of mouth;
- Less likely to give second chance to provider;
o Activists:
- Will complain to provider on all dimensions;
- Likely to complain to 3rd parties; - 4Why people do and don’t complain- Consequences may occur;
- Feel they should be compensated for the failure;
- Feel it’s not worth time or effort;
- Ego involvement in the service; - 5Types of complaint actionsTypes of complaint actions:
- On the spot to service provider (best case scenario);
- Complain after via telephone or internet;
- Spread negative word of mouth (worst case scenario); - 6Expectations & Fairness in Customer Service RecoveryIf customer takes time to complain, they have a higher recovery expectation.
Outcome fairness: Results that customers receive from complaints (e.g. refunds);
- Size of complaint should match compensation;
Procedural fairness: Policy rules and timeliness of the complaint process (ex. rule that all complaints are dealt with within two weeks);
- Clarity of process, speed and absence of difficulties;
Interactional fairness: The interpersonal treatment received during the complaint process (ex. attitude of individuals assigned to deal with the complaint)
- Treated politely, with care, and honesty - 7Service recovery strategieso Make the service fail safe – Do it right the first time:
- Reliability is a key to quality;
- Service Culture;
o Encourage & Track Complaints;
- New mind-set – complaints are good;
- Make complaining easy;
- Be active listener;
o Act Quickly;
- Employees must be empowered to solve
problems if they occur;
o Provide Adequate explanations:
- Way the explanation is delivered;
o Treat customers fairly;
- outcome;
o Cultivate Relationships with Customers;
o Learn from Recovery Experiences;
o Learn from Lost Customers; - 8Service guaranteesA pledge or assurance that a product will perform as promised and, if not, then some form of reparation will be undertaken.
For tangible products, a guarantee is often done in the form of a warranty.
Services are often not guaranteed when:
- cannot return the service;
- service experience is intangible;
Benefits:
- Forces focus on customers.
- Sets clear standards.
- Generates feedback from customers.
- Opportunity for recovery and retain loyalty.
- Information tracked and integrated into improvement efforts.
- Employee morale and loyalty can be enhanced.
- Reduces customers sense of risk and builds confidence. - 9Types of Guaranteeso Satisfaction vs Service Attribute Guarantee:
- 100% satisfaction and No more than 2 people in a line
o External vis Internal Guarantee:
- Ensuring supplies when needed or pay staff money
o Characteristics of Effective Guarantee
- Unconditional (No strings attached);
- Meaningful (Guarantee elements of the service that are important to the customer, The payout should cover fully the customer’s dissatisfaction);
- Easy to understand and communicate (Customers need to understand what to expect, Employees need to understand what to do);
- Easy to invoke and collect (No red tape in the way of accessing or collecting on the guarantee);
o When to NOT USE a guarantee:
- When existing quality is poor (draw attention to the problems);
- Doesn’t fit company image (high end hotel Ritz);
- Service Quality is uncontrollable (Education & Passing Exam, On-time departures);
- Abuse of guarantee;
- Costs outweigh benefits;
o When to USE a guarantee:
- Little variability in competitor service quality (esp. for 1st company to offer one). - 10Pricing of Service Knowledge of service pricesService prices are different for consumers:
1. Customer knowledge of service prices
2. The role of non-monetary costs
3. Price as an indicator of service quality
Knowledge of service prices:
- Internal reference price (price point in memory for good service);
- Service variability limits knowledge (dentist visit with x-rays vs without);
- Providers are unwilling to estimate price (lawyer);
- Individual customer needs may vary (hairstylist & coloring based on hair length)
- Collection of price info is overwhelming (promotional pricing)
- Prices are not visible (financial services, insurance) - 11Non-Monetary Costs of Services- Time: time needed for service to be served (wait)
- Search Costs: effort invested when searching for provider
- Convenience: opening hours, travel costs, etc.
- Psychological: fear (understanding insurance) rejection (bank) - 12Approaches to Pricing Services1. Cost-based
- Price based on raw-materials, labor and add overhead and profit to determine price (ex. utility, contracting, advertising)
Challenges: cost hard to trace, labor is hard to price, costs may not equal value customer perceives its worth.
2. Demand-based:
- Based on what customers are willing to pay for the service.
Challenges: price must be adjusted to reflect the value of the non-monetary costs
3. Competition-based:
- Focus on the price charged by other firms in the industry
(ex. Airline Industry)
Challenges: Heterogeneity of service limits comparability, Prices may not reflect customer value - 13Customer Definitions of Value1. Value is low price (Dry cleaning: cheapest)
2. Value is whatever I want in a product or service (MBA degrees: Best education possible)
3. Value is the Quality I get for price (Hotel: price first, quality second)
4. Value is what I get for what I give (Housekeeping: rooms cleaned for price given) - 14Pricing strategies when the customer defines value as: Value is low priceo Discounting – price sensitive buyers
o Odd pricing – pricing just below amount to make buyers perceive they are getting a lower price
o Synchro-pricing – using demand – time consumed, location of seat, etc.
o Dynamic pricing – changing of price based on market demand – online mainly
o Penetration pricing – introduced at low price to stimulate trials - 15Pricing strategies when the customer defines value as: Value is whatever I want in a product or serviceo Prestige pricing – high quality or status service offered
o Skimming pricing – new services are introduced at high prices with large promo expenditures - 16Pricing strategies when the customer defines value as: Value is the Quality I get for priceo Value pricing – giving more for less – bundling (tie) services for lower price than individually sold
o Market Segment Pricing – groups charged different amounts – client categories – price elasticity - 17Pricing strategies when the customer defines value as: Value is what I get for what I giveo Price framing – price information so customer know how to understand the price
o Price bundling (packaging items – extended warranties, training, service contracts)
o Complementary pricing – base price and other additional items (Copier rental price, installation price very low)
o Results based pricing (lawyer fee – no payment until case settled)
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- Flashcards on Untitled, created by Roberta Daugelai on 30/03/2016.
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- Roberta Daugelai
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