Service Recovery in Successful Relationships

¶ … Service Recovery in Successful Relationships

Mitigating losses from customer defections through service recovery strategies has a direct link to the profitability of any enterprise. While no enterprise can completely alleviate service failures either caused by lack of employee training or systemic and process-related failures, the essence of the service recovery paradox is the ability to attain higher satisfaction levels from the customer as if the incident or occurrence had never happened (Michel, Meuter, 441, 442). Service recovery is defined as a service provider's response to a failed service that makes the difference between customer retention and defection, which directly impact any organizations' profitability and long-term viability (McCullough, et.al.). It is common knowledge that the cost of recruiting new customers is estimated to be five times that of keeping an existing customer, as mentioned throughout service recovery literature (McCullough, et.al.), (Boshoff, 42), (Cranage, 212) and (Maxham, 23, 24). In certain situations, by increasing customer retention by 5%, a service provider can increase profits nearly 100%, a significant finding from the research completed by McCullough (et.al.). Michel (23, 24) differentiates between compliant management and service recovery activity. Specifically, Michel (et.al) viewed service recovery as an organizations' strategy to respond to a failed service prior to an actual complaint from a customer. Michel (et.al.) differentiated this from complaint management, which is contended in the cited research to be based on customer complaints after a service failure has occurred. For purposes of this analysis, the differentiation between the strategic approach to service recovery vs. The incident-based customer complaints models (Hedrick, Beverland, Minahan, 65, 66). As has been observed by many researchers and theorists in service recovery (Michel, Meuter, 443, 444), (Maxham, 23), and (Matos, Henrique, Rossi, 64, 65) the majority of dissatisfied customers are reluctant to complain and often do not, which leads to service recovery becoming more of a strategic issue. These theorists argue that service recovery efforts may lead to even greater dissatisfaction, therefore creating even more dissatisfaction and lack of future opportunities to serve the customer and earn back their trust. This dynamic is called the "double deviation" effect, and it intensifies customer dissatisfaction levels (Maxham, et.al.). These aspects of service recovery form the theoretical foundations of creating strategic plans specifically to turn around service failures and re-earn customers' trust and eventual business. Implicit in service recovery strategies is also the need for creating a sense of ownership with employees delivering the service itself. Strategies for ensuring successful change management are also discussed in the context of this analysis as well.

Introduction

Service recovery as a strategic initiative requires a methodical approach to resolving service failures at a systemic or process level, a monitoring of customer responses with regard to dissatisfaction as evidenced by compliant behavior, and an assessment of the underlying foundations of service recovery from an attribution theory, equity, social exchange and Confirmation/Disconfirmation Paradigm theory standpoint. All of these theoretical frameworks rely heavily on how expectations are created and maintained, and form the foundation of how consumers judge whether service recovery efforts are effective or not (Hawes, Mast, Swan, et.al.). In essence, expectations are the context by which consumers determine if a service is acceptable or not. As a role of the critical role of expectations, a discussion is included as to how they are formed, the nature and characteristics of expectations, and how they are measured. Expectations are critical in both product and service-related businesses (Huang, 536, 537) yet in the former, they form the basis of the service transaction (Hawes, Mast, Swan, et.al.). Organizations that are attaining the highest levels of performance in services industries have created processes for internalizing lessons learned in service recovery and transforming them into processes and strategies (Boshoff, 43, 44). Based on the accumulated research a proposed Services Recovery Model is also defined in this analysis. This proposed model defines the need for coherence and consistency between organizational and individual service recovery strategies, based on the foundation of accumulated expectations of customers. The focus of the Services Recovery Model is the validation and reinforcement of trust through coherency and consistency of organizational and individually-oriented recovery strategies.

From these theoretical foundations, the developments of strategic responses to service recovery are possible to design, implement and monitor over time. Service recovery has progressed as an academic discipline and business practice due to the increasingly commoditized product strategies that rely increasingly on price and service, less on product or services features. In conjunction with the commoditization of products is the increasingly sophisticated use of analytics and lifetime customer metrics.

From the insights gained from analytics, multi-dimensional approaches to defining service recovery strategies continue to be made more effective and targeted (Bhandari, Tsarenko, Polonsky, 174). Despite these external market dynamics the objective of making ongoing relationships as productive and valuable as possible for customers is crucial for greater levels of trust and loyalty to be earned. Despite the ongoing and often thorough efforts of organizations to deliver exceptional levels of performance in services, it is often seen as an unrealistic goal or objective if attainment is set at 100% (McCullough, et.al.). The shift from seeing customer problems as a source of cost and pain to viewing them as a potential to resolve the problems faced by them and thereby earn greater levels of trust and loyalty (Robbins, Miller, et.al.) is a mindset that is critical and essential for any service recovery strategy to succeed (Autry, Hill, O'Brien, 320, 321).