Making the Case for Service Recovery Customer Retention
Service Recovery is one of the key ingredient’s to good service, leading to happy
customers and we all know happy customers are very good for business, whether
you are a retailer, coach, director of golf or general manager. Research has shown
that customers who have had a bad service experience which was resolved quickly
and properly are more loyal to a company than are customers who have never had
a service failure - significantly more loyal. Service Recovery practices are a critical
element in any Customer Loyalty Program.
I see a huge opportunity for improvement and a chance to create remarkable
experiences that create word-of-mouth marketing in situations when products and
services fails – if sound service recovery programs are in place.
Every service and product, whether human or technology driven, will eventually fail
one day putting you and your customer in an uncomfortable situation. Smart
organizations will understand this and develop a service recovery program which
ensures that their customers are satisfied even after things have gone wrong.
The goal of service recovery is to identify customers with issues and then to address
those issues to the customers' satisfaction to promote customer retention.
However, service recovery doesn't just happen. It is a systematic business process
that must be designed properly and implemented in an organization. Perhaps more
importantly, the organizational culture must be supportive of idea that customers
are important and their voice has value.
Think about your own experiences with service or product problems. Did you get
a quick acknowledgement of the problem, speedy resolution of the problem, and -perhaps -- compensation for your troubles? Imagine if you got a truly sincere
apology and not some phony empathy? Weren't you more likely to buy from that
business again because of the confidence you now had in their business practices?
That's the key value to effective service recovery and complaint handling: customer
retention.
One way to think about service recovery is that it is a positive approach to
complaint handling. Complaint handling has serious negative connotations; whereas,
service recovery has positive connotations. Complaint handling is placating people,
minimizing a negative. Service recovery practices are a means to achieve the
potential, latent value a customer holds for you and your services by fostering an
on-going positive relationship.
Service recovery has a secondary value. It creates positive word-of-mouth about
your services and golf club and minimizes the bad spin that lack of service recovery
practices can create.
Why Does Service Recovery get No Respect?
So why isn't service recovery part of every organizations' business processes? No
easy answer exists. Perhaps it's the contention between operations and marketing.
Sales & Marketing is often a key focus of golf clubs and any business, driving income
is sexy. Marketing conducts expensive research, fine tunes the 4Ps that comprise its
marketing strategy (Product, Place, Promotion, and Price), and penetrates new
customer bases through its sales and marketing programs. New customers are
expensive and achieving sales growth and expanding market share can be costly.
Service Recovery isn't sexy. It's an operational task that involves negotiating with
angry customers. Often it requires us to look inwards at ourselves and the
company analysing why services or products have failed.
In the short term it is usually easier to just dismiss these upset customers and move
on to greener fields? Some customers cannot be recovered but they can be made
less dissatisfied so they don't bad-mouth the organization. This may seem like
heresy from a service recovery programme however; customers are not always
right.
Having said that most customers can be recovered through simple application of the
Golden Rule. And those recovered and retained customers become profit centres.
They buy more and they give positive recommendations to friends and colleagues,
which is the most important form of “advertising.”
For a rough calculation on the potential value of a Service Recovery Program for
your business find out the annual sales volume per customer, then apply the
operating profit margin to find the profit per customer. Next, find out the annual
customer churn, that is, how many customers stopped buying from you -- especially
long-standing customers. Multiply, the churn by the profit margin and you have the
potential value of the Service Recovery Program's annual budget. You'll probably
find that even reducing a small amount of the churn will more than pay for the
program. And this doesn't even include the reduced sales from customers who
didn't leave but still have issues with you and the club!
When organizations plan to implement recovery programs it is helpful to
differentiate between the strategic initiatives that should be in place before the
actual problem occurs and the tactical activities that should happen after a problem
has occurred and the customer contacted the company.
Let’s start with the strategic initiatives that will ensure that the right environment
for remarkable service recovery is in place.
Anticipate the need for recovery
Whenever you roll out a product or service, the people related to it are probably
well aware of potential problems or obstacles that might occur. It is probably not so
much arrogance than probably more wishful thinking that limits the ability of
companies to foresee potential problems with a product. Accepting that even the
best designed product or service will fail one day in specific situations is the first
step. Anticipating potential problems will help organizations to be prepared when
the first customer contacts us with a problem.
Build an organization that is fast on decision making, and fast to
respond.
One of the key success factors to win back customers and restore their satisfaction
is to act fast. While your front-line employees might be working hard (and fast)
already, the whole organization that deals with service recovery has to be “designed
for agility”. This includes clear escalation and decision-making processes. One key
principle should be that the fastest decision-making happens when the front-line
employee can make the decision. So the real goal is not to define better escalation
processes, but to define processes that empower employees so that escalation
processes are not necessary anymore.
Empower front-line employees
In most companies, the employees that are actually interacting with customers are
the ones that receive the lowest salary in an organisation. While increasing the
salaries (compared to other competitors) is one way to attract and retain talent that
is able to deliver exceptional service, empowering employees and giving them the
freedom to do whatever is necessary to ensure that customers are satisfied is
probably even more economically meaningful.
Train employees
Ensure that your training program includes not just lessons on delivering service
when everything works out as planned, but also to include lessons that teach
employees to improvise or to set recovery programs into action if something goes
wrong.
While these strategic initiatives are important to define the long-term direction of
your service recovery programs, the "moment of truth" happens when a customer
contacts a company and interacts with an employee to discuss the problem and
possible solutions.
We all live in dread of the angry and dissatisfied customer. A happy customer talks
to 2 people but an unhappy customer talks to 8 people. Avoiding an unhappy and
talkative customer is vital. Happily it is possible to train for such interactions and
learn to deal with them like professional politicians. I strongly recommend training
those employess in the front line well. Here are some useful tips.
What do you do in that moment of truth when you, or your employee are face to
face with an unhappy customer:
Acknowledgement
Acknowledge that there is a problem. It doesn’t matter whether the customer
didn’t understand certain aspects that are obvious from an organization’s
perspective. He is the one that has a problem and if you want to keep this customer
he needs to be taken serious. If one tries to convince customers that there is no
problem, you are actually telling them they are stupid. This applies also to situations
when the customer is following the wrong steps to perform a task – never blame
the customer.
Empathy
Understand the problem from a customer’s point of view and also understand that
he might be upset after a problem has occurred. While it is not necessary to listen
to a customer when he starts cursing at employees, front-line employees should try
to create an atmosphere that supports and enables a positive solution of a problem.
Confronting the customer with his anger and frustration will not lead to an
escalation of the problem, communicating that one can understand his situation will.
Apology
Saying sorry is essential. Whether the employee should apologize in his name or in
the name of his company depends on the context of the service recovery. If the
employee (or a direct colleague) was involved when the problem occurred, he
should apologize on his own behalf. If the employee is in a call-centre and a problem
happened at a completely different location in the organization, he should apologize
in the name of the organization – everything else is not authentic.
Own the problem
Taking ownership of the problem by the employee that is confronted with the
problem (no matter in what position he is in) ensures that customers feel that they
are taken care of. And even if your job is not to resolve the problem ultimately,
telling customers to go somewhere else (and not "bringing" them there) sends the
message that they don’t care.
Fix The Problem
Obviously fixing or at least trying to fix the problem for the customer should be the
top priority. This might be easy in some situations (maybe just replacing the defect
product) it becomes a challenge when the problem is not a real problem. Let’s say
the customer was simply using the product in a wrong way, fixing the problem in
such a situation means re-educating the customer so that he uses the product or
service in the supposed way.
Provide assurance
When customers get in touch with you to report a problem and to demand a fix
their most important need is to be taken seriously. Giving them a feeling of
assurance that the problem will be sorted out and should (hopefully) not occur again
will leave a professional impression and help rebuild the customer’s confidence a
company’s products and services.
Provide compensation
If you want to make angry customers happy, give them money. Providing a refund,
token or other compensation depending on the severity of the problem remains to
be a powerful method for service recovery. Increasing the amount of money that a
company pays to company to fix problems requires a rigorous control but it can
indeed ensure that your customers are satisfied. It is important to note that just
"handing out money" is not enough – if money is handed out unfriendly or even
worse, in a tedious discussion with the customers, satisfaction will not be restored.
Remember a business not having a service recovery programme is the same as
neglecting your short game hoping that you will hit every green in regulation.
Sooner or later sometimes through no fault of your own, things will go wrong and
the true measure of your business will be dealing with matters when they go wrong,
just as the truly great players are able to return a score even on an off day.
Written by: Rod Park
Park Consulting Services
Email: [email protected]