Service Recovery Failure - Coursework Example

Service Recovery Failure Name: Institution: Instructor: Date Table of Contents Table of Contents 2 Introduction 3 Achieving Service Recovery 3 Factors leading to service failure 4 Steps towards Service Recovery 6 Apologize 6 Listen and empathize 6 Fix the problem 6 Offer atonement 7 Follow-up 7 The impact of Service recovery intervention on customer loyalty 7 Link between Customer Satisfaction and Financial Performance 8 Conclusion 9 Works cited 10 Introduction The need for organizations to coordinate their marketing communication strategies to achieve a clear, competitive and consistent message about their product has become a big challenge for all result-oriented companies. Effective marketing communications should therefore, become an interregnal part of every result driven and efficient organization, for the firms to remain profitable both in the short and long term. How creative and innovative marketing practitioners are in the appropriate coordination, combination, in using tools of marketing combination will have enormous impacts on the firm services or products and by extension, their market shares. IMC (Integrated Marketing Approach) believes that firms should leave no chances for any form of error, miscommunication, or time for confusion (Goldstein 130). It is based on the above arguments that this paper will examine on ways to achieve service recovery failure and evaluation of the link between customer satisfaction and financial performance of an organisation. Achieving Service Recovery No matter how well an organisation manage its customer services, problems always become inevitable. Some of the problems can be very serious, thus largely affecting the operations of organisations, while others may be minor. Overall, this problem plays a role towards shaping the outlook of the firm depending on the way the problem is handled. Marketing researchers have established the fact that, most satisfied customers are those have never experienced serious problems or defects in problems or services provided by an organisation. The immediate satisfied customers are the ones who have experienced product or service difficulties, often-significant ones, which have been redressed by the firm. The least satisfied customers are the ones whose difficulties have remained unresolved by an organisation. It is notable that the aspect of service recovery ahs remained a foreign concept to most of the businesses, as they do not understand it; therefore, they have often failed to practise it. Simply put, the idea of service recovery aims at putting smile on a the face of a customer after the firm has made a mistake. It is solving customer’s complains or problems and sending them out door feelings as if they have just conducted business, with one of the greatest firms on the globe. Service recovery entails bringing customers back from brinks of defections, in order to retain and attract new customers. Bell (33) argues that service recovery have largely received attention for the last two decades, within the service management as well as service marketing. It is notable that the cost of gaining new customers exceeds cost or retaining by almost five times, thus making managers to be increasingly concerned about minimizing the number of customer defections. Research fro marketers have indicated that there are four main ways in which service failures and the subsequent recovery affects the loyalty of the customers towards service and product companies. For example, service failure has negative effects on the customer loyalty intentions; failure resolutions have positive effects on the loyalty intentions, customer satisfaction ahs positive effects on the loyalty intentions. Further, outstanding recovery results into loyalty, which is more favourable as compared to if there was no any failure occurrence. Bowen (35)argues that the above findings has resulted to service recovery paradox, which indicates that customers can be more satisfied with a firm although they failed to deliver on first attempt than if they delivered the particular service without any error. Factors leading to service failure Spreng (20) argues that the main reason why service delivery occurs can largely be attributed to the general failure between marketing and operation department in a given firm. It is worth noting that marketing department spends a substantial amount of resources allocated to them in fine turning the 4P’s (Price, product, place and promotion) , which comprise their marketing strategies. They try penetrating the new customer bases via these marketing and sales programs. As a result of this, firms concentrates on ways of attracting and retaining new customers, thus compromising the aspect of high quality customer service. Secondly, it is notable that many of the firs are not ready to venture into the area of service recovery (Bitner 106). This is due to the fact that it entrails negotiations with angry customers. The budgetary allocations typically falls into the customer service department, one of the loathsome cost centres, which drains the firm’s profits. Consequently, most of the businesses view it easy to ignore the customer’s complains and moves on to other green fields. In some instances, it is probably appropriate as easier to move o as some of the customers are irrecoverable. However, most of the customers can be recovered, thus becoming a great profit centre for the firm. Bell (32) indicates that rough calculation on potential value of the service recovery program in any given organisation establishes the sales volume per customer on annual basis. This is then applied to the operating profit margins, in order to establish profit per customer. The other important step is finding out customer chum, which si the number of customers who stopped from the firm, especially the long-standing customers (Zemke 15). The chum is then multiplied by the profit margin that results to the potential value of service recovery program budget on annual budget (Bell 30). Based on this, a firm will recognize that even decreasing small amount of customer chum will more than reward for this program, although it does not include reduced sales from the customer who failed to leave the organisation despite having issues (Sousa 850) Steps towards Service Recovery Apologize This is one of the most important steps towards attaining a sustainable service recovery in any given organisation. It starts by apologizing to all the customers and personality for the wrongs committed. Customers do not know whose fault it was, all they want is for someone to champion their causes. Therefore, it becomes crucial to apologize on behalf of the organisation, thus take responsibility for the error. Listen and empathize The other important step is the need to listen and take care. It is important to avoid phrases, such as “I Understand” or “I know how you feel” among other notable phrases (De Matos 170). This is because it is hard for any person to understand how another person is feeling at any time. Instead, it is appropriate to use phrases such as “I can only imagine how you feel”, “what an unfortunate situation” or “That is got to be very frustrating” among other notable phrases (Hart 151).Empathizing and listening helps the customers to unwind and feel that they are understood by the organisation. Fix the problem Once the customers are made ware of the problem, the employees must do all what they are able do in resolving the problem in the short time possible. One of the effective ways of moving forward is asking the customers what they would like to have happened. In solving the problem, all the employees must be empowered; thorough attending training on areas such as customer service, as most of the times, the customers requires what they initially asked for (Sousa 850). Offer atonement The customers will only value recovery process if it includes some forms of atonement. The larger the service problem as well as the more valued the customers, the bigger the atonements will have in restoring the customers to desired state of satisfaction. Provision of refunds, gift cards or any other form of compensations, depending on severity of problem, is still one of the powerful forms of service recovery. Follow-up After the problem is rectified, it is advisable to make follow-ups. This can be done by calling the customers and asking important questions about how well the problem was fixed or what else they think can be done by the organisation in preventing occurrence of similar problems in future. The impact of Service recovery intervention on customer loyalty Bitner (80) indicates that customer loyalty is one of the moat important assets, which can be possessed by any firm regardless of the sector it operates. Further, it is notable service failure is not necessarily a disaster for a given firm. This is only possible if the service recovery is well handled, thus increasing the level of customer satisfaction, loyalty and trust. Service failures often occurs, but what is relay important is the steps taken by are the actions and steps taken by the firm to recover from the failure. In deed, organisations should recognize that service recovery is an acid test for the customer orientation. Therefore, if the organisation fails to exceed in this area, then it fails to be customer oriented. One of the companies that have appropriately employed the aspect of service recovery effort to retain and retain its customers is Telstra Corporation Limited operating in Australia. The firm is a media and telecommunication that builds telecommunication networks as well as marketing mobile, voice, internet access and pay television. Often the company has been met with challenges in delivering high quality services to its esteemed customers. For example, natural disasters such as floods among others have greatly damaged the firms’ facilities such as cables, thus hindering delivery of services. Despite all the major challenges that the firm has faced all the years, it frequently employs the appropriate service recovery methods, such as service recovery paradox. Consequently, the firm has gained a substantial number of customers and investors, thus being able to generate over 25,000 million Australian dollars by 2010 (Zemke 13) Link between Customer Satisfaction and Financial Performance Customer loyalty is defined as the power of the relationship existing between individual’s relative altitudes and the repeated patronage with the supplier. This is a self-reinforcing system, whereby firms deliver superior value regularly to keep and find high quality customers as well as employees (Smith 110). Scott (43) argues that economic benefits of high levels of customer loyalty can be well quantified. When a firm delivers superior values, it is able to win customer loyalty. As a result, a firm is able to raise its revenues, market share, thus making their profitability to go up. McColl-Kennedy (230) indicates that through effective and efficient ways of attracting and retaining customers, organisations are able to raise their financial performance, especially to firms operating in service industry. Although customer loyalty alone cannot alone increase the profitability of the firm, it plays an important role in raising the overall financial status of the firm. For example, Apple Inc. the leading manufacturer and seller of consumer electronics products across the globe has enjoyed a relatively high levels of customer satisfaction. This is due to its revolutionary products and services like the iPhone 4& 5, iPad 1& 2, the iTunes, Macintosh computers among other notable products and services. Due to the high customer loyalty across the globe, Apple Inc. has been able to sell its products in major markets such as the Asian, European and American market. Consequently, the firm has continuously grown in its financial abilities, thus being rated as the leading firm in terms of brand value estimated at approximately U.S. $ 56 billion in 2010 (Smith 108). Mattila (67) indicates that not all customers have the potential to become profitable loyal to a firm. However, every company should develop its own method in order top discover on the ways it can restrain from spending of the customers, who rates well in the behaviour and attitudes towards the organisation. Organisations are therefore, advised to identify on the way of holding loyal customers, who are more profitable, but could even be spending more on what is being offered by the firm. Pimpakorn (89) creating and nurturing of real customer loyalty demands satisfaction the wants and needs of the customers at sustainable profits. In most cases, experts in customer loyalty have ignored the aspect of nurturing customer’s loyalty in beliefs that profitability and loyalty are synonymous, although market places have disagreed with this aspect (McColl-Kennedy, 230). Conclusion From studying the case above, one can see the urgent need of enhancing customers’ satisfaction, in order to enhance the profitability of a firm both in the short and long run. By affecting the proper measures geared towards effective service recovery programs, firms such as Telstra Corporation Limited has been able to retain a high number of customers, thus being able to compete accordingly with emerging telecommunication companies in Australia. Works cited Bell, Zemke. Service Breakdown: The Road to Recovery .Management Review (October), 32-35. 2008. Print. Bitner, Booms Mohr. Critical service encounters: the employee’s viewpoint. Journal of Marketing, Vol. 58, October, pp. 95-106, 2010. Print. Bitner, Booms Mohr. The service encounter: diagnosing favorable and unfavorable incidents.Journal of Marketing, Vol. 54, January, pp. 71-84, 2009. Print. Bowen, Lawler III.The Empowerment of Service Workers: What,Why, How, and When. Sloan Management Review 33(3) (Spring):31-39, 2008. Print. De Matos, Henrique Rossi. Service Recovery Paradox: A Meta-Analysis. Journal ofService Research 10(1) 60-77, 2007. Print. Goldstein, Duffy .The service concept: The missing link in service design research. Journal of Operations Management 20(2) 121–134, 2001. Print. Hart, Sasser. The profitable art of service recovery. Harvard Business Review 68, 148–156, 2009. Print. Mattila, Amira. The Impact of Culture on Consumers' Perceptions of Service Recovery Efforts. Journal of Retailing, 80, 3,196-206, 2003. Print. McColl-Kennedy, Smith. Customer Rage Episodes: Emotions, Expressions and Behaviors. Journal of Retailing, 85 (2), 2009, 222-237. Print. Pimpakorn, Newton.Customer-oriented behaviour of front-line service employees: the need to be both willing and able. Australasian Marketing Journal: in Press, 2010. Print. Scott, Ruyter. How the Local competition Beat a Global Brand. Australasian Marketing Journal, 18 (1), 41-47, 2010. Print. Smith, Tony. A cross-cultural study of switching barriers and propensity to stay with service providers.Journal of Retailing, Vol 79/2, pp 107 – 120, 2003. Print. Sousa, Voss. The effects of service failures and recovery on customer loyalty in e-services: An empirical investigation. International Journal of Operations & Production Management, Vol. 29. No. 8,  834-864, 2006. Print.   Spreng, Harrell. Service recovery: impact on satisfactionand intentions. J Serv Mark 9(1):15– 23, 2011. Print.   Zemke, Ron.Knock Your Socks Off Service Recovery. NewYork: Harvard UPS, 2011. Print. Read More