Service Recovery and Customer Satisfaction - Essay Example

? MARKETING Service Recovery and satisfaction …………………………………….. College ……………………………. …………………………………………….. Introduction ‘Service’ in the marketing landscape has become one of the most significant component of today’s global economy. Services provided or facilitated by a marketer are intangible activities or benefits such as financial advice, entertainment etc in exchange for money or some thing else valuable. Technology, innovation, facilities and entertainment are some of the common elements in the market that deliver some specific experiences to the customers and this explains why some experts (Kerin, Hartley and Berkowitz, 2005, p. 316) believe that today’s business contexts are on the verge of a new economic era driven by the experience economy. This piece of research paper explains the relevance of service recovery followed by the service failure and describes different ways to achieve service recovery. The paper also explains how customer satisfaction and financial performance are interrelated and details whether they are always positively related. Service Recovery Strategic service breeds success to many marketers whereas many others fail since their service is inferior to that of others or is less attractive to the customers. Service failure thus provides many dissatisfied customers. As Botha, Strydom and Brink (2005, p. 301), service recovery is a remedial action designed with planned process or strategy of returning an aggrieved or dissatisfied client to a state of satisfaction with the company. Customer satisfaction is perhaps the most critical milestone that almost all marketers target and it is the base for better customer relationship, customer loyalty and even for achieving sustainable competitive advantage. Latest technologies and innovation help marketers differentiate products, and therefore they concentrate on making difference in the service being offered to the customer along with the product. When service fails, service failure is critical to survive in the market. A good service recovery system would be able to increase customer satisfaction, positive word-of-mouth for the company, improve product quality through customer feedback and elimination of costs in marketing and other processes. Service Recovery effort and strategic ways for it Fisk, Grove and John (2007, p. 176- 178) detailed a five-step strategic effort for service recovery. It comprises of apology, urgent reinstatement, empathy, symbolic atonement and follow-up. Almost same process was explained in the work of Botha, Strydom and Brink (2005, p. 301), but with a seven-step strategic cycle, they are 1) welcome complaints, 2) give immediate response, 3) treat clients fairly, 4) learn from recovery experience, 5) learn from lost clients and 6) doing it right. Apology with an attitude of welcoming complaints The process of service recovery should begin with an attitude of apology, which is an approach to becoming aware organization’s current situation in regard to dissatisfied customers. Apology is, as denoted by Fisk, Grove and John (2007, p. 176) admitting the failure and this can happen only when the organization has an attitude to accept complaints from customers and others too. Service can be identified and admitted only when the marketer accepts complaints from clients. If client’s complaints aren’t welcome to the firm, it will be fully unaware of how dissatisfied the customers are and why they are so etc. Urgent Reinstatement with immediate response Naturally, a dissatisfied customer would expect immediate response from the marketer and they want to know that some thing will be done by the marketer to remove the source of their disappointment. When the marketer accepts complaints from their customers, he must act as quickly as possible. Botha, Strydom and Brink (2005, p. 301) emphasized that a client will become more dissatisfied when he sees his complaints not listened and responded by the marketer. Treating clients fairly with empathetic approach Once the marketer has taken an effort to correct the problem that the client has complained, an expression of empathy is required for successful recovery, because conveying a message that the firm understands its mistake and it will take measures to solve it will help its clients feel positive about the firm. What Fisk, Grove and John (2007, p. 177) meant by the term apology in respect of service recovery is more than simple acknowledging of the service failure but rather making an effort to comprehend why the customer is dissatisfied and what made him disappointed. Symbolic Atonement Approaching the clients with an empathetic attitude make it necessary that the marketer should make amends in some tangible ways for the firm’s failure, may be through some strategic measures like offering gifts, coupons, free desserts etc. Follow-up and learning from service failure experience Once the above mentioned steps have been taken by the marketer, a proper and effective follow-up should be there so that it can see whether the firm can win back the customers’ goodwill and assess whether the sign of symbolic atonement was duly received by the firm. The marketer can make use of communication through phone or email to understand whether the firm’s atonement has been effective and useful for the process. Analyzing the failure, assessing its impacts on customers and financial performance, and assessing how the failure impacted customer goodwill etc are involved in the process and these can help the firm learn. The service failure and service recovery process and can be an experience that can help the marketer recognize its symptoms in advance and try to avoid such troubles well in advance. Similarly, the firm can learn from the lost customers as well because their responses and feedback can be used as useful information for further developmental activities of the firm. Best Service-recovery process and its impact on customer loyalty Out of the five basic steps or ways for service recover, as detailed above, treating clients fairly and empathy seem to be most important step, because, if customers are not treated fairly, the whole effort put for recovering the service failure will become ineffective. In order to make it successful, the marketer has to accept complains, respond to them quickly and do any other arrangement that is necessary for it. But, the ultimate goal of all of these steps is to treat customers fairly. For instance, welcoming complaints and responding to them quickly are most seemingly part of treating clients fairly. No doubt, treating customers fairly is the most appropriate way of creating and establishing customer loyalty, especially when there is a service failure. When customers are treated fairly, it can serve as an advertisement because the goodwill and better reputation will be spread among the public through word-of-mouth. In today’s highly dynamic marketing environment, most leading companies are developing customer loyalty and retention programs, with emphasis to offer consistently high values and satisfaction. Creating and adding values and satisfaction thus offer long term profitability and financial advantages too. Achieving increased customer loyalty is critical to organizational success and this can be attained through several marketing strategies. Service recovery is one of such strategies to use for achieving customer loyalty. Loyal customers are one of the most valuable assets in any organization as they give back word-of-mouth values to the firm (Noone, Kimes and Renaghan, 2003, p. 12). The best practically effective and pragmatically easier way to achieve customer loyalty is identifying the most valuable customers and then serving them accordingly. Ensuring quality services or recovering the failures with effective strategic approach seem to help firms get loyal customers. customers are always loyal, and types of services or types of service recovery approach determine whether customers can be turned to be loyal or not. Service Recovery example from Australia Quick and personalized customer service is becoming more popular strategy to recover service in recent days. Davoren (1998) said that Ansett Australia, the airline company based in Melbourne, had made significant efforts towards the way they handled customer issues and how customer information has been utilized for the organization to improve customer experiences. As Davoren (1998) mentioned, Ansett established a unit called Community Relation in order to add values to front-line departments, and to manage complaints and compliments from customers. receiving customer feedback through letter, fax, email, phone and flight attendant directly from front-line staff member. As part of this customer relation and complaints resolving effort, a performance indicator was established acknowledging and resolving customer issues within three days. This has been a very strategic step to recover service and bring success to service experiences. Link between Customer Satisfaction and Financial Performance Customer satisfaction, referrals and customer loyalty have considerably attracted significant numbers of theoretical and empirical researches. Impact of customer satisfaction on referrals or word-of-mouth, its impacts on customer loyalty and its impacts on financial performance have been studied and researched by many marketing researchers and have found that they are closely related. More satisfied customers bring referrals to the company through word-of-mouth and this creates customer loyalty. Loyal customers are retained and it brings financial as well as competitive advantages to the company. Suh, Barker and Pegg (2005, p. 52) argued that quality or superior-valued services increase the level of customer satisfaction. Dissatisfied customers will engaged in negative word-of-mouth and satisfied customers in positive word-of-mouth. Negative word-of-mouth leads a business in to service failure whereas positive word-of-mouth leads it to achieving customer loyalty and better financial performance as well. ‘Customer focus’, ‘customer relationship management’, ‘customer oriented’ are some of the vitally important marketing strategies that aim at increasing customer satisfaction. All such strategies are also meant to satisfy customers, but at a profit. Though profit maximization is not a common objective of today’s businesses, no business wants to gain loss with any specific strategy. When a business is, therefore, targeting customer satisfaction, this is in fact looking at attaining a reasonable profitability level. Customer satisfaction is closely related to financial performance, because, most businesses target customer satisfaction as a link to achieving financial performance too. Allen (2004, p. 13) argued that customer retention, followed by customer satisfaction and customer loyalty, is a strong predictor of profitability. He explained, based on a study conducted in University of Michigan, that customers can be considered to be assets. The more the customers are satisfied, the highest is the values of their representation as assets. The study also concluded that customers can not only be considered as assets, but also its net present values can be measured. While analyzing the various elements included in ensuring customer satisfaction, it can be understood that the marketer has to create, add and deliver values propositions to the customers. The marketer often requires extensive researches too. The marketer thus requires to indentify, find and evaluate customers’ common as well as individual or specific needs and wants, and thus to plan the products and services accordingly. When it comes to more dynamic and modern marketing concepts, customizing products according to individual requirements is an illuminating example of how companies are attempting to meet individual requirements. All the marketers identify customers wants and needs, design and develop their offerings accordingly and make sure that these meet the requirements, in order to ensure that their customers are maximum satisfied. Why should marketers spend more in designing and developing products according to individual customer requirements? Why should they customize their products and services? It is simply the investment. Investment is spending money to gain more. Therefore customer satisfaction and financial performance is obviously related, except that customer satisfaction may not always lead to better financial performance. Customer satisfaction and financial performance? Not always positively related As detailed above, customer satisfaction leads the organization to better financial performance and therefore these are positively related. But, this is not always positive, because, if the marketer spends much on increasing customer satisfaction without proper plan of its impact on the profitability, the result may be loss. The marketer needs to evaluate and assess the losses incurred due to service failure or due to customer dissatisfaction, and then to recognize whether the amounts being spent on increasing the customer satisfaction can be obtained back when customers are turned to be satisfied. Aare customer satisfaction and financial performance always positively related? It is positively related, but not always. For instance, if the company doesn’t plan properly or fails in its plan, regarding whether the spending on increasing customer satisfaction can be turned to be profitable once they are turned to be satisfied, it may not be successful in increasing financial performance with satisfied customers. Conclusion This piece of research paper has explained what is service recovery and how it can solve the issues or financial losses associated with service failure. The paper has highlighted various ways to achieve services recovery and explained that treating customers fairly is the most significant strategic step in the service recovery process. The paper has also detailed that the relation between customer satisfaction and financial performance is positive, but not always so because of that some time the amounts spent on increasing customer satisfaction may be more or equal than what can be earned from them when they are turned to be more satisfied. References Allen, DR 2004, Customer satisfaction research management: a comprehensive guide to integrating customer loyalty and satisfaction metrics in the management of complex organizations, American Society For Quality Press Botha, J, Strydom, J and Brink, A, 2005, Introduction to Marketing, Illustrated third edition, Juta and Company Ltd Davoren, B 1998, Ansett Australia - service recovery a priority, Ansett Australia, Retrieved from http://www.callcentres.com.au/ansett.htm Fisk, RP, Grove, SJ and John, J, 2007, Interactive Services Marketing, Illustrated edition, Cengage Learning Kerin, RA, Hartley, SW and Berkowitz, EN 2005, Marketing, Eighth edition, The McGraw Hill Companies Noone B.M, Kimes S.E and Renaghan L.M (2003), Integrating customer relationship management and revenue management: A hotel perspective, Journal of Revenue and Pricing Management, Vol-2, Henry Stewart Publication Suh, J, Barker, S and Pegg, S 2005, Service Recovery Readiness in Australian Hospitality and Leisure Operations: A Conceptual Framework and Findings from an Exploratory Study, Journal of Quality Assurance in Hospitality & Tourism Read More