Compensation References by a Passenger of Virgin Atlantic Airways - Assignment Example

Dear Mr. Bryce: We recognized the problems faced by you. As what Sir Richard Branson had telephoned you earlier, we thank you for your constructive if tongue-in-cheek email. Our company is sorry that you did not like the quality of our onboard entertainment and the in-flight meals that were served to you on your December 7, 2008 flight with us during your Mumbai to Heathrow travel. Actually, the meals that we served to you were award-winning food preparations. They are very popular on our Indian routes. The food preparations that are being served during our flights are based from the preferred foods from Virgin Atlantic Airways by the customers. Starting September 2011, we will offer special meals as an option for those clients who are requesting. We are apologizing for the headache that you got after watching our onboard entertainment. The Virgin Atlantic Airways sound and video systems in our aircraft get wear-and-tear. We will try to increase the frequency of upgrading our entertainment facilities in the future. Rest assured that we are providing solutions to all the problems raised. To show you we are sincere about our apology, Sir Richard Branson authorized giving 20,000 additional miles to your Virgin Atlantic Flying Club card. In addition I am sending you an £100 American Express Gift Certificate so you and your family and friends can enjoy a dinner anywhere you choose on Virgin. We hope your frustration will be gone the soonest. We would like to keep you satisfied as we value so much loyal customers like you who have been patronizing our products through the years. Very truly yours, (SIGNATURE OVER PRINTED NAME) Marketing Manager SUMMARY OF THE LITERATURE USED THAT SUPPORTS THE SOLUTIONS AND COMPENSATION REFERENCES INTRODUCTION This paper is about the summary of the literature used that supports the solutions and compensation references with regards to the letter of complaint filed by a passenger of Virgin Atlantic Airways (Telegraph Media Group Ltd, 2009). As its Marketing Manager, I wrote a business letter as a reply to the complainant. Today’s economy is getting more service-oriented and we live in a service society. The service sector is experiencing great development which is implying bigger competition. The customers have a wider range of services to choose among. As a service provider, it is all about providing a superior service. However, being a service provider can sometimes imply a hard undertaking. Sometimes the service provider does not accomplish to provide the service perfectly. These situations are more known as service failures. Customer service performance that did not meet a customer’s expectations is referred to as customer service failure. When it happens, a client usually expects to be paid with damages or recompense in the form of apologies, discounts, credits, refunds, or any combination of the above. Service recovery is a crucial element of any service management strategy. Service recovery can be defined as following: “The action of a service provider to mitigate and/or repair the damage to a customer that results from the provider’s failure to deliver service as it is designed” (Robbins & Miller, 2004, p. 467). Service recoveries are often used to recover service failures. This can, for example, imply an apology or offering the customer something extra at no cost. The success of excellent service recovery efforts is determined by the complainant’s expectations and perceptions of the organization. Service recovery has received considerable attention in the academic literature (Davidow, 2003; McCullough et al. 2000; Tax et al., 1998; Parasuraman, 2006) because effective recovery management has been shown to have a significant positive effect on customers who have reacted adversely to a service failure (Berry and Parasuraman, 1991). IDENTIFICATION OF THE PROBLEMS Customer complaint situation is not about Virgin Atlantic Airways itself. They are about helping one of the Virgin Atlantic Airways' customers get what he wants and resolving the problems. The letter of the complainant addressed to its owner, Sir Richard Branson, pointed the following below: The problems were identified. The passenger was complaining about the "hungriest" he had "been in" his "adult life" as a result of the "culinary journey of hell" that he "was subjected to at the hands of" the "corporation". He is likening the main meal experience to being given as a Christmas present "your hamster in the box and it’s not breathing". Despite the client's "love" of "the Virgin brand" and his continued use of "it despite a series of unfortunate incidents over the last few years", the complainant asked Sir Richard Branson in his letter to understand his pain at being served "a desert with a tomato", "desert with peas in", "a sour gel with a clear oil on top", "more mustard than any man could consume in a month" and "a small cookie provided" harder than " a piece of brass" in a "baffling presentation it appears to be in an evidence bag from the scene of a crime". Another problem that was identified was the "splitting headache from squinting at a crackling screen". There were "flickering white lines running up and down the screen" while the client was relaxing "with a bit of your world-famous onboard entertainment". The client also complained on "another crime-scene cookie, only this time you dunk it in the white stuff, a mixture between the Baaji custard and the Mustard sauce". In all likelihood, this case of an airplane passenger complaining about his being served with a poorly prepared meal and poor quality onboard entertainment is not a severe customer service failure if managed properly. This type of customer service situation started as minor difficulties. However, it can quickly escalate into huge drawn-out battles. The aircraft service people may unknowingly cause customer complaint situation like this to escalate. OFFERED SOLUTIONS TO THE PROBLEMS RAISED TO TURN THE FRUSTRATED CUSTOMER TO BECOME A LOYAL CUSTOMER Conduct Service Recovery Efforts The success of these service recovery efforts is determined by the complainant’s expectations and perceptions of the organization. When situation like this happened to a new customer, she or he may be right away discouraged and will return no more. But since this situation happened to a customer who has been receiving good service for so long, he or she may or may not write this failure off. For sure, this not so good service will be compensated with an improved service the next time around. To be able to act correctly in a service recovery situation, a company can, for instance, have a service recovery policy for how to act in service failure situations. A company can also choose to empower the frontline employees who interact frequently with the customers. There is somewhat an interrelation between service recovery policy and the degree of empowerment. A non-specific service recovery policy seems to demand a high degree of empowerment while a specific policy does not seem to require a high degree of empowerment. According to the findings, a company can also have a semi-formal policy and a medium degree of empowerment. This means that the more formal and specific service recovery policy, the less empowered staff is required. Elements that impact any effort to restore client satisfaction are the strength of customer relationships and the severity of service failure. Five major factors, according to White & Yanamandram (2007), deter customers from switching to an alternative service provider: switching costs; interpersonal relationships; the attractiveness of alternatives; service recovery; and inertia. These factors are mediated by dependence and calculative commitment. As the (Swanson & Hsu, 2010) survey output of three hundred seventy-seven American hospitality customers, results indicate that for satisfactory recoveries attributed to a hospitality firm relative to employee or customer attributions, the customer is more likely to discuss the encounter, share information with a wider social network, and both convince others to use the service provider and to have re-patronized the firm. This study likewise suggest that the more severe the initial failure, the greater the likelihood that a critical incident had been discussed with a wider social network and the greater the likelihood of warning and convincing others to not patronize the hospitality organization. For unsuccessful (i.e., dissatisfactory) hospitality-based recovery attempts, the recovery locus attribution was not significantly associated with the word-of-mouth and repurchase behaviors investigated in this study. Even when focusing on the customer’s needs, different problems might always occur that affect the customer’s satisfaction (Robbins and Miller, 2004). Service recovery has, by Wallin (1997) as well as by Robbins and Miller (2004), been identified as one of the key ingredients when achieving customer satisfaction, customer loyalty as well as profitability. As a result, developing an effective service recovery policy has become an important focus of many customer retention initiatives. According to Robbins & Miller (2004), service recovery policies involve actions taken by service providers to respond to service failures. What is done and how it is done affects customers’ perceptions of service recovery. Service recoveries are in many ways connected to empowerment, communication and policy. According to a chairman and Chief Executive Officer of a leading company within the service sector (Parasuraman, 1991), it is important to continuously improve the services. The improvement involves a focus on customer needs, zero errors and employee empowerment. Parasuraman (1991) further emphasizes the importance of a well-working communication between the employees in order to increase the reliability of the firm. The business should strive toward better customer retention as well as a positive word-of-mouth communication. The increased competition and more demanding customers have affected the service businesses’ increased attention to serving their customers rather than selling to them. According to a study done in the late 1980s by Zeithaml (1990, in Parasuraman, 1991), almost fifty percent of a company’s service recoveries were ineffective. Several studies conducted by Hart et al. (1990) showed that instead of recovering it, more than fifty per cent of the conducted service recoveries reinforced the negative experience. This result can affect the striving toward better services as well as service recoveries (Parasuraman 1991). Every service business needs to develop a system. This system can be a policy for how to handle service failures and service recoveries. If the business fails to do this, the risk of loosing the customer to a competitor is very high. In order to succeed with a service recovery situation, the business needs to take some factors into consideration. Parasuraman (1991) state that the employees’ responses and attitudes in service failure situations are very important to observe. Some employees are very understanding while some are not. The unwillingness of the employees to resolve a failure is a big problem. Service failures were not handled by the employees in a satisfactory way. Training to make the employees more secure in how to act will increase the service recovery effectiveness. Research has shown that service recovery is critically important from a managerial perspective in terms of maintaining customer relationships. Yet few firms excel at handling service failures. There is a growing number of managers who claim that customers tend to be dissatisfied with their service recovery effort. To address these criticisms, complaint management must acknowledge and find new approaches to achieve consistency and to correct the misalignment of interests that can exist between the actions of the organization and the needs of its customers and employees. Drawing upon the knowledge based view, a comprehensive model is constructed by Triki (2010) in terms of input, process, and outcome in an attempt to understand the relationships between firm characteristics, knowledge based resources, complaint handling and the resulting outcomes. Compensate the Customer for the Inconveniences that He Experienced as a Result of the Service Failure There is a need for compensation. The compensation that should be given are discussed below. A. Compensate for the Inconvenience in the Form of Apology It is good that Virgin offered the customer sufficient apology. Sir Richard Branson himself telephoned the complainant. He personally apologized. Virgin Atlantic Airways apologized for the headache that you got after watching our onboard entertainment. The bad signal and quality of video system that time was a result of wear-and-tear. The company assured the client that we will try to increase the frequency of upgrading our entertainment facilities in the future. When dealing with customer complaint, simply apologized. Do not make unnecessary remarks. The sales people or the service providers do not have to point out to the complainant his or her mistake as a customer. There is no need for these service providers to get in the last word. The client does not care about that! If the problem was caused by the sales people or the service provider you, or someone in the company, or a defective product, it was your fault! They just want a solution. And if your client service does not give him or her what he or she wants, he or she wil go elsewhere. B. Compensate for the Inconveniences in the Form of a Discount The customer will be gifted with seventy-five percent (75%) discount on his repurchase of a ticket the next time he decides to fly via our airlines in going to any destination. With regards to determinants of customer repurchase intention, many past studies have found a very strong relationship between customer satisfactions and repurchase intention. Customer satisfaction is viewed as the most important factor leading to repurchase intent. It is stated that the higher satisfaction, the more likely for customer to repurchase. However, there are other researchers who have argued that Customer satisfaction should not be sufficiently used as determinant of Repurchase intention, there should be other variables relevant to the relationship of these two constructs. It is in this context that Switching barrier was proposed as moderating variable, which may have effects in between two constructs. Switching barrier is defined as any factor that makes it difficult or costly for customers to change providers. Previous studies investigating the influence of satisfaction on repurchase intentions have focused on linear, additive models. One of the first attempt to empirically testing their influencing on direct effect and indirect effect (both moderating effect and mediating effect) on Satisfaction and Repurchase intentions relationship. Four types of switching barriers link to repurchase intention were presented to be tested in the model based on theoretical foundation (Kitchathorn). C. Compensate for the Inconveniences in the Form of a Payout The company is giving twenty thousand (20,000) additional miles to the complainants Virgin Atlantic Flying Club card. The company also sent £150 American Express Gift Certificate. The client can be offered something extra at no cost. During his telephone apology to the complainant, Sir Richard Branson invited him to select the food and wines for future Virgin flights. The complainant can be invited to an all-expenses paid trip to Virgin facilities to choose the food and wines for its flights. Another thing that the company can do is to invite the complainant to come taste test the new meals of the Virgin Atlantic Airways. Starting September 2011, the Virgin Atlantic Airways will offer special meals as an option for those clients who are requesting. D. Service Guarantee Programme One approach to service recovery is the implementation of a service guarantee programme. A service guarantee is "a statement explaining the service customers can expect (the promise) and what the company will do if it fails to deliver (the payout)" (Hart et al. 1992, p. 20). REFERENCES Berry, L.L. and Parasuraman, A. (1991), Marketing Services: Competing through Quality, The Free Press, New York, NY. Davidow, Moshe. 2003. ―Organizational responses to customer complaints: What works and what doesn't. Service Res. 5(3) 225-250. Hart, C. W., Heskett, J. L., & Sasser, W. E. Jr. (1990). The Profitable Art of Service Recovery: How to Best Turn Complaining Customers into Loyal Ones. Harvard Business Review, 68(4), 148-156. Hart, C. W. L., L. A. Schlesinger, and D. Maher (1992), "Guarantees come to professional service firms," Sloan Management Review, 33 (3), 19-29. Hvitman, Sandra and Rylner, Eli. 2005. Service Recovery Policy, Empowerment or Both?: A Study of the Interrelation Between Service Recovery Policy and Empowerment Within Service Organizations. Master's Thesis within Business Administration. Jonkoping International Business School, Jonkoping University. Kitchathorn, Parawee. Factor Influencing Customer Repurchase Intention: An Investigation of Switching Barriers that Influence the Relationship between Satisfaction and Repurchase Intention in the Low Cost airlines Industry in Thailand. McCullough, Michael A., Leonard L. Berry, Manjit Yadav (2000) ―An empirical investigation of customer satisfaction after service failure and recovery. Service Research Vol. 3, n. 2. pp. 121-137. Parasuraman, B. (1991). Service Marketing. New York: The Free Press A Division of Macmillan, Inc. Parasuraman, A. (2006) Modeling Opportunities in Service Recovery and Customer-Managed Interactions. Marketing Science, 25, 590-593. Robbins, T. L. & Miller, J. L. (2004) considering customer loyalty in developing service recovery strategies. Journal of Business Strategies, 21, 95-109. Swanson, Scott R. & Hsu, Maxwell, K. The Effect of Recovery Locus Attributions and Service Failure Severity on Word-of-Mouth and Repurchase Behaviors in the Hospitality Industry. Journal of Hospitality & Tourism Research October 20, 2010 Telegraph Media Group Ltd., 2009, Virgin: the world"s best passenger complaint letter? Retrieved from http://www.telegraph.co.uk/travel/travelnews/4344890/Virgin-the-worlds-best-passenger-complaint-letter.html. Triki, Mjahed, S. Proposing and validating a knowledge-based model of service recovery impact on employee and customer behavior. Second International Conference on Engineering Systems Management and its Applications (ICESMA), March 30, 2010 to April 1, 2010, Sharjah, pp. 1-8. Wallin Andreassen, T. (1997). Dissatisfaction with Services. The Impact of Satisfaction with Service Recovery on Corporate Image and Future Repurchase Intention. Stockholm: Akademitryck AB. White, L. & Yanamandram, V. (2007) A model of customer retention of dissatisfied business services customers. Managing Service Quality, 17, 298-316. Zeithaml, V. A., & Bitner, M. J. (2000). Service Marketing. Integrating Customer Focus Across the Firm (2nd ed.). USA: McGraw-Hill Higher Education. Read More