By Fabian Segelström and Jeff Howard
On this page we explore the “what,” “why” and “how” of service failure and recovery as part of our workshop Designing For Service Recovery at the SDN Conference in Berlin. For more on service recovery see the examples at the bottom of this page.
What is Service Recovery?
Service recovery comes into play when something in a service delivery goes wrong. The service delivery company ideally takes action to ensure that their customer gets their desired outcome anyway, and later rectifies their own process so that the failure doesn’t reoccur.
In their classic 1990 article from the Harvard Business Review [PDF 1.1MB] Christopher Hart, James Heskett and W. Earl Sasser Jr. share a striking example of service recovery:
From the Profitable Art of Service Recovery: “The vacationers had nothing but trouble getting from New York to their Mexican destination. The flight took off 6 hours late, made 2 unexpected stops, and circled for 30 minutes before it could land. Because of all the delays and mishaps, the plane was en route for 10 hours more than planned and ran out of food and drinks.
“It finally arrived at 2 o’clock in the morning, with a landing so rough that oxygen masks and luggage dropped from overhead. By the time the plane pulled up to the gate, the soured passengers were faint with hunger and convinced that their vacation was ruined before it had even started. One lawyer on board was already collecting names and addresses for a class-action lawsuit.
“Silivio de Bortoli, the general manager of the [Club Med] Cancun resort and a legend throughout the organization for his ability to satisfy customers, got word of the horrendous flight and immediately created an antidote. He took half the staff to the airport, where they laid out a table of snacks and drinks and set up a stereo system to play lively music.
“As the guests filed through the gate, they received personal greetings, help with their bags, a sympathetic ear, and a chauffeured ride to the resort. Waiting for them at Club Med was a lavish banquet, complete with mariachi band and champagne. Moreover, the staff had rallied other guests to wait up and greet the newcomers, and the partying continued until sunrise. Many guests said it was the most fun they’d had since college.”
Why is Service Recovery Important?
Service recovery has received attention for over 20 years within service management and service marketing. Since the cost of gaining a new customer usually greatly exceeds the cost of retaining a customer (it is often stated that it costs five times as much to attract a new customer as maintaining one), managers are increasingly concerned with minimizing customer defections. The research has led to four major findings on how service failure and subsequent recovery affect customers’ loyalty towards a service company:
- Service failure has a negative effect on customer loyalty intentions.
- Failure resolution has a positive effect on loyalty intentions.
- Customer satisfaction with the recovery has a positive effect on loyalty intentions.
- Outstanding recovery results in loyalty intentions which are more favorable than they would be had no failure occurred.
Whereas the three first findings could be expected, the fourth is somewhat of a surprise and has become known as the service recovery paradox. The service recovery paradox means that a customer might be more satisfied with a company although they didn’t deliver on their first attempt than if they had delivered the service without errors, if the recovery action is perceived as very good. For more on the service recovery paradox, please see de Matos, Henrique & Vargas Rossi (2007) and Magnini, Ford, Markowski & Honeycutt Jr (2007).
How Does Service Recovery Work?
The main focus of the workshop will be how to perform service recovery and we will introduce a tool we have designed to help service designers approach and design service recovery. The concepts from the service recovery literature which provide the basis for the tool are introduced briefly below.
When it comes to immediate recovery after a service breaks down, the company representatives need to consider why the service delivery broke down as the reason for the break down affects the recovery expected by the company. If the breakdown occurs due to mistakes or errors by the service personnel or external sources the recovery should be psychological -– the employees need to apologize for the inconvenience. If the error however is due to errors in the service architecture the recovery effort needs to be tangible and the customer should be compensated. See Bitner, Booms, & Tetreault (1990) for more information.
To be able to provide great service recovery the employees need to feel that they have the freedom to do so. Several companies pre-authorize front line employees to spend a capped amount to fix customer problems. Swisscom has a system in place where each employee is pre-authorized to spend up to $1,000 to solve a customer’s problem and employees at the Ritz-Carlton Hotel may spend up to $2,000 per incident. The principle behind this is that customers are more satisfied with their encounter if the first person they contact about a problem takes the initiative to fix things without having to send the request up the chain to their manager. It lets employees focus on solving problems.
Having dealt with the customer recovery, a company should ask itself how it might avoid the failure reoccurring. By analyzing what happened and changing their routines the company can perform operations recovery. If the failure is bound to happen due to company procedures (like overbookings), the standard solution space for employees need to be defined. Another part of getting the organization prepared for future failures is to train their employees to provide great recovery in the future (employee recovery).
Standardized recovery by Delta Airlines:
Previous posts on this blog on service recovery:
- Service Recovery
- OZOcar Service Encounter
- Netflix Says They’re Sorry
- Service Recovery Paradox
- Hamfisted Service Recovery
Blog posts elsewhere highlighting service recovery efforts:
- A story about amazing customer service at Jamba Juice
- Customer Service Pizza Style
- Thank you for making it easier for me
- Customer service win Liberty Mutual
Below is a list of recommended reading for those interested in learning more on service recovery. All articles are followed by a link; articles of which publicly accessible versions exist online are directly linked whereas those only accessible through databases are linked to Google Scholar.
Bell, C. R., & Zemke, R. E. (1987). Service Breakdown: The Road to Recovery .Management Review(October), 32-35. Google scholar
Bitner, M.J., Booms, B.H. and Mohr, L.A. 1994. Critical service encounters: the employee’s viewpoint, Journal of Marketing, Vol. 58, October, pp. 95-106. Google scholar
Bitner, M.J., Booms B.H. and Tetreault, M.S. 1990. The service encounter: diagnosing favorable and unfavorable incidents, Journal of Marketing, Vol. 54, January, pp. 71-84. Google scholar
Bowen, D. E., and Lawler III, E. E. (1992). “The Empowerment of Service Workers: What,Why, How, and When.” Sloan Management Review 33(3)(Spring):31-39. Available at Google Books
De Matos, C.A., J.L. Henrique, C.A.V. Rossi. 2007. Service Recovery Paradox: A Meta-Analysis. Journal ofService Research 10(1) 60-77. PDF version
Goldstein, S. M., R. Johnston, J. Duffy, J. Rao. 2002. The service concept: The missing link in service design research. Journal of Operations Management 20(2) 121–134. Google scholar
Hart, C.W.L., Heskett, J.L., Sasser Jr., W.E., 1990. The profitable art of service recovery. Harvard Business Review 68, 148–156. PDF version
Sousa, R & Voss, C. 2009. 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. Google scholar
Spreng RA, Harrell GD, Mackoy RD. 1995. Service recovery: impact on satisfactionand intentions. J Serv Mark 9(1):15– 23. Google scholar
Zemke, Ron and Bell, Chip, 2000; Knock Your Socks Off Service Recovery. AMACOM,NY. Available at Google Books