Recovering and Learning from Service Failure
Is your company doing its best to address customer complaints and learn from mistakes?
Keeping and developing relationships with current customers is a key business strategy.1 Yet problems and complaints are bound to occur over the lifetime of customer relationships. Handling these effectively is vital to maintaining customer satisfaction and loyalty, as the example of Saturn illustrates. When faced with the need to repair a problem on 350,000 of its vehicles, the company chose to do whatever was necessary to satisfy customers: it set up an 800 number, went directly to some owners’ homes, and opened its checkbook to dealers. According to Joseph Kennedy, Saturn’s vice president of sales, service, and marketing, the goal was “to fix both the car and the customer. We want Saturn to be a 100-year car company.” Saturn has achieved high levels of customer loyalty and in 1996 was rated number one in sales and dealer satisfaction in its class.
The impact of recovery strategies on a company’s revenue and profitability is dramatic. Hampton Inn hotels, for example, realized $11 million in additional revenue from the implementation of its service guarantee and scored the highest customer retention rate in the industry.2 General Electric has found that, on average, customers buy fifteen major appliances in their lifetimes. Committed to maintaining customer loyalty, the company has invested heavily in the GE Answer Center to manage customer relationships and ensure that problems are addressed efficiently and effectively.
The ability to deal effectively with customer problems is also closely related to employee satisfaction and loyalty, which are critical concerns in industries where customer relationships are more closely associated with the individual service provider than with the organization.3 American Express pays careful attention to the job satisfaction of its investment advisers, since it estimates that more than 30 percent of an adviser’s clients would defect if the adviser left the company. In addition, customer complaints provide valuable insights into root causes of operations failures. Many quality-award winners, including Federal Express, Xerox, and Ritz-Carlton, use failure data when making decisions on process improvements, coupling service recovery with initiatives to increase customer satisfaction in the future.
The majority of customers are dissatisfied with the way companies resolve their complaints.
Despite the benefits offered by effective service-recovery strategies, our research shows that the majority of customers are dissatisfied with the way companies resolve their complaints.
References (37)
1. Focusing marketing efforts on current customers is referred to as “customer satisfaction” or “defensive” strategy. For insights into the benefits of such a strategy, see: C. Fornell, “A National Customer Satisfaction Barometer: The Swedish Experience,” Journal of Marketing, volume 56, number 1, 1992, pp. 6–21; A. Griffin, G. Gleason, R. Preiss, and D. Shevenaugh, “Best Practices for Customer Satisfaction in Manufacturing Firms,” Sloan Management Review, volume 36, Winter 1995, pp. 87–98; and F.F. Reichheld and W.E. Sasser, Jr., “Zero Defections: Quality Comes to Services,” Harvard Business Review, volume 68, September–October 1990, pp. 105–111.
2. B. Ettorre, “Phenomenal Promises that Mean Business,” Management Review, March 1994, pp. 18–23; and R.T. Rust, B. Subramanian, and W. Wells, “Making Complaints a Management Tool,” Marketing Management, volume 1, number 3, 1992, pp. 41–45.
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Leslie Brokaw
debra netherton