Service recovery: When and how it works best
Although specifics vary, there is wide consensus in marketing
circles that the cost of acquiring a new customer is relatively much higher
than retaining an existing one. This is especially problematic for services,
which are process- driven phenomena performed with human participation at both
employee and customer ends. 'Zero defects' are near to impossible in human interaction-based
service delivery and the negative impact of service failures on customer satisfaction,
re-patronage intentions and customer advocacy are a matter of concern for most
firms. One predominant countermeasure taken to alleviate concern over service
failures is to implement a service recovery strategy.
Service recovery is an imperative when it comes to hospitality-based services.
Hospitality-based services have stronger personal and emotional characteristics
embedded in them and service failure tends to draw greater customer ire. Add
to this, word-of-mouth is stronger when compared with several other types of
services. However, implementing a service recovery program without addressing
the broader issue of customer retention is to not see the forest for the trees.
This article aims to broaden this perspective by proposing a service-oriented
customer retention model that integrates service excellence, recovery and service
Some evidence first
Let us start with a snapshot of results that highlight how the key parameters
of customer satisfaction, re-patronage intentions and customer advocacy varied
based on different scenarios. We set out by using data collected over one full
year from four hotels in the Orlando area in Florida, USA. An electronic internet-based
feedback system was used wherein customers were sent an email upon checkout
from the hotel. These surveys are quick to elicit feedback and capture the customer's
post-consumption state of mind in a timely and effective manner. The email message
requested customers to click on a link that opened a survey that sought feedback
specific to their stay. A total of 1,427 surveys were analysed.
We also elicited responses (23.76 per cent of the sample) from those customers
who had a problem but did not report it during their stay. Most studies examining
service recovery find it difficult to elicit responses from this group, and
this is unique to this study. The summary of these results are:
- A problem-free stay should be the primary objective
for hotel firms to enhance customer satisfaction, re-patronage intentions
and positive customer advocacy. Additionally, excellent service recovery does
not lead to greater satisfaction and re-patronage intentions compared to a
problem free stay. Put differently, we did not find generalisable evidence
to support the presence of a service recovery paradox. Note that the service
recovery paradox is a much researched phenomenon that portends that excellent
service recovery is far more superior to a problem-free stay in enhancing
customer loyalty. This leads to a false notion that at some subliminal level,
customers understand that services can fail, and that professional recovery
is adequate to induce their re-patronage. These findings support previous
research that debunks the myth of a service recovery paradox. In other words,
firms have to first strive towards service excellence, i e, fewer service
- Poor service recovery can be more damaging than
not acting at all. Satisfaction, re-patronage intentions and customer advocacy
were the lowest for the group that reported the problem and perceived service
recovery efforts to be poor. This is significantly lower than the group that
did not report the problem or seek resolution. This is not meant to understate
the problem pertaining to a firm's inability to act as a result of customers
not reporting the problems. Firm inaction here (where customers did not report
the problem) can be largely attributed to the lack of a response mechanism
that encourages feedback at the time of service consumption. Therefore, firms
need to have a strong service recovery strategy that works in a service-oriented
customer retention model.
Interdependencies at play
At the Trident Mumbai
The findings of our study above highlight the interdependencies
between service recovery, service excellence and service feedback mechanisms.
We highlight these interdependencies in our service-oriented customer retention
At the outset, we substitute the key components with what needs to be done.
Service excellence is substituted with the need to reduce service failures,
service recovery with the need to recover effectively and lastly,
service feedback mechanisms with the need to reach out proactively.
Not to sound cliché, but for simplicity's sake, we term these as the
three Rs of service-oriented customer retention: Reducing service
failures progressively, Recovering effectively and Reaching out to customers
using all available options to elicit feedback.
- The first imperative is that firms should aim towards
consistently reducing service failure rates. Using diagnostics such as service
blueprints that help identify potential weak points of service delivery, firms
can develop effective recovery mechanisms. In addition to this, firms also
need to continuously analyse service performance across all potential weak
points and readjust strategies. For example, the time taken to approach a
customer for drinks orders after "greet and seat" can be repeatedly
inconsistent in a restaurant. Identifying such issues through continuous observation
and also adjusting service delivery to reduce failures is vital.
- The second imperative to get service recovery right.
As such, it's the second chance and there is no room for a third. Effective
service recovery requires an operating service philosophy that visibly warns
employees about the pitfalls of poor service recovery. Poor service recovery
has an adverse impact on how customers perceive commitment of a firm towards
good service. Firms need to actively empower employees to own complaints and
resolve them. Recovery guidelines should be consistent and commensurate with
the seriousness of the service failure. Remember, empowerment without controls
is like keeping a tiger for a pet without rules and procedures on how it is
- The third imperative is to have mechanisms and procedures
in place to effectively reach out to customers so that they bring to hotel
manager's attention, cases of service failures. These mechanisms should encourage
customers to talk about problems experienced during the stay as well as after
the stay. There are several mechanisms that can enable firms to reach out
proactively. Service guarantees, empowered frontline staff equipped with adequate
resources and a highly visible communications strategy aimed at reaching guests
are some of them. Post consumption, hotels can use mechanisms such as e-mail
surveys to encourage those customers to give feedback, who hitherto did not
do so during their hotel stay. As evidenced in this study, nearly 25 per cent
of responses were people who experienced a problem but did not complain during
In addition to the three imperatives viewed independent of one another, it is
their interdependencies and their alignment that is integral towards successful
service-oriented customer retention. This is better understood by looking at
the resultant effects of alignment that are illustrated in the model along the
three sides of the triangle. These are:
- Reliability: Put differently, if either (reducing
failures or recovering effectively) of these falter, it will have a direct
impact on the reliability of a service's offering. The alignment and coordination
of these two components should be smooth. Over time, not only will customers
be assured to greater consistency in service delivery, they will also get
a sense of comfort that recovery will be positively commensurate with the
nature of service failure if and when it happens. Note that although we put
greater importance on getting service right the first time, we emphasise the
need for an effective recovery platform as a second line of defense.
- Commitment: Again, the co-ordinated effort of recovering
effectively and reaching out proactively enhances the commitment to service
excellence of a firm. Customers want to alleviate concerns that recovery is
a one-time incident. Therefore when customers are guaranteed of effective
service recovery in the event of failure and also observe proactive efforts
to seek customer feedback, their belief in a firm's commitment towards good
service is strengthened.
- Focus: The lack of reaching out to customers proactively
and eliciting feedback will significantly diminish a firm's understanding
of innate customer needs, even if service failures are kept to a minimum.
This means that a service delivered with perfection in process loses its effectiveness
if customer needs have evolved far and beyond what is being delivered. Conversely,
merely reaching out and not progressively reducing service failures indicates
that the firm's customer orientation is suspect. Therefore, the co-ordination
or alignment of progressive service failure reduction and reaching out proactively
enhances the focus of a firm to meet the needs of its customers.
Hospitality managers face significant customer driven challenges because of
the wide range of reviews and social networking websites prevail on the Internet.
We recommend that hospitality-based service firms work towards crafting balanced
customer retention strategies that are driven by a culture of service excellence
(progressively reducing service failure rates), empowering the front-line to
solve customer problems in case of service failures and deploying customer feedback
systems such as guarantees, email surveys etc where customers feel encouraged
to bring their problems to the attention of management. Most importantly, the
processes need to be aligned to meet the broader goals of service-oriented customer
Srikanth Beldona is an assistant professor in the Alfred
Lerner College of Business and Economics at the University of Delaware, USA.
Kesh Prasad is president, Differential Web Solutions, based out of Virginia
and is adjunct professor at University of Delaware and George Washington University,