MGMT 339 EXAM 2

Service failure

Service failure

occurs when service performance falls below a customer’s expectations in such a way that leads to customer dissatisfaction.

Service recovery

refers to the actions taken by a firm in response to service failure

Complaining Customers: The Tip of the Iceberg

1-5% complain to management or company headquarters, 45% complain to a frontline employee, 50% encounter a problem but do not complain

Service Recovery Paradox

A good recovery can turn angry, frustrated customers into loyal ones…...can, in fact, create more goodwill than if things had gone smoothly in the first place.

Service Recovery Paradox Challenges

only a small percent of customers complain, service recovery must be excellent, and service recovery can be expensive

service recovery paradox is more likely to occur when:

the failure is not considered by the customer to be severe, the customer hasn’t experienced prior failures with the firm, and the customer perceives that the company had little control over the cause of the failure

Service guarantees

for tangible products, a guarantee is often done in the form of a warranty.

Perishability

cannot return the service

service guarantee is intangible

if you’re not satisfied, we don’t expect you to pay

unconditional

the guarantee should make its promise unconditionally - no strings attached

meaningful

the firm should guarantee elements of the service that are important to the customer.

easy to understand and communicate

customers need to understand what to expect. employees need to understand what to do satisfy customers.

Benefits of service guarantees

a good guarantee forces the company to focus on its customers, an effective guarantee sets clear standards for the organization, a service guarantee reduces customers’ sense of risk and builds confidence in the organization, a service guarantee makes it easier for customers to address service failure

Reasons companies might not want to offer a service guarantee

existing service quality is poor, guarantee doesn’t fit the company’s image