Making the Case for Service Recovery - Customer Retention

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1 Making the Case for Service Recovery - Customer Retention Service Recovery is one of the key ingredient s to good service, leading to happy customers and we all know happy customers are very good for business, whether you are a retailer, coach, director of golf or general manager. Research has shown that customers who have had a bad service experience which was resolved quickly and properly are more loyal to a company than are customers who have never had a service failure - significantly more loyal. Service Recovery practices are a critical element in any Customer Loyalty Program. I see a huge opportunity for improvement and a chance to create remarkable experiences that create word-of-mouth marketing in situations when products and services fails if sound service recovery programs are in place. Every service and product, whether human or technology driven, will eventually fail one day putting you and your customer in an uncomfortable situation. Smart organizations will understand this and develop a service recovery program which ensures that their customers are satisfied even after things have gone wrong. The goal of service recovery is to identify customers with issues and then to address those issues to the customers' satisfaction to promote customer retention. However, service recovery doesn't just happen. It is a systematic business process that must be designed properly and implemented in an organization. Perhaps more importantly, the organizational culture must be supportive of idea that customers are important and their voice has value. Think about your own experiences with service or product problems. Did you get a quick acknowledgement of the problem, speedy resolution of the problem, and -- perhaps -- compensation for your troubles? Imagine if you got a truly sincere apology and not some phony empathy? Weren't you more likely to buy from that business again because of the confidence you now had in their business practices? That's the key value to effective service recovery and complaint handling: customer retention. One way to think about service recovery is that it is a positive approach to complaint handling. Complaint handling has serious negative connotations; whereas, service recovery has positive connotations. Complaint handling is placating people, minimizing a negative. Service recovery practices are a means to achieve the potential, latent value a customer holds for you and your services by fostering an on-going positive relationship. Service recovery has a secondary value. It creates positive word-of-mouth about your services and golf club and minimizes the bad spin that lack of service recovery practices can create.

2 Why Does Service Recovery get No Respect? So why isn't service recovery part of every organizations' business processes? No easy answer exists. Perhaps it's the contention between operations and marketing. Sales & Marketing is often a key focus of golf clubs and any business, driving income is sexy. Marketing conducts expensive research, fine tunes the 4Ps that comprise its marketing strategy (Product, Place, Promotion, and Price), and penetrates new customer bases through its sales and marketing programs. New customers are expensive and achieving sales growth and expanding market share can be costly. Service Recovery isn't sexy. It's an operational task that involves negotiating with angry customers. Often it requires us to look inwards at ourselves and the company analysing why services or products have failed. In the short term it is usually easier to just dismiss these upset customers and move on to greener fields? Some customers cannot be recovered but they can be made less dissatisfied so they don't bad-mouth the organization. This may seem like heresy from a service recovery programme however; customers are not always right. Having said that most customers can be recovered through simple application of the Golden Rule. And those recovered and retained customers become profit centres. They buy more and they give positive recommendations to friends and colleagues, which is the most important form of advertising. For a rough calculation on the potential value of a Service Recovery Program for your business find out the annual sales volume per customer, then apply the operating profit margin to find the profit per customer. Next, find out the annual customer churn, that is, how many customers stopped buying from you -- especially long-standing customers. Multiply, the churn by the profit margin and you have the potential value of the Service Recovery Program's annual budget. You'll probably find that even reducing a small amount of the churn will more than pay for the program. And this doesn't even include the reduced sales from customers who didn't leave but still have issues with you and the club! When organizations plan to implement recovery programs it is helpful to differentiate between the strategic initiatives that should be in place before the actual problem occurs and the tactical activities that should happen after a problem has occurred and the customer contacted the company. Let s start with the strategic initiatives that will ensure that the right environment for remarkable service recovery is in place.

3 Anticipate the need for recovery Whenever you roll out a product or service, the people related to it are probably well aware of potential problems or obstacles that might occur. It is probably not so much arrogance than probably more wishful thinking that limits the ability of companies to foresee potential problems with a product. Accepting that even the best designed product or service will fail one day in specific situations is the first step. Anticipating potential problems will help organizations to be prepared when the first customer contacts us with a problem. Build an organization that is fast on decision making, and fast to respond. One of the key success factors to win back customers and restore their satisfaction is to act fast. While your front-line employees might be working hard (and fast) already, the whole organization that deals with service recovery has to be designed for agility. This includes clear escalation and decision-making processes. One key principle should be that the fastest decision-making happens when the front-line employee can make the decision. So the real goal is not to define better escalation processes, but to define processes that empower employees so that escalation processes are not necessary anymore. Empower front-line employees In most companies, the employees that are actually interacting with customers are the ones that receive the lowest salary in an organisation. While increasing the salaries (compared to other competitors) is one way to attract and retain talent that is able to deliver exceptional service, empowering employees and giving them the freedom to do whatever is necessary to ensure that customers are satisfied is probably even more economically meaningful. Train employees Ensure that your training program includes not just lessons on delivering service when everything works out as planned, but also to include lessons that teach employees to improvise or to set recovery programs into action if something goes wrong. While these strategic initiatives are important to define the long-term direction of your service recovery programs, the "moment of truth" happens when a customer contacts a company and interacts with an employee to discuss the problem and possible solutions.

4 We all live in dread of the angry and dissatisfied customer. A happy customer talks to 2 people but an unhappy customer talks to 8 people. Avoiding an unhappy and talkative customer is vital. Happily it is possible to train for such interactions and learn to deal with them like professional politicians. I strongly recommend training those employess in the front line well. Here are some useful tips. What do you do in that moment of truth when you, or your employee are face to face with an unhappy customer: Acknowledgement Acknowledge that there is a problem. It doesn t matter whether the customer didn t understand certain aspects that are obvious from an organization s perspective. He is the one that has a problem and if you want to keep this customer he needs to be taken serious. If one tries to convince customers that there is no problem, you are actually telling them they are stupid. This applies also to situations when the customer is following the wrong steps to perform a task never blame the customer. Empathy Understand the problem from a customer s point of view and also understand that he might be upset after a problem has occurred. While it is not necessary to listen to a customer when he starts cursing at employees, front-line employees should try to create an atmosphere that supports and enables a positive solution of a problem. Confronting the customer with his anger and frustration will not lead to an escalation of the problem, communicating that one can understand his situation will. Apology Saying sorry is essential. Whether the employee should apologize in his name or in the name of his company depends on the context of the service recovery. If the employee (or a direct colleague) was involved when the problem occurred, he should apologize on his own behalf. If the employee is in a call-centre and a problem happened at a completely different location in the organization, he should apologize in the name of the organization everything else is not authentic. Own the problem Taking ownership of the problem by the employee that is confronted with the problem (no matter in what position he is in) ensures that customers feel that they are taken care of. And even if your job is not to resolve the problem ultimately, telling customers to go somewhere else (and not "bringing" them there) sends the message that they don t care. Fix The Problem Obviously fixing or at least trying to fix the problem for the customer should be the top priority. This might be easy in some situations (maybe just replacing the defect product) it becomes a challenge when the problem is not a real problem. Let s say the customer was simply using the product in a wrong way, fixing the problem in such a situation means re-educating the customer so that he uses the product or service in the supposed way.

5 Provide assurance When customers get in touch with you to report a problem and to demand a fix their most important need is to be taken seriously. Giving them a feeling of assurance that the problem will be sorted out and should (hopefully) not occur again will leave a professional impression and help rebuild the customer s confidence a company s products and services. Provide compensation If you want to make angry customers happy, give them money. Providing a refund, token or other compensation depending on the severity of the problem remains to be a powerful method for service recovery. Increasing the amount of money that a company pays to company to fix problems requires a rigorous control but it can indeed ensure that your customers are satisfied. It is important to note that just "handing out money" is not enough if money is handed out unfriendly or even worse, in a tedious discussion with the customers, satisfaction will not be restored. Remember a business not having a service recovery programme is the same as neglecting your short game hoping that you will hit every green in regulation. Sooner or later sometimes through no fault of your own, things will go wrong and the true measure of your business will be dealing with matters when they go wrong, just as the truly great players are able to return a score even on an off day. Written by: Rod Park Park Consulting Services rod@rpark.fsbusiness.co.uk