Service Recovery

Sometimes organisations lose customers or have a decline in customers because of something that went wrong, and they must come up with a ‘recovery strategy’.

A satisfied customer will tell four or five others about a pleasant brand experience. Deliver a poor experience, and seven to 13 others will hear about it. Here is another study's scary statistic: Unhappy customers will continue to voice their dissatisfaction for up to 23 years!

No company can afford to have its brand spoken ill of for two decades. No company can also afford to lose half its customers every five years. Yet, that is the average across most industries. Despite the unprofitable implications of customer dissatisfaction, surprisingly little attention is paid to customer retention. About 80% of marketing budgets are devoted to customer acquisition, even though it costs three to five times more to replace than to keep a customer.

That is unfortunate. Customer recovery – the effort to satisfy unhappy customers to reduce defection – must be a core element of customer equity strategies.

Customer recovery can affect profitability. Studies show that customer recovery investments yield returns of 30% to 150%. British Airways calculates that customer retention efforts return $2 for every dollar invested. In fact, British Airways finds that ‘recovered’ customers give the airline more of their business. Hampton Inn Hotels estimates that its service guarantees increased revenue $11 million and earned it the industry's highest customer retention rate.

An effective customer recovery program includes two level processes that must be incorporated into customer service operations.

Click here to view a video on the six steps to service recovery.

The First Level Consists of Both Apology and Accountability

Say, "I'm sorry," and take ownership of a mistake, even if it's because of suppliers or other problems.

Next, work with the customer to determine an appropriate remedy. This involves the customer in the resolution and sometimes uncovers less costly solutions. Resolution should not only address a customer's direct loss but also compensate pain and suffering. Some refer to such compensation as atonement. Manage expectations with resolution schedules.

Finally, follow-up. Determine whether the customer has received the promised treatment, and, more importantly, how they feel about it. One study indicated that a follow-up call to a once-unhappy customer can boost satisfaction by 5% to 7%, and intentions to repurchase by 8% to 12%.

The Second Level Is Building Integrated Customer Recovery Capabilities:

Companies must do more to upgrade the skills and training of customer service representatives, especially since they handle an estimated 65% of all complaints. Other employees must also understand the importance of customer retention.

Customers should be easily able to complain via email, letter, or even well-publicised hot lines. Systems should streamline complaint acceptance and generate complaint-based reports. To institutionalise improvements, systems should be developed to hold other departments accountable for their actions. Complaint data should also be used to determine investment priorities and service improvements.

Such systems must incorporate integrated customer and product databases. A specific type of database identifies customers who haven't visited a casino within a certain period. Knowing this may be a sign of dissatisfaction; the casino calls to find out why and sends a personal invitation to return along with a coupon.

No one likes to hear complaints, but they are opportunities for positive change, not reasons for defensiveness. Carefully track the number of complaints and resolution. More importantly, complaints must be relayed to the proper organisational areas to minimise re-occurrences. Remember that a rising number of complaints are usually a sign of success, not failure. Often, complaining customers are the ones most committed to a brand.