Service Recovery

Sometimes organisations lose customers or have a decline in customers because of something that went wrong, and they have to 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. 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 badly of in the marketplace for two decades. No company can also afford to lose half its customers every five years, yet that's the average across most industries. Yet, 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's unfortunate. Customer recovery - the effort to satisfy unhappy customers to reduce defection - must be a core element of customer equity strategies.

Customer recovery can substantially impact profitability. Studies indicate that customer recovery investments yield returns of 30-150%. British Airways calculate that customer retention efforts return R 2.00 for every Rand invested. In fact, British Airways find that "recovered" customers give the airline more of their business. Hampton Inn Hotels estimate that its service guarantee increased revenue R11 million and earned it the industry's highest customer retention rate.

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

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 supplier 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 5-7%, and intentions to repurchase by 8-12%.

Click here to watch a video on how to handle a dissatisfied customer.

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 easily be able to complain via email, letter or even well-publicised hotlines. 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. Complaints 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're actually opportunities for positive change, not reasons for defensiveness. Carefully track the number of complaints and resolution. More importantly, complaints must be relayed to the appropriate 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.

Click here to view the best service recovery story.