W5: Customer satisfaction and service failure

and recovery

What is customer satisfaction and why is it important?

The evolution of the modern-day customer is changing modern day competition, as
there is less of an emphasis on brand loyalty and an increasing emphasis on
building customer satisfaction. Satisfaction is, therefore, one of the most
important elements of brand equity, and is especially important for service firms.
Many top companies are now shifting their focus more towards building satisfaction
as they can see the profit earning potential (Mueller, 1991).
Assumption is that satisfied customers are loyal customers and this will ensure the
realistic future cash flow for the business. In this digital age, its important to
differentiation yourself against the competitors so that you dont become a product of
laggard. Due to the digital age, there is a high likelihood of switching between
rivals (as transparency in price comparison sites increases) and the product offering
of different companies being ever so fierce. Although it might help the company
reduce their advertisement costs it can add more value to the consumer.
You can increase the price premium to long term customers who are usually
paying regular price. However, this can have a negative impact if this keeps
progressing as customers will distrust the value offering that the company provides.
In short, there are loyal customers who are willing to pay high (iPhone faggots)
but if prices are too high switching is more than likely, or consumers are more likely
to stick to the brand or product due to its familiarity. Therefore, knowledgeable
repeat customers are easier to handle.
What is the Kano Model of satisfaction?
The emphasis on the model is to categorise and prioritise the customers needs. In
all, to enhance customer satisfaction.
 X axis: Whether the
need was met or not.

Y axis: How did the

customer respond to
it, were they satisfied
or disgusted?

It is separated into 3 categories, 1) Must be requirement: They should be met, if

not people are usually disgusted or disappointed. E.g. - Flying: Luggage from long
haul flights, if people do not receive it they will feel dissatisfied. If the luggage was
there then its what you expect to already be provided as a service. 2) Performance
needs: Customer usually state them, more is usually better, its what you compete
with your competitors on. E.g. - Cabin pressure, the movies provided. More is better.
3) Attractive needs: Things arent obvious or customer do not tell you about. They
are not expected. e.g. - if you get an upgrade in the airline to a business class, your
expectation has been met or over met in some point. There is a sense of customer
delight.
An example of falling customer satisfaction is from British Airways, where they
changed the service concept to bring costs down in line with budget airlines, this
caused the band reputation to fall (Cohen, 2017) and further alienated its core
customer bases who expected HQ service (Hopping, 2017). This therefore created a
competitive disadvantage and tainted the brand image of BA.
Service Failure and Recovery
Customers dissatisfied 25% of the time but only complain 5% of the time, therefore
how can you access the service quality if there is no one complaining? In some
culture, its frowned upon to complain and usually complaints are not taken as a
suggestion but negative criticism.
Chebat (2005): Paradox between streamlining and customer satisfaction.
Complaining should be regarded as a way of managing emotions or
psychological compensation.

Why do customers complain?

Obtain compensation
Release their anger
Help to improve the service
Out of concern for others
How do they complain?
Public, Private or do nothing are the systematic steps that consumer take to
execute complaints. Companies should be aware of public complains as any wrong
doing could result in a mass downward spiral of negativity. E.g.- United Airlines and
the Chinese man. Whereas many people, if the assumption of the facts above is
true, are done through private which can result in consumer switching or negative
word of mouth.
Why?
Customer coping strategies to service failure (Sarkar et al., 2015):
1. Action coping those who find ways to make things better, and 2) Positive
thinking where customers see an opportunity to learn from stressful
encounters. 3) Emotional venting customers who experience a stressful
encounter may try to vent their feelings to attract the attention of the provider.
Andreassen (2001): In contrary, we can learn that from an image and buy-more
perspective, there is no point in delighting the dissatisfied complaining
customer. However, with strengthened loyalty, customers would be more inclined to
buy the same services during a longer time. Furthermore, customer delight with
service recovery will create positive word of mouth.

What do customers expect once they have made a complaint?

Procedural, interactional and outcome justice
Therefore, its necessary to give employees right training and motivation to handle
such situations if they do arise. We understand that customer satisfaction leads to
loyal customers, and in line with this thinking negative feedback should not be a
deterrent but a chance to improve on the negative service offering provided.
Paradox: Customers who experience a service failure that is satisfactorily resolved
may be more likely to make future purchases than customers without problems. If
second service failure occurs, the paradox disappearscustomers expectations
have been raised and they become disillusioned. Severity and recoverability of
failure (e.g., spoiled wedding photos) may limit firms ability to delight customer with
recovery efforts. So, the best strategy remains: Do it right the first time.
How?
Monitor complaints but more importantly foster and develop an organisational
learning culture that takes negative feedback as a strategic tool to move forward.
Dont make your complaints a tick boxing activity. Many companies are told how to
increase revenue and profit but unlikely to be trained in scenarios where shocks
might occur. Conducting root cause analysis, throughout the year and not only
when there is a complaint is a good strategy.
Customer service hotline to increase the communication to the consumers.
Feature service improvements that results from customers feedback.
Its all about reducing the anxiety and telling the customers that if this happens,
this is what we will do for you... This might even lead to the change in the
procedural way that complaints are handled. Its about finding out what the current
way of doing things are and improving them and creating a new benchmark for
quality. At the same time making sure the improvements continue not only once but
fostering an organisational culture with effective leadership that allows a greater
continuity of such progression.
Readings:
Institute of customer service (2017), defines 5 rules for complaint handling.
- Have strategic plan
- Train your staff and management in complaint handling
- Give complaining enough priority and authority
- Ensure that you can process complaints from all sources
- Set up processes to log and analyse all complaints and share with everyone
What to do?
1. Thank the customer for complaining
2. Put yourself in the place of the customer
3. Start with the view that the customer has a valid point, not that they are trying
to rip you off
4. Get all the facts first
5. Correct the mistake
6. Learn from every complaint (It costs at least 5 times as much to gain a new
customer than keep an existing one)
7. Always respond
8. Listen to your staff
9. Lead by example
It is also note that power plays an important part in service recovery, Wong (2017)
found that customers with high power motivation with status- enhancing
compensation in comparison to low power motivation with utility enhancing
compensation. Optimising such target compensation result in cost saving for the
service provider.
Allen et al (2015): Service organizations should train employees to be active
listeners. Therefore, decreasing the knowledge gap and educating the
consumers.

Hart (1988): However, not too loyal. At one point, Dominos Pizza (which is based
in Ann Arbor, Michigan but operates worldwide) promised delivery within 30
minutes or the pizza is free. Management found that customers considered this
too generous; they felt uncomfortable accepting a free pizza for a mere 5- or 15-
minute delay and didnt always take advantage of the guarantee. Consequently,
Dominos adjusted its guarantee to delivery within 30 minutes or $3 off, and
customers appear to consider this commitment reasonable.

What does a guarantee do? Customer centric, Transparency, Feedback

mechanism and guaranteed marketing muscles.

Heijden et al (2013): Younger FLEs and those with a longer organizational tenure
generated more ideas for improvement.
Reading: Bougoure (2016) on service failure and brand credibility
Failure organisations must offer a full range of service recovery mechanisms, such
as those listed and other options like upgrades, meal vouchers and accommodation,
to protect brand credibility in the event of a service failure. However, Walgren
(2016), considered whether companies respond to kids complaining. Over one-third
of the companies in the sample did not even bother to respond to childrens
legitimate complaints, even though each child specifically asked the company to
write back.

Jared Spool (2015) suggested that to build a winning strategy using Kano model,
you need to be more customer centric. This means creating a customer journey
map, decreasing the perception gap between consumer and service providers.
However, a balance is required as improvement to existence ideology cost money
(training and motivating). With complex products, it might be hard to change the
ideology, Jared described this as experience rot if you dont fix the problem,
then someone will- usually the competition.
Due to the nature of our service offering evolving, companies need to be aware of
their product offerings. Netflix has capitalised on learning from market dynamism,
although small when started it has oriented itself to fit within the organisation
dynamism of todays consumers. Its assumed that you can never make someone
happy but only neutral satisfaction. When it works we dont talk about it, when it
does not we do. Thats why the needs dimension needs to be met for firms to do
well.