The goal of service recovery strategies 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 the central tenant of service recovery strategies — that customers are important and their voice has value.

Research has shown that customers who have had a service failure resolved quickly and properly are more loyal to a company than are customers who have never had a service failure — significantly more loyal.  

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 company 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 a company by fostering an ongoing positive relationship.  

Service recovery has a secondary value.  It creates positive word-of-mouth about your company and minimizes the bad spin that lack of service recovery practices can create.  

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.  Customer acquisition is sexy.  Marketing conducts expensive research and penetrates new customer bases through its marketing programs.  Companies spend big bucks on achieving sales growth and expanding market share.  

Service Recovery isn’t sexy.  It’s an operational task that involves negotiating with angry customers.  The budget typically falls in the customer service department — one of those loathsome cost centers that drain profit.  Isn’t it easier to just dismiss these upset customers and move on to greener fields?  

In some cases, it probably is easier and appropriate.  Some customers cannot be recovered, only ameliorated so they don’t bad-mouth the organization.  This may seem like heresy from a self-proclaimed customer service nut, but customers are not always right.  However, most customers can be recovered through simple application of the Golden Rule.  And those recovered and retained customers become profit centers.  They buy more and they give positive recommendations to friends and colleagues, which is the most important form of “advertising.”  

Stages of Service Recovery Maturity

Service Recovery progresses through a series of stages:

Stage 1: Moribund.  There is no complaint handling.  Angry customers are ignored.

Stage 2: Reactive. Customer complaints are heard and a response is made.  But it’s a haphazard process with no defined goals for the response and no one owns this business process.

Stage 3: Active Listening. At this stage, the response to issues voiced by customers is structured.  Specific people have the responsibility to respond to complaints and guidelines are in place for the response.  However, it is still reactive.

Stage 4: Solicitous. The critical change from Stage 3 to 4 is the move from reactive to proactive solicitation of customers with issues.  The reason this is so important is that most customers don’t bother to complain.  They just move on to other suppliers of products.  Haven’t we all done this?  It’s a lot of work to complain.

Stage 5: Infused. The pinnacle of Service Recovery Practices is achieved when the complaint identification merges with business process improvement or six sigma programs to support root cause identification and resolution.  The owners of business processes that cause customer issues are notified of the occurrences to prompt reexamination of the process design.

The solicitous role is accomplished by encouraging customer to voice their complaints.  Event surveys (also known as transactional or transaction-driven surveys) are a commonly used technique to get issues voiced.  The survey design must be such that more than just high-level measurement of customer satisfaction is captured.  The design must allow for action to be taken.

In essence, we see two levels of feedback loops.  First, there is feedback from the customer to the organization.  Second, there is feedback from the customer-facing groups to its business partners within the organization.  While company culture is clearly critical to implementing this level of feedback management, certain technologies can infuse this information sharing into business practice.

Customer surveys are a good means for measuring the level of customer satisfaction with a company’s products and services.  Measurement at a high level can target a company’s continuous improvement projects to those areas causing the greatest dissatisfaction and customer complaints.

But, this top-level measurement treats customers as expendable commodities.  After all, even if a company eventually improves failing processes, those customers whose dissatisfaction was measured are still dissatisfied.  Therefore, the most critical step in the survey process is the last one — taking action on the findings.  Two broad types of action should be taken:

1. Short Run.  Address the immediate concern the customer has raised.  A customer loyalty program or customer retention program is incomplete unless it includes service recovery or customer complaint handling processes.
2. Long Run.  Address the root causes of customer dissatisfaction — and reinforce the root cause of satisfaction.

Customer complaint handling should be a structured process, though, not a haphazard reaction.  Organizations should measure progress from the lowest level (with no procedures for handling customer complaints) to a middle level of reactive responses. Even better is a systemic response, proactively soliciting complaints through surveying or other means of direct customer contact.  Ideally, a company would like to avoid the service failure in the future.  Thus, providing feedback to the owners of the business process that lies at the root cause completes the ideal service recovery system.

Dr. Fred Van Bennekom founded Great Brook to help organizations collect and apply customer and employee feedback.  Great Brook conducts workshops on survey practices along with advising clients on all phases of survey management and analysis.  Fred authored Customer Surveying: A Guidebook for Service Managers and he teaches operations management in Northeastern University’s Executive MBA program.  To learn more about Fred, check out Great Brook’s website at GreatBrook.com.