18. Service Recovery That Really Works – Lead With Your Customer, 2nd Edition:Transform Culture and Brand into World-Class Excellence

CHAPTER 18

Service Recovery That Really Works

Whatever the situation, you are best served when you apply the operational values defined and prioritized in part I of this book.

A best-in-class organization does this for everyone who has an impact on its customers. That’s plan A. But what happens when your customer’s experience doesn’t go according to plan?

Unfortunately, no one will ever live in a perfect world. No matter how proactive you are, or how strong and integrated your service nets are, everyone occasionally makes mistakes. And then, the natural consequence of handling service recovery poorly would be other negative effects on your customers or compliers—and on your reputation, loyalty, and bottom line. In this respect, let’s look at examples of relevant information from numerous research studies that have been common knowledge for years:

• Satisfied customers typically refer five new people to a product or service, while dissatisfied customers will complain to 10 people or more. Combine this dynamic with the belief that it can cost five to six times more to gain a new customer than keep an existing one, and there is plenty of justification for investing in a superior customer experience.

• Organizations, because of poor processes or uneducated or unmotivated employees, often make it difficult for customers to report a problem.

• Most customers won’t complain—they simply do not return. Ironically, it’s often your most passionate advocates who will complain, because they care about your business and want it to succeed.

• Despite common corporate assumptions, most complaining customers are not trying to “scam” the business. According to the 2017 National Retail Security Survey, the average shrink (or loss) rate of storefront businesses is 1.44 percent, of which shoplifting and “external (threats)” is 36.5 percent, or 0.52 percent of overall customers. Take away the percentage of shoplifters and you have a very small fraction of a percentage that are “complaining their way into your profits.” Most companies will make the mistake of instituting strict service recovery policies, claiming it is to “protect” losses from the half-percent who abuse the system. The truth is that they do not save significant losses over those who don’t enforce such limiting policies—they simply irritate the 99.5 percent of their honest customer base who need service recovery—making recovery even more unlikely (National Retail Federation 2017).

• Service recovery processes that require additional effort or time on behalf of the customer (filling out forms, waiting for a supervisor, and so on) usually negate whatever recovery effort is made on behalf of the company.

• One last commonly known saying you may have heard: “The customer is always right.” What is not so commonly known is the opinion that world-class organizations hold about that saying: It is a lie. You’ve probably known for a long time that your customers are not always right. The perspective that world-class companies adopt allows for the truth and retains the all-important customer relationship: “The customer may not always be right, but they are always the customer. And if they are wrong, they will be wrong with dignity.”

Identifying Appropriate Service Recovery Situations

What is the best approach to handle situations that failed to delight your customer? World-class service recovery must be appropriate for the situation, and enacted by the frontline employee who encounters the customer with the problem. There are two reasons for this:

1. When service recovery is more immediate, it results in higher customer satisfaction and greater loyalty.

2. Frontline staff, when trained properly, will be more effective and efficient in resolving customer situations than management—often spending fewer resources and getting better results.

The most successful organizations are prepared to respond to dissatisfied customers appropriately—even creating loyalty in the process! Remember, the primary element at the center of a service recovery situation is the relationship. All the issues that affect relationships (trust, communication, respect, concern, and the like) will come into play during this time. It is absolutely critical to treat any attempt to complain as an opportunity to strengthen your company’s connection with this customer. World-class companies have found that, in some cases, they actually have a better relationship (with higher levels of customer satisfaction) after a service recovery interaction than if the interaction had never occurred!

The World-Class Model of Service Recovery

A world-class model of service recovery can help employees make the most effective decisions. This model was initially conceived by our colleagues Dennis Snow and Guy Smith, and it has found its way into organizations all over the world. This service recovery matrix combines two criteria:

Severity: How significant is the situation? How much has it affected the customer’s experience with our organization? Consider the Customer Compass points introduced in part I.

Responsibility: How responsible is your company for what has occurred? The key for assessing responsibility is to fix the situation with the specific customer first. It is only after the customer is satisfied that you should focus on accountability—who did what and how to resolve the root of the problem so it won’t occur again.

To better explain the best option for repairing that customer’s experience, consider an overview of the four quadrants of the service recovery model (Figure 18-1).

Figure 18-1. Service Recovery Model

Low Severity, Low Responsibility

Starting at the lower left corner of Figure 18-1, the first quadrant is low severity and low responsibility. When the situation is not very important to the customer, nor is it something for which your company is responsible, the best solution is to simply listen to the customer and empathize with them. When an issue is this inconsequential, the person usually just wants to be heard (one of the five essential customer needs). Saying “I’m sorry” isn’t necessarily admitting fault—it is only communicating concern and care for the person who is somewhat unhappy.

Low Severity, High Responsibility

Moving to the lower right corner of the figure, the second quadrant is low severity and high responsibility. When the situation isn’t significant to the customer, but the problem was caused by your company, the best thing to do is to fix it as quickly as possible, without calling attention to the situation. To “make a big deal” out of something when a customer considers it to be a minor issue only draws attention to the fact that there is a problem, which can actually encourage the customer to reconsider the perceived severity of the situation. When possible, it is a nice gesture to offer some small token of regret for the customer’s inconvenience, such as a free cup of coffee or a lollipop for a child—depending on what is appropriate.

High Severity, High Responsibility

Moving to the upper right corner of the figure, the third quadrant is high severity, high responsibility. Occasionally, big mistakes are made that are truly the fault of the company and that seriously undermine the customer’s experience. When this happens, we are forced to roll out the red carpet—a big gesture is required to offset a big problem. In this situation, it is best to keep in mind that, in the mind of this customer, your company has broken its promise—and your attitude and actions should match that. Due to the severity of the problem, multiplied by the fact that your company is responsible, the customer will tend to be emotional, reactionary, and primed to spread the word. The immediate goal here is to do whatever possible to dissipate the emotion and begin to repair the trust that was lost by breaking your promise. The secondary goal is to follow up to make sure this never happens again.

High Severity, Low Responsibility

Finally, moving to the upper left corner of the figure, the fourth quadrant is high severity, low responsibility. This is the quadrant that most companies get very, very wrong. Usually, when the responsibility is low, the typical response will be to match the lack of responsibility with an attempt to empathize. From the customer’s perspective, this response is completely unacceptable. The impact on the customer experience is severe. They are vulnerable. They really need help to salvage the situation. What do world-class companies do instead? They see this as a great opportunity to be a hero.

Consider all the famous (or infamous) stories you’ve heard passionately shared about a service experience that makes or breaks a company’s reputation—nearly all of them fall into this category. Nothing cements loyalty like a company that “saves the day” for a desperate customer—even when it wasn’t the company’s responsibility. Companies that respond to this customer’s dire need with a smile and an “I’m sorry” are destined to be known by all who hear the story as “the company that didn’t care.”

World-class companies recognize these situations as valuable opportunities to make a difference—exceed expectations—and make a profound impression on that customer. You can’t buy that kind of goodwill. And who wouldn’t want to come to work every day if they knew they had an opportunity to be a service hero?

Three Lessons About Service Recovery

There are three lessons to be learned about service recovery and for successfully implementing the lessons of the matrix shown in Figure 18-1:

1. Empower the front line to respond immediately.

2. Generate low-cost or no-cost service ideas.

3. Net your recovery.

Let’s look at each lesson in more detail.

Lesson 1: Empower the Front Line to Respond Immediately

Great organizations empower their frontline employees to deliver service recovery rather than limiting this responsibility only to management. Ultimately, this is the only way to create effective recovery. There are reasons why this works best:

• The more immediate the recovery, the more the customer feels acknowledged. The longer they wait, or the more hoops they have to go through to resolve the issue, the more likely they will feel unappreciated as customers.

• Immediate service recovery not only helps companies to retain their customers, but also keeps the employees around. This is because they’re empowered through training to make decisions that will satisfy their customers. Feeling like they have been heroes to customers can make them feel important and extremely satisfied.

In addition, well-trained frontline employees do a more effective job of offering service recovery than their managers. Supervisors often overcompensate because they have so many other responsibilities. Frontline employees typically are more connected with both the customer and the circumstances surrounding the issue.

One powerful example of effective service recovery training comes from the Ritz-Carlton hotel. Ritz-Carlton has become famous for fully empowering employees to use up to $2,000 per incident for handling service recovery matters (Reiss 2009). This means that a housekeeper on duty could easily comp a few room nights without ever having to ask their manager. It also means that if employees request the assistance of a co-worker, they can rely on their co-worker to comply with the request. This doesn’t happen by accident. Ritz-Carlton’s leadership invests in this effort to ensure the employees are well trained and have sufficient understanding of the options and impact to both the guest and the hotel brand. Ritz-Carlton’s success—and sterling reputation—is its return on this investment.

This approach is not about high-end hotels throwing money at problems. Each year, the moderately priced Hampton Inn chain refunds half of 1 percent of its total room revenue to dissatisfied guests. In the long run, this pays off for Hampton Inns. According to one industry expert, for every $1 refunded, the chain gets back an average of $7 in future business because the guest refers a new guest or returns—which probably would not have happened without the initial refund. Though this does not happen often, Hampton Inn staff members are given tools, such as those outlined in this book, to provide appropriate service recovery. In addition to these tools, coaching and daily lineups help involve associates in the process of optimizing the improvement opportunities from these recovery scenarios to avoid repeating the initial mistake. World-class companies empower the front line simply to deliver on their promise—and realize world-class results.

Lesson 2: Generate Low-Cost or No-Cost Service Ideas

The most successful organizations make great profits and have the means to invest a lot of their budget into continuous improvement initiatives—and for the most part, they don’t. Part of the mindset of extraordinary businesses is to make the most of their resources. This means two things to world-class companies:

1. Only spend what they need to. Using low-cost or no-cost solutions, whenever appropriate, frees up the remaining resources for other investments.

2. Leverage your best existing asset by involving frontline employees in generating and implementing creative problem-solving ideas.

According to many of these best-in-business organizations, some of their greatest breakthroughs have been the result of challenging the team to be innovative with existing (limited) resources, and exceed expectations regardless. Your staff members are already on your payroll. They know your business and your customers better than anyone else. Give them a real opportunity to show how resourceful they can get, and the results are sure to impress you—and your customers.

Lesson 3: Net Your Recovery

The goal of service recovery is to recover not only the quality of the customer’s experience but also a solution to that particular problem so that it never happens again. When you offer service recovery for the same problem over and over, that’s a clear indication that you need to create better service nets.

If this is the case, do a more thorough job of exploring the true root causes of the recurring problem. Gather a diverse group of affected employees and uncover trends or patterns of behavior that may indicate causes and possible solutions. Some organizations choose to include customers or people with completely different perspectives to come in with “fresh eyes” and review the situation. Study the customers’ “moments of truth,” or key interactions, with corresponding integrity matrices, and the real problem and solution will become apparent.

One additional insight from this model is to think of it beyond the external customer and consider it in terms of your internal customer, or employee. Empathizing is a nonnegotiable. Fixing the problem is only a baseline response. Pulling out the red carpet is a nice, albeit needed gesture when you make a big mistake, but only serves to dig you out of a hole that you dug yourself. What will set you apart to your employees is when you model the behavior of being a hero when you don’t have to be. If you show that you care enough to help them even when you aren’t obligated to, you will gain employee loyalty that you may need to call upon when times get tough. Never dismiss the power of providing service recovery internally as well as externally.

Summing Up

Service recovery and service netting are not easy concepts, but they are where the “real world” meets “world class.” Great organizations succeed when they consider the entire experience from customers’ perspectives and implement proven solutions that align with their core vision and values.

It all comes down to this: The magic behind world-class businesses isn’t some wand or magic dust but the consistent efforts of your employees to create loyal customers day in and day out.

Next Steps for Improving How You Recover From a Disappointing Customer Experience:

Have you clearly identified the impact to the overall customer experience?

Who is responsible for the occurrence?

How can you respond as quickly as possible to resolve the incident?

What does the customer essentially want—the underlying value?

How can you ensure that the experience is well documented and shared for others to learn from?

What appropriate support systems need to be created to ensure the problem never happens again?