Service recovery is the effort that companies put forth to satisfy customers by compensating for poor experiences they’ve had with the company, its employees, or its products or services. Customers who have experienced service or product failure, and have not been compensated or helped by the company, can become disgruntled or angry toward the company. These unhappy customers often stop buying from the company or even create negative publicity for the company.
If companies collect customer feedback and act to make up for negative experiences, they can often retain these customers. They may compensate customers monetarily, with replacements and returns, or simply by apologizing for negative service interactions.
Customer service expert David Tooman said, “sales without customer service is like stuffing money into a pocket full of holes.” For long-term success, businesses need to not only listen to their customers, but also solve problems that their customers experience – before they leave. Almost 91 percent of unhappy customers never do business with a company again after a negative experience.
Forrester found in a 2010 study that 81 percent of consumers who encountered problems but got great service recovery were very likely to continue doing business with the recovering company. Just 5 percent of those who got very bad service recovery were also very likely to stay; 57 percent were actually likely to leave. The difference between customer retention with good and bad service recovery is staggering.
Customer retention is much cheaper than customer attraction. And the dividends of customer loyalty are immense. Great customer service, and especially service recovery, can build customer loyalty, advocacy, and trust, which will improve the company’s bottom line.
Sometimes, unhappy customers who have been contacted and had their problems solved become more loyal to a company than they would have been if the experience had been satisfactory in the beginning. This phenomenon is called the service recovery paradox.
The service recovery paradox stems largely from the customer engagement created by service recovery. When a company reaches out after a negative experience, and makes up for that experience, the customer feels valued personally.
The recovery paradox may be true in the best of cases, but that doesn’t mean that any organization looking to retain customers should first seek to offend them. In 96 percent of cases, customers don’t even comment on poor experiences, so the company doesn’t know enough to attempt recovery. The best approach to service recovery is to make it unnecessary in the first place.
- Gather Complaints. The squeaky wheel gets the grease; but some squeaks are inaudible unless proactively sought out. A customer who complains is a customer willing to help your organization improve the customer experience. How easy would it be for one of your customers to complain? How many methods are currently in place to collect complaints? Do employees understand why and how to log and organize customer feedback? Organizations must make it easy to complain directly to staff. Otherwise the harbored complaint will likely turn into a lost customer, or worse: a Facebook post with 1,000 of the dissatisfied customer’s friends as an audience.
- Monitor Social Media. Because it is a consumer’s market, and a digital age, careful attention should be paid to what customers are saying about your business online. Are they recommending you to friends? Do they wish a certain product would return? Are they angry with your customer service? Interaction with customers online promotes loyalty, and communicates malleability of procedure—something a customer looking to change their experience would appreciate.
- Apologize. When a mistake has been made or offense committed, the insincerity of an auto-generated apology will not suffice. A disappointed customer needs a sincere, human apology. “The customer is always right,” reads the mantra claimed by so many businesses. If they are always right, they need to know, and feel it.
- Review. Ask the customer to retell their story, and note the details and motivations for the feedback. If the apology was accepted, the consumer will be willing to expound on their needs for a better customer experience.
- Fix the problem and follow up. The complaint and explanation is only useful on a macro level if the whole company recognizes it as a problem, and works to fix it. However, the customer needs to know through report that the problem has been solved in order to overcome the negative feelings felt at the time of offense. Often, the error will need to be overcome with some compensation to the customer such as a free upgrade or in-store credit.
- Document. A history recorded is the future’s yield sign. Make sure what happened has been meticulously recorded to avoid similar mistakes down the road. One customer may have been saved, but more are at risk if the solution is not adapted into company culture through knowledge and understanding.
Contact MaritzCX to learn more about service recovery and other ways to drive business outcomes through customer experience improvement.