Recovering and Learning from Service Failure

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Effective service recovery is vital to maintaining customer and employee satisfaction and loyalty, which contribute significantly to a company's revenues and profitability. Yet most customers are dissatisfied with the way companies resolve their complaints, and most companies do not take advantage of the learning opportunities afforded by service failures. The authors provide a research-based approach for helping managers develop a comprehensive service recovery system.

To encourage dissatisfied customers to complain, leading firms set performance standards, often through the use of guarantees; communicate the importance of recovery to employees; train customers in how to complain; and use technological support offered through customer call centers and the Internet. In resolving problems, companies need to focus on providing fair outcomes, procedures, and interactions. Successful companies develop hiring criteria and training programs that take into account employees' service-recovery role, develop guidelines for service recovery, are easily accessible to customers, and use the information in customer databases to solve problems.

Firms promote organizational learning by documenting and classifying complaints; useful methods include creating internal complaint forms, accessing complaints made to front-line employees, and categorizing customers who complain. Finally, companies need to generate additional information on service quality, disseminate it to those responsible for implementing improvements, and identify those process improvements that will have the greatest impact on profitability.

Customer conflicts are inevitable. A powerful service-recovery strategy can turn these conflicts into opportunities to improve performance and raise profitability.

Stephen S. Tax is associate professor of marketing at the University of Victoria, British Columbia. Stephen W. Brown is professor of marketing at Arizona State University and holds the Edward M. Carson Chair of Services Marketing. He is also director of the Center for Services Marketing and Management.

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