By Dr. Vishnu Kanhere
Chartered Accountant
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Risk Management
Service failure :
Failure of customer service is a phenomenon widely
encountered in today’s times. The business environment has become so complex and
the points of failure have grown so many, that ‘service failure’ is encountered
at a level much higher than in the past.
However it is important to note here that service failure is
not necessarily a disaster which spells ‘death knell’ for a company, but it
certainly damages ‘goodwill’. If the service recovery — the actions taken in
response to the failure — is handled well, then customer satisfaction, trust and
loyalty in effect actually increases.
What is a matter of greater concern is ‘facing’ a service
recovery failure. In short, failing to redress customer grievances in time and
address service failure is categorised as ‘service recovery failure’.
Dealing with service failure :
‘Service failure’ can be overcome with ‘good service’. Good
service response, in fact represents commitment and builds trust between the
company and the customer. This increases customer satisfaction and loyalty.
Customers are likely to talk positively about the company that redresses their
grievances. This enhances company’s image. Even though it may seem like a
paradox, the whole experience of ‘service failure’ can at times generate more
goodwill than if nothing had gone wrong in the first place.
In contrast, service recovery failure — even for a relatively
small issue — can increase customer dissatisfaction and frustration. This makes
the customer feel greater negativity about the company, damaging its image and
potentially turning other customers away.
Service recovery :
The proactive steps taken by a company to handle customer
complaints, service failure issues, and customer grievances go a long way in
building customer goodwill, and thereby retaining customers. This is the core of
service recovery that addresses service failure. This process rises above mere
complaint handling, which is reactive in nature. Service failure is addressed at
three levels. First by redressal — such as tendering an apology, refund or
product replacement. The second level is to make the recovery process work
smoothly without taxing the customer and repeat call. The third level is the
tone, tenor and manner of the interaction and communication with the customer.
This should neither be apologetic, nor patronising, but should treat the
customer as a valuable associate of the organisation.
Case study of the month :
The CEO of a well-known biscuit manufacturer is surprised to
receive a small envelope in his mail. The envelope contains a biscuit wrapped in
a letterhead. He opens the biscuit to find a piece of thread inside. Curious
about the incident he hands over the letter/packet to you as the risk manager of
the company, rather than to the sales department. You are asked to outline your
line of action and the probable reason of the letter being written to the CEO
for a relatively minor incident.
Solution to the case study :
The first step as a risk manager would be to understand the
scale and magnitude of the problem. It is evident that unless the customer had
felt severely wronged at the point of first contact, either the shopkeeper or
the dealer, he would not have taken the step of posting the biscuit with the
thread in it to the CEO of the company. This is reflective of the seething
discontent of the customer.
The ‘risk manager’ took upon himself to contact the customer
on telephone, apologised and thanked him for bringing the defect to the notice
of the CEO. He followed up the call by sending the customer six packets of
various products of the company.
On telephone he had also enquired about the :
-
the
date of purchase.
-
the
name of the store from which the product was purchased.
-
whether any complaint had been made to the store or the shopkeeper, and
-
their
response.
The first step of making a telephone call ensured customer
loyalty.
He also carried out a survey of the complaints received by
the sales department regarding ‘product quality’, ‘product delivery’ and
‘product availability’. His survey yielded that there were very few product
quality complaints and those that were received were virtually not attended to.
His suggestions to the CEO were :
(1) to establish a system where ‘product quality’
complaints on a regular basis were reported to the Sales Director along with
redressal measures.
(2) placards at retail level giving toll-free telephone
number where the customer could complain about ‘product availability’ and
‘product quality’.
(3) create a system of quick response to the customer’s
complaint.
His suggestions were accepted and over a period of 6 months
the sales improved as the steps communicated to the customer/consumer the
company’s concern for his (consumer’s) satisfaction.
