How Service Recovery Paradox Enhance Customer Loyalty

Allianse Writer

Dissatisfied customers will most likely not patronize your products or services. Worse, they may even leave bad reviews that could harm your reputation. Granted that you have your share of such customers, did you know that you could turn them into happy customers? But you would need to understand first the service recovery paradox phenomenon to do so.

Table of Contents

What Is Service Recovery?

As you focus on delivering value proposition and capturing value, remember not to neglect customer experience. Unforeseen factors can and will arise to cause customer pain. But by putting the right people in the frontline and equipping them with the necessary information to assist customers, you can mitigate their complaints.

As implied, service recovery refers to turning a bad customer experience into a positive one. In essence, you are correcting a mistake and delivering on your brand promise. Once performed, you are doing your dissatisfied customer justice. At the very least, you could keep the customer satisfaction level high.

A successful recovery entails:

  • Restoring the customer’s trust
  • Increasing customer attention
  • Driving brand awareness

Once you satisfy those three components, you not only solve a problem. Those previously dissatisfied customers may turn into loyal customers.

What Is the Service Recovery Paradox?

As you strive to deliver the best customer experience possible, things beyond your control may happen that cause customer dissatisfaction. For sure, such situations are unfavorable to your business, especially during the early stage. And so, the dissatisfied customers would expect and demand that you rectify their complaints.

Now, two things may happen depending on how you handle the issue.

  1. You fail to solve the problem, thus leaving them even more frustrated.
  2. You solve the problem, and that’s the end of it.

Hopefully, you are not satisfied with the two possible outcomes stated above. You see, there is also such a thing called the Service Recovery Paradox, a term first coined by McCollough and Bharadwaj in 1992. In essence, it describes a phenomenon in which post-failure customer satisfaction exceeds pre-failure satisfaction level.

Effective service recovery can help your startup in a big way. It not only maintains but also elevates customer satisfaction to a higher level. As a result, you win customers over and earn their loyalty.

Attribution of Blame in Service Failures

A service failure happens when the service delivery does not meet customer expectations. It is more personal than product failures, so it has a profound psychological effect. Hence, customers are more likely to assign blame to:

  • Organization
  • External sources, usually beyond the control of an organization
  • Customer if they contributed to the service failure

Courses of Action Taken by Dissatisfied Customers

After a service failure, these are the possible steps taken by customers:

  • Do nothing, but will have a negative impression on the organization
  • Complain in private, such as sharing their negative experience by word-of-mouth or posting on social media
  • Complain to a service company
  • File a complaint with a consumer claims tribunal or may even take legal action
  • Never buy from the organization again

Customers generally are more forgiving when the blame falls on external factors. The same applies if the issues are minor and easy to resolve. For example, a restaurant customer complains about a particular food. The restaurant could solve the problem by replacing the dish. But they could also go beyond that by offering dessert or coffee for free. Such a gesture is a way to compensate for the inconvenience and makes for a hugely positive experience.

But if the perceived cause of the problem is the service system, customers are more likely to complain. And if the issue is severe and complex, they will not be as forgiving. For example, an airline may oversell tickets during the holiday season. Consequently, some customers may be stranded and angry for sure.

How Do You Approach Service Failure and Recovery?

Service recovery comprises actions that take customers from dissatisfaction to satisfaction. Once a service failure occurs, your response can turn a minor issue into a significant concern. But if you handled it correctly, there is a chance to forge a stronger customer relationship.

Essentially, the Profitable Art of Service Recovery consists of two main approaches.

1. Identify the Problem Before It Even Reaches the Contact Center

“Prevention is the best cure.” But no matter how you strive to deliver a positive experience, problems can still occur. Be that as it may, you can still rectify the situation through service recovery. The goal, in this regard, is to reduce the number of customers that complain or contact customer service.

Reducing such contact has practical and financial reasons. First, your organization’s existing customer service team does not become overwhelmed. As a result, they can focus on resolving the most critical issues.

One of the best ways to accomplish this goal is to use technology. For example, a company website may contain troubleshooting and solutions. This way, customers can solve the problem themselves without the need to reach out to your customer support team.

2. Use Service Recovery to Retain Customers and Build a Stronger Relationship

The service recovery paradox applied to most types of businesses. Hopefully, it is also applicable to you. So, whenever a service failure happens, you should rectify the problem – that is the primary goal.

Understand that customers hate waiting too long. Hence, you should resolve their issues most quickly and efficiently. Even better is if you could exceed customer expectations. Because when you do, that is when the service recovery paradox happens. And they will reward your effort by not only becoming loyal to your brand. Satisfied customers will also spread the word, which enhances your brand equity.

What Steps Can You Take for A Successful Service Recovery Plan?

There are essentially a few steps you take when creating your service recovery process. Regardless of the size of the customer service team and customer relationship strategy, these could be among your underlying principles.

1. Be Proactive

Anticipate the possible problems that may happen by reviewing the customer journey. Also, most customers are social media users. Such being the case, use tools that help you track mentions of your brand. This way, you can get a pulse of how the consumers feel about your products or services.

Usually, if there are any mentions, comments, or feedback, it is positive or negative. In both cases, do engage with the customers. You can thank someone who said a positive thing about you. But pay extra attention to those who had a negative experience. Reach out and offer to help them.

Being proactive is nothing new. In many restaurants, for example, it is a typical practice. Time and again, a server has approached you to ask if everything is okay. In this case, they are being proactive in finding out if there are any issues they can and should help resolve. Remember that it is easier to solve problems early than letting them go out of hand.

2. Decide on How You Want to Approach the Service Recovery Plan

Are you going to be proactive in identifying customer issues before they reach the contact center? Or will you embrace the service recovery paradox theory?

It is logical to assume that a company could take those approaches on the surface. But the truth is that not all businesses can do that. Some companies can only choose one of the two.

Instead of deciding yourself, it may be best to gather the relevant departments to discuss the best approach. Aside from contributing their ideas, it is also vital that your chosen course is consistent. It is also your way of preventing a silo from forming within your organization.

While the objective of handling customer issues is to resolve them, you should also consider how you can turn them into loyal customers. A restaurant may offer a free dessert, coffee, or dish, as mentioned in a previous example. But not all companies can similarly provide products as a token.

Ask yourself this question: What offer can you make so that the previously dissatisfied customer will feel good and highly appreciated?

3. Prioritize Employee Training

In particular, you should equip your sales and customer service agents. They need to possess the necessary knowledge and skills to handle any issues in the best way possible. The goal, again, is to resolve problems and leave customers with a higher level of appreciation of your brand compared to not having encountered any problem. A poorly trained staff cannot achieve such goals and may even worsen the customer relationship.

In empowering your employees, one of the training goals is to know the boundaries or limits. This way, the frontliners know what they can and cannot offer. As a result, you already prevent one of the worst mistakes in customer relationships – making empty promises.

The frontliners should know how far they can go in offering a resolution. For example, you can commit a certain amount and leave that to their discretion regarding appeasing angry customers. Furthermore, they should also know when to escalate the issue to a superior.

For simplicity, you can create a document that identifies the most common problems and solutions. So, besides training your employees, please provide them with the necessary tools and materials to simplify the process.

Why Should You Put So Much Attention on Service Recovery?

For typical startups and small businesses, much of the focus goes to products or services, sales, and day-to-day operation. Hence, some entrepreneurs may not pay much attention to customer service and recovery.

Here are why you should focus more on handling service failures and recovery.

1. Mitigate Negative Brand Reputation

If you look at a blank piece of paper with a small dot in the middle, that blemish draws your attention. And so, whenever an upset customer vents on social media, you cannot know how many people saw that. Because of that, some people might already decide to choose another company. It is a pity, especially when they have not tried your products or services and formed a negative bias.

But if you have a well-trained team that implemented good service recovery strategies, you can lessen negative publicity. And by handling any negative feedback online, you not only appease the customer. It is an opportunity to show the audience how much you value their service and will go out of the way to fix a problem. As a result, you might even gain more customers.

2. Increase the Customer Retention Rate

When consumers decide to purchase your products or services, they may encounter issues. Some may even be due to a third party. For example, a logistics company fails to deliver goods on time. So, the cause – be it the fault of others or yours – doesn’t matter. The only thing that matters is appeasing the disappointed customers.

The desire to feel appreciated is intrinsic to humans. When there are problems, you can demonstrate how much you value customers. By doing that, you can build trust and a stronger relationship. It is only natural that they would be more loyal to your brand. And if high customer satisfaction level is your policy, the customer retention rate would be much higher.

3. Increase Lifetime Value Profitability

In one estimate, 9 out of 10 consumers are willing to trust a brand after a service failure. But that is if the company admits to a mistake, be earnest in finding a solution, and be transparent with how they intend to solve the problem.

As you know by now, using the service recovery paradox can increase customer loyalty after a failure. In effect, they will continue to patronize your products or services over the long term. To illustrate the significance, customers tend to spend 57% more on brands they are loyal to than others.

In essence, customer retention equates to a stable revenue stream. And because of continuous patronage, you have a higher lifetime value profitability.

4. Lower Expenditures

When the cost is lower in any aspect of business, you can benefit in two ways. One is that you can allocate funds to areas that need more money. Another is that it adds to your net income. Regardless, you can lower business costs by efficiently handling customer complaints.

For instance, fixing a problem early or before it happens reduces the size of the customer service team needed. In other words, you would be maintaining fewer employees rather than hiring more. You may also save on other expenses associated with the staff, such as training and office resources.

Another significant advantage of customer service recovery is the cost of customer acquisition. Compared to customer retention, it is 5 to 25 times more expensive. And if you increase the rate of retention by even only 5%, your profit increases by up to 25%.

Service Recovery Efforts Enhance Customer Satisfaction and Customer Loyalty

As a business owner, you strive to provide customers with the best experience. And one way to do that is by meeting or exceeding their expectations. Suppose you can guarantee 100% customer satisfaction. In this case, remember Murphy’s 14th law, which states that if anything can’t go wrong on its own, someone will make it go wrong.

Factors that to customer dissatisfaction vary, but they happen. It is natural for customers to assign blame, but not for businesses. So, what you need to do is to take proactive measures early to identify and reduce mistakes. Also equally important is assembling a team that can handle customer issues professionally.

It is no secret that many companies do not provide top-notch customer support or service. As a consumer yourself, you must have had your share of frustrations. It seems that more companies offer poor service than those who provide exceptional after-sales service. And this is to your advantage if you embrace the service recovery paradox.

By going out of your way to please a dissatisfied customer, they may view you as one of the few companies that care. Such a positive impression leads to higher customer loyalty. As you retain more customers, you can also expect your revenue to increase.

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