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How to Completely Restore Customer Confidence After Things Go Wrong 

7 Crucial Elements of Service Recovery

Yesterday afternoon I dropped off a prescription for my daughter at my neighborhood pharmacy. I had some errands to run and I told the pharmacy cashier I’d be back in 2-3 hours.

Three and half hours later I returned to pick up the medicine and an employee nonchalantly said, “Looks like we’re out of stock on that one.” And that’s it. She offered no apology, showed no remorse, and had no solution. Shocked, I replied, “I didn’t get a call about that.” And she said, “Yeah, we don’t usually call when we run out of something. Plus, we’ve been, like, crazy busy today.” “Well, what am I supposed to do?” I asked. “Like I said, we’re out; I don’t know what else to tell you.”

Every day things go wrong in the service world and we are faced with the challenge of turning service failures into service recoveries. But what does it really take to restore customer confidence and regain goodwill? (Obviously, my pharmacy didn’t know or care.) I began to explore that question more than 10 years ago and since that time I have studied service failure and service recovery from every possible angle and I have benchmarked best-in-service companies throughout the world. My research has led to me uncovering a series of 7 simple, but remarkably effective strategies that will unequivocally position any organization to keep customers coming back after even the worst has happened.  Each of the 7 strategies is scientifically proven and surprisingly easy to execute.

I present to you How to Completely Restore Customer Confidence After Things Go Wrong: The 7 Things You Must Do

 

1. Courtesy. Certainly, anyone in the position of interacting with customers must be friendly, helpful, polite, courteous, and flexible. These attitudes and behaviors are not just nice, but they are indeed expected. But when it comes to complaint handling specifically, we know that employee politeness while addressing the issue helps diffuse the problem in the customer’s mind (Liao, 2007).

Research by Hui Liao found that when customers feel like they are being treated with respect, dignity, and sensitivity by employees, they feel a sense of justice and fairness from the company (Liao 2007).

As simple as it may sound, politeness is a tangible asset that can positively impact customer satisfaction with service recovery. If you solve the customer’s issue, but are rude or indifferent in the process, you can still negatively impact the relationship. Simply put, when your employees are polite and courteous, customers will experience more satisfaction and reward you with stronger loyalty.

2. Apology. Making an apology to customers after things go wrong is positively related to satisfaction with the recovery (Liao, 2007).  When a service employee apologizes to a customer, she conveys politeness, courtesy, concern, effort, and empathy and this goes a long way (Smith, Bolton, & Wagner, 1999). Consider the following research:

  • Gallup research has shown that a genuine apology can actually strengthen a customer’s emotional bond to a company, leaving him or her more emotionally connected than customers who never experienced a problem (Fleming & Asplund, 2007).
  • Research by TARP has shown that when an apology is perceived as genuine, customer satisfaction increases 10 – 15%.
  • A revolutionary program appropriately called Sorry Works! encourages doctors and hospitals to apologize quickly when mishaps occur and to offer a fair settlement upfront to families and their attorneys. One of the first hospitals to implement Sorry Works was The University of Michigan Hospital. The results have been astonishing. The University of Michigan Hospital has cut lawsuits in half, reduced litigation expenses by two-thirds (or $2 million annually), and reduced their insurance reserves from $72 million in 2001 to less than $20 million in 2007.(Wojcieszak, 2008).

Offer your customers a heartfelt apology after a service failure and you will not only restore customer confidence and regain goodwill, but you should also realize the benefits of reduced litigation expenses and claims costs.

3. Justification. A vital, but often overlooked element of customer recovery is to provide an explanation for how or why the problem happened. Taking the time to explain to a customer what might have caused the problem helps organizations re-establish trust.

In an article titled, Manage Complaints to Enhance Loyalty, John Goodman says, “In many cases, a clear, believable explanation as to why the policy or performance is reasonable will at least mollify the customer and, in some cases, satisfy him or her.” (Goodman, 2006). Hui Liao had this to say about the importance of providing an explanation, “Explaining to customers what might have caused the service failure may (also) enhance customer satisfaction.  Similarly, in the service recovery context, open communication may alleviate customers’ bad feelings about the service failure.”

Providing an explanation can be as simple as saying, “Thanks for taking the time to let us know about _____. We appreciate customers who let us know when things aren’t right.  Here’s what we think may have happened…”

4.  Resolution. One of the gifts of a voiced complaint is that if offers the company an opportunity to re-perform the service. When given this second chance, companies must bend over backwards to fix the problem and restore customer confidence. When a company fails to resolve the issue, the customer is left hanging, she begins to lose trust in the organization, and feels like voicing the complaint was a waste of time.  

TARP, Inc. studies have discovered that a customer who goes to the effort to complain, but remains dissatisfied is usually 50% less loyal than someone who did not bother to complain (Goodman, 2006). As a result, a poor problem resolution process will produce a “double deviation” effect and will result in perceived injustice, hence intensifying customer dissatisfaction (Bitner, et al 1990).

Resolving the customer’s problem will have a positive impact on customer satisfaction and customer loyalty. Failing to fix a problem after a customer has gone through the trouble of voicing a complaint is treacherous because customers have been let down twice and they may not be as willing to forgive you.

5. Immediateness.  Not only is resolving the customer’s problem obviously important (point # 4), but a speedy recovery response will enhance customers’ evaluations of your company (Smith, Bolton, & Wagner, 1999). Your goal with problem resolution needs to be “One and done”. What I mean is, your employees need to be equipped with the trust (from you), empowerment, and training to be able to resolve complaints on the first phone call or first visit.

Not only does a speedy recovery improve the customer’s perception of the company, but it actually has a greater impact on loyalty than the resolution itself. TARP, Inc. found that ninety-five percent of complaining customers would remain loyal if their complaint was resolved on the first contact. That number dropped to seventy percent when the complaint was not immediately resolved.

The longer it takes for the service provider to provide a full recovery, the greater the customer’s perception is that they have been treated unfairly (Smith, Bolton, & Wagner, 1999).

Improve your organization’s ability to handle problems quickly and well and you’ll undoubtedly realize increases in customer satisfaction and loyalty.

6. Compensation.  Reparation (in the form of discounts, free merchandise, refunds, gift cards, coupons, and product samples) after a service failure has been found to restore equity and improve customer satisfaction (Smith, Bolton, & Wagner, 1999).

A Society of Consumer Affairs Professionals customer loyalty study found that 58% of complaining consumers who received something in the mail following their contact with consumer affairs departments were delighted, versus only 40% of those who did not receive anything.

Don’t hesitate when it comes to compensating customers after a service failure. Your reward will be increased customer satisfaction, loyalty, and powerfully persuasive positive word-of-mouth advertising.

7. (Bonus) Surprise & Delight.  This bonus element is all about going beyond problem resolution and inspiring a feeling of astonishment through unexpectedness.

One of my clients in the beauty industry is maximizing surprise & delight by creatively using gift cards in a way that is generating profits. They used to compensate customers dollar-for-dollar; a $3 overcharge was resolved with a $3 check. Makes sense doesn’t it? Well, now they give a $10 gift card for a $3 overcharge. The customer is WOW’d. But not only is the customer WOW’d and telling her girlfriends about the unexpected gift card, but the company is enjoying a redemption rate of 67% with customers spending 2x the gift card amount in the store.

Try a little surprise & delight and you’ll get your customers talking and, if you design it right, you’ll also enjoy growth as a direct result of the WOW factor.

Closing Discussion

Remember, one of the gifts of a voiced complaint is that if offers the company an opportunity to re-perform the service. Don’t mess up your second chance with customers who give you the gift of complaints. Take these 7 crucial elements and make them your gold standard. When you do, I promise, customers will reward you with repeat purchases and positive word-of-mouth.  Good luck!

Growth In Any Economy

 

The Easiest Way to Achieve Growth is to Slow the Loss of Your Existing Customers

Every year, the average company loses 20 to 40 percent of its customers. Service failures and an inability to successfully handle problems and complaints are a leading cause for this annual exodus, yet less than 10% of companies have a plan of how to respond to customers when things go wrong.

I’ve spent the better part of 10 years studying the revenue impact of service failures and service recovery. What I’ve learned has been nothing short of astonishing. Consider the following:

  • The worst word-of-mouth stories about a company often start when a customer experiences a problem. Dissatisfied customers tell an average of 11people about their experience.
  • Suerat Company’s research has found that as much as 11% of a company’s annual revenue is at risk due to poor problem resolution.
  • A customer who goes to the effort to complain, but remains dissatisfied is usually 50% less loyal than someone who did not bother to complain.
  • TARP, Inc. research has found that if a complaint handling system is poor, it will further alienate the customer, resulting in lower repurchase rates.
  • When it comes to complaint handling, the problem is rarely the problem. The company’s response usually ends up being the real “problem.” Service recovery has a significant impact on customer satisfaction because customers are more emotionally involved in and observant of recovery service than in routine or first-time service and are often more dissatisfied by an organization’s failure to recover than by the service failure itself.

 And on a higher note…

  • In his book, The Loyalty Effect, Frederick Reichheld demonstrated that a 5% improvement in customer retention rates will yield between a 25 to 100% increase in profits across a wide range of industries.  If you can completely regain the goodwill of just 5% of your customers who complain, the payoff can be huge!
  • In A Complaint Is a Gift, authors Janelle Barlow and Claus Moller share compelling research from Polaroid Corporation. Polaroid found that if customers who called to report problems with already purchased camera gear felt satisfied with the response to their problems, they could be sold additional photographic equipment on the same telephone call. They explain, “The telephone representative might say, ‘By the way, we have a new printer on sale for $599,’ and many customers would buy at the same time they were calling to register a complaint.” This is mind-blowing!

Given these facts, I am shocked that more companies don’t have a plan of action for how to respond when things go wrong. I am shocked that a company would allow employees to interact with customers without putting them through complaint handling training. And that is why I’ve written this blog post.

How to Get to the Root Cause of Any Problem By Asking Why 5 Times

 

A decade or so ago I discovered a problem-solving technique that makes me look like a “rock-star” with my clients. The technique is so simple a 4-year old can do it; it always works, and it never ceases to amaze.

The technique is known as the 5 Why Technique and it was popularized by Toyota Production System in the 70’s and all you do is ask the question “why?” five times.

Here’s how you use the 5 Why Technique.

Take a problem, any problem, and ask why? Here’s an example:

1. Why do our agents perceive the quality monitoring process to be unfair? Because not every supervisor counts off or awards points for the same things.

2. Why don’t all supervisors award points consistently? Because the dimensions on our monitoring form are largely subjective and open to interpretation.

3. Why are the dimension viewed as “open to interpretation”? Because we’ve never taken the time to develop deliverables or specifics for each dimension. 

4. Why haven’t we taken the time to clearly define dimensions for our monitoring form/program? Because we were in a hurry to get a monitoring program in place and did not properly design and define all program components. 

5. Why were we in a hurry to get the monitoring program in place? Customer satisfaction surveys revealed an immediate need to improve service and we thought a formal monitoring program would give us better service results. Clearly we need to take the time re-think and re-design our monitoring program, including training our supervisors and clarifying dimensions, so that it is fair and consistent, then and only then can we improve customer service. 

The root cause of the problem of agents seeing the monitoring program as unfair is that the program was quickly thrown together. It really needs to be reviewed and re-designed in order to meet any objectives.

Isn’t that simple? The beauty of the 5-why technique is you get the synergy of a group working and the group remains fiercely focused on the problem at hand. When I use this technique with clients, my job is really easy. All I have to do is ask the five simple “why” questions and write the answers down. The group collectively ALWAYS discovers the root cause right there on the spot…which is why I always end up looking like a rock star!

The next time you’re trying to get to the root cause of a problem, give the 5 Why Technique a try. You’ll focus your intentions and move quickly toward the root cause of the problem.

Four Ways Your Business Needs to Be Using FaceBook

 

 

While “Tweeting”, FaceBook, and blogging are as familiar as an old-shoe to millions of consumers, most business leaders don’t understand how to harness the power of social media for business advantage. I want to get you going on the fast-track for using social media to build, strengthen, and even repair customer relationships.

This week we’ll talk about Facebook. With over 175,000,000 active users, Facebook is the fastest growing social network in the world. You had better believe MANY of your customers are on FaceBook every day.

Here are 4 specific ways you can begin to harness the power of FaceBook for your business.

  1. Poll your customers – Tens of millions of FaceBook users candidly give their feedback on a variety of issues. Businesses can use Facebook Polls to get answers to important questions about new products, current products, problems, or just about anything. Last Thursday, StarBucks asked its more than 1.2 million FaceBook “fans” for feedback on the company’s VIA Ready Brew. Facebook polling is really quick and simple to set up and you can accurately target your polls by gender, age, location, interests and other demographic data.
  2. Announce new products and services. Two weeks ago I found out on FaceBook that Southwest Airlines was beginning service to Boston Logon Airport. I got so excited about this news that I forwarded the announcement to everyone in my FaceBook and I even shared the news on Twitter. With a click of a mouse and virtually no-cost, Southwest was able to announce this new service to its 64,000 fans. Pretty smart, huh?
  3. Find complaints about your brand – and take action. Paula Berg of Southwest Airlines says, “We monitor more than 100 travel and airline industry blogs a day. We also are very active on YouTube, Twitter, and FaceBook.”

This morning I read in a Dell whitepaper that GelPro, the manufacturer of anti-fatigue kitchen floor mats recently found a negative review on Amazon. They identified the customer and resolved the situation. The customer had moved and was not aware that GelPro had attempted to resolve his issue long before his review appeared on Amazon. The result: GelPro turned a dissatisfied customer into a satisfied one. He withdrew his negative Amazon review. A few weeks ago I wrote an article entitled: If I post a complaint about your brand on Twitter, how long will it take for your company to respond? If you haven’t read this article, you can check it out at http://tinyurl.com/bnpkt6

  1. Get your customers to “support” each other. Four or five years ago I bought some awesome video editing software from a  company called Serious Magic (it’s since been acquired by Adobe). I was new to video editing and I had LOTS of questions (problems). The first time I ran into a problem it was nearly 8pm, when the company’s support line was closed. I went to the online user forum and posted my question. Within 7 minutes I had consistent responses from three users. And the best news is their support actually fixed my problem!  For a period of three years I went back to that user forum with questions and I always got my issue resolved. Now how smart is that? Get users to share their expertise and truly help other customers, virtually deliver support 24 hours a day via ecstatic fans (users), AND slash your operation expenses (because the company doesn’t have to do it). This is one of the coolest uses of social media in my opinion. Your company can do this by simply building community platforms around communities of shared interest.

Don’t make the mistake of writing FaceBook off as Internet entertainment for young people. You can strategically use FaceBook to build relationships, capture the voice of the customer, quickly recover from problems, and so much more. Start a conversation with your consumers now and you’ll be on the leading edge! Get started on FaceBook now by going to http://www.FaceBook.Com/business

SIDE NOTE: While writing this article, I was on FaceBook on the page of a prominent company that strategically uses the site. I saw that on March 5th a customer posed a pretty serious complaint about the company, yet I saw no response from a company representive. I sent a message to the consumer, asking her if she’d heard back from XYZ company. It’s now been 6 days since the customer’s posting. Here’s what she just wrote back to me:

“Nope didn’t hear anything from them unfortunately.  Too bad too- bc i used to be a big XYZ fan.

Thanks for your concern, i appreciate it.”

Lesson here: When customers take the time to post a complaint or gripe on your official FaceBook (or Twitter, MySpace, etc.) page, YOU NEED TO RESPOND. And you need to respond publicly so all of the thousands of other users who visit the page can see your responsiveness. Your response needs to be posted within 24 hours.

212 Degrees

I lead my daughter’s Brownie Scout troop and I recently conducted a science experiment with my group of 13 second grade girls to demonstrate the power of making one small degree of change.

We put a small pot of water on a burner and put a cooking thermometer in the water and we discovered that:

At 211 degrees, water is (very) hot.
At 212 degrees, it boils.

I told the girls that with boiling water, comes steam.
And with steam, you can power a train!

The girls were just amazed that one degree made the difference between hot water and boiling water.

One extra degree makes all the difference and separates the good from the great. It separates the ‘simply very hot’ from something that generates enough force to power a train.

 Consider this…

The average margin of victory for the last 25 years in all major golf tournaments was less than 3 strokes.

The margin of victory between an Olympic Gold Medal and no medal is extremely small. In the 2004 men’s 800m race, the margin of victory was .71 seconds.

At the Indy 500 the average margin for the past 10 years has been 1.45 seconds.

Most of my readers have a vested interest in transforming their service culture. If that’s you, I want you to know that you can start small and start today. One small degree of change could position you as the service leaders in your industry.

Imagine the difference you could realize if you simply got all of your employees to smile through the phone as they spoke with customers. What if you took the time to hold a 5-minute customer service training with your staff this week?

I truly believe the difference between good and great can be as simple as making one degree of change.

Never forget…

At 211 degrees, water is hot.
At 212 degrees, it boils.
And with boiling water, comes steam.
And with steam, you can power a train.