Q 364. Customer thinks more highly of a company if a defect is fixed rather than when the company provides a defect free product to the customer. This is Service Recovery Paradox. Does it imply that a company should change the focus from defect free production to after sales service? Support your argument with logical examples.

 

 

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The service recovery paradox is a situation where a customer likes an experience of an efficient and empathetic correction of a problem (Service Recovery), compared to how he or she would like the company if the product was defect free in the first case. It happens mostly in Customer Facing Service Industries (like Hospitality, Retail, Banks etc).

 

This may give an impression that a company should change the focus on better after sales service than a defect free production.

 

However this is not a full picture, because fundamentally, if the product is not Defect free, it leads to more efforts on the part of a Customer. Taking a personal experience, I order a lot from online (especially more so during this current lock-down period). Sometimes the items are poor or unsuitable,  then I have to go back to the website and file for return, repack the item and handover to courier person when he comes for pickup. Post that I need to keep tracking that my money has been refunded....and then again go through the steps of ordering. So these are extra efforts and time wasted, and no amount of service recovery is going to alleviate these factors.

 

Also, if a company keeps doing this, then however good they are at fixing defects, over time customers will realize that its products are not trustworthy at all and shun it. 

 

Further, if the issue is serious (e.g incorrect medicine given to patient in a hospital, technical glitch leading to missing a flight), then no amount of Service Recovery is going to pacify the person.

 

Thus, I believe that while sometimes and in some cases, organization may get away with smart and efficient service recovery, these benefits are only TRANSIENT. In the long run, to ensure customer satisfaction and loyalty, all companies have to focus on Defect Free Production only.

 

There is no alternative to : FIRST TIME RIGHT, EVERY TIME RIGHT !!
 

Service Recovery Paradox;

                Customer loyalty and customer retentions is very important factor in the day-to-day businesses and many companies are having the customer satisfaction is the primary goal of their business. To sustaining the business and improving the customer satisfaction, service after the sales is one of the important criteria.

The research shows that many of the customers are delighted or satisfied after buying the product while the company is doing the good service facility and resolve their problems as and when required.

                Service recovery paradox is explained as, the customer gets satisfied whey they are experienced in the service failure and it was resolved as per their expectations, then the customers more likely to buy a product in future.

 

There are two different cases are explained below for the suitable and not suitable situations of the service recovery paradox.

Case 1:

Service recovery paradox cannot be suitable for all types of services or products. In this case, the customers are buying or using the service only once. So that if these services are not provided properly that is right at first time and the customers are not getting satisfied. Also, they will not recommend for others and the customer loyalty on the product or services will become poor. For example, the studio that they are making wedding photograph service. If these services are not provided right at first time or there are any defects are found in the wedding photograph, the customer gets annoyed and dissatisfied about the studio service. This factor will reduce the customer loyalty and retentions since there is no service recovery paradox exist.

 

Case 2:

This service recovery paradox can be suitable for the some of the products or services, the company buying the manufacturing equipment’s from the good service facilitated supplier. Later the company found that there are some problems are identified after the equipment’s installation and manufacturing started. If these equipment’s supplier resolves the issues or problems which was identified by the manufacturing company at specified time frame. The company may get highly satisfied about their equipment’s supply and service facility because the manufacturing equipment’s are the capital expenditure for the company. The company cannot change or replace the equipment’s in a shorter period, and it require more money. So, these types of companies are expecting the service facility after sales and it is much required for their consistent operations and satisfy their own customers. (Continuous process Industries). Here the customer loyalty is increases with the service recovery exist.

 

Service Recovery Paradox is not only the factor for achieving the customer satisfaction. So that, based on the business, a company should focus on defect free production and after sales service.

Service Recovery Paradox is a situation or a phenomenon where in a customer thinks more highly about a company after the company has corrected a problem with their service in comparison to how they would regard a company if non faulty service had been provided at first place.This paradox occurs specifically when a company corrects service issue in an efficient manner, demonstrating respect and consideration for the customer and his or her needs.

 

Relevance and Linkage : We all know that crises occur, no matter the extent of the company’s contingency plans are. However, customer satisfaction to a large extent depends upon any brand’s ability to recover efficiently with grace, and invoke the service recovery paradox. Just as we admire and sympathize with the player who gets injured during a cricket match but at last score good runs and make the team win, we look for similar qualities in our brands too. Enduring at the crisis or difficult time is what builds loyalty and gives the relationship a substance and longevity. With the right plan in place, including empowered employees, straightforward communication and immediate responses, even the worst service failures can be transformed into a very positive Customer Experience.

Example of Service Recovery Paradox, I have noticed personally are :

i) Customer become even more loyal with a taxi provider company if the company turns the bad experience faced by customer say music system was not working during a trip into a positive experience by giving next ride as free or making that bad experience ride as a free or a discounted ride.

ii) At a retail chain, a customer had a bad experience during Billing process as there was big queue and it took a long time to reach the billing personnel however at last company turned that experience to good one by offering a freebie to customer. So they not only retained the customer but also made him / her more loyal and associated with them.

To conclude, we shall not think so much if something has happened bad erroneously but learn a lesson out of it and try to correct or improve it as soon as possible. As its rightly said that Problems are Opportunities.

The service recovery Paradox does not mean that the focus must SHIFT from error free production to after sales service. The focus in after sales service must be in addition to error free production. Good service recovery demonstrates that the organisation cares for the customer and is flexible and considerate of customer needs. e.g. if I order an item from Amazon and receive it in damaged condition, and on reporting the damage Amazon quickly replaces it, without any time lag, I will be happy. However, this will be OK only if it happens once in a while. If it happens often, my trust on the product and capability of the organisation itself will wane off and so would be my ordering the items. First time right still remains important and crucial factor.

Defect free production should be the primary focus of any company as it reduces product cost avoid company resources to fix them later.

Once defected parts moved out of factory/Facility there will be lot of resources including money needs to spent to correct it. More cost will be spent to fix as it passes more stages of production.

 

If the customer will get right product first time than there will be long term customer relation and will improve customer base.

 

It is indeed a common belief that recovering a customer after delivering a poor experience results in better loyalty than, if the customer is provided a perfect experience the first time. This concept is called The Service Recovery Paradox(SRP). I strongly believe is only an assumption. I do not believe that in these modern times customers appreciate any imperfection. They spend money very wisely and choose a brand/company, out of many other options, based on the perceived value.

Gone are those days when customers would appreciate the post-sale services to “correct things” and bond better with the company as long term loyal customers.

In earlier days this concept would provide some comfort to the companies which made a lot of errors/ defects in the product and were happy to spend an extra cost to “Recover” customers. The concept gained a somewhat acceptance because there were some researches that did show that an element of correctness existed in the claims of the concept SRP. However, the crux of many studies showed that SRP is most likely when the error/defect is not deemed severe by the customer and has had No previous concerns with the organisation. In this situation, the customer feels that this is an exception and an uncontrollable situation and the company may have had some rare deviation from normal process and also the defect is not so severe. Hence the customer is okay to “give another chance”- Recovered customer!! In fact, this is also what the customer recovery team is supposed to convince a customer to do, many a times with an incentive as a token of appreciation (Discount/Refund/benefit on next purchase/ vouchers) for being so “Cooperative” and “Loyal”.

In my personal experience in products of immediate consumption or allied functions, I know that majority of the customers do not complain about the inconvenience as they feel "managing" the situation is better than to take an effort for correction.  They do not give a repeat chance for some time, as they order from some other place and talk about their bad experience with their circle of contacts and very recently the online medium is used widely to vent out dissatisfaction and frustration …. The damage is beyond the reckoning of the food outlet, but may have been controlled if the product/ service was provided right the first time.  I have seen that even in situations where the SRP may be deemed successful, wherein the customer has “Forgiven” the defect on record, the customer actually coming back is lesser times than the customer shifting loyalty for at least some time.

In my experience in food industry, where the life of the product is not for long and there are many other options in rampant, the service recovery mechanism;

-      Satisfies the customer at that point of time, as the immediate need is met, but does not guarantee revisit intentions

-      Does not avert the sour experience from being shared more in detail than the recovery effort, which causes negative word of mouth recommendation.

-      Does not guarantee that the Brand image remains intact and does not get hit negatively

-      Incurs cost – either directly or indirectly

It is also seen that the same customer may return after some time after trying other options, but will recheck for the defect experienced earlier- the faith/trust is reduced, The positive or encouraging factor in the above points is that the customer is satisfied that his concern is taken care of, which is actually a trailing measure of performance

It is right to believe that a very strong and focussed approach is required to retain a customer, - Difficult task with less chances of success and almost all the time, an attached undesired cost!! A good example is the case study of the recent recovery efforts by the United Airlines. The margin for error in a service recovery process is very low as even very large scale recovery efforts eat into the trust and reduce the loyalty- there are times that the recovery process may also disturb the customer. The customer feels that there is a need to try other available options. The concept of loyalty shift cycle applies, most of the times, and the customer does come back but a considerable damage is done already.

It is in fact easier to focus on creating experience which are convenient and enjoyable for the customer while meeting their need. The focus and spend should rather be on developing processes and systems to get the product/ service right the first time, consistently. That is the most dependable and sustained method to earn customer trust and loyalty and also recommendations. Efforts on QA systems and standards and training yield long term and effective results for sure.

As a matter of fact, it is notable that in their profiles, the top ranking companies in the world boast of their services which are right the first time and lay very less emphasis on their post sales services or retention programme

 

Having said that, it is not advised that organizations should not try to recover a customer in case of a defective delivery. But it is definitely advised that the company should not hope that such recovery activities will increase the lifetime value of a customer or improve their inclination to ask for the service /product again in the near future. I strongly believe that the SRP is a debatable myth!!

Service recovery paradox refers to a situation where satisfaction of recovered client/customers exceeds

customers who haven't encountered any problems during initial service.

A good service recovery leads to higher level of satisfaction and more positive word-of-mouth.

Service recovery paradox doesn’t work  well for clients/customers who already have failures in the past. Logically, a client/customer will not be satisfied with repeated service failures or large failures.

Long time clients/customers who had experienced service recovery will have their satisfaction improved to more or less the same level as compared to a  new client/customers.

Service recovery paradox works well when the client/customer believes it was beyond your control. As long as there are stong evidence to prove that the issue was beyond your control, the service recovery process stands a better chance of improving customer satisfaction.

Service failures has potential to happen, even in a best organizations. This could be due to service not available when promised, late or slow delivery, poor execution, or rude employee.

All of these kind of service failures results in negative experiences.      Naturally, for business owners, client/customers are accounts which they fought hard to win. Over time, they work even harder to build trust on their client/customer. Because they rely on those clients/customers for recurring revenue & referrals, it is very  high stakes if a service failure occurs. This means the clients/customers have a skin in the game too; the client/customers will not be excited about leaving the business owners for a competitor, despite a service failure.   Nevertheless, service failure is an opportunity. It is a rare chance for business owners to demonstrate more intimately what it means to work with the business owners. How committed they are to that client relationship, and the extent they will go, in order to resolve a problem. These are the things they do not necessarily get to do while things goes right.

Service Recovery Paradox:

In this competitive world, both defect-free production and after-sales service are important.
We cannot say that we should be just focusing on after-sales service and not defect-free production because defective products will increase the cost and this will add additional expenses which will drain down the revenue.
Also if we have to increase loyal customers then we just not have to fix the defective product but also change the experience of customers by adding values like faster resolution, additional goodies, coupons, etc...

E.g.
A customer had ordered a product from an online shopping company and the delivered product is faulty and he had raised the complaint.
Now first of all the online shopping company will apologize to the Customer and do whatever necessary to increase the 
satisfaction like speedy delivery of the product, additional vouchers or coupons, etc... so that Customer feels happy about the after-sales service.
And at the same time, the online shopping company should do the Root cause analysis and fix the issue to the core so that the faulty products are not delivered to the customer and it will save the transportation, vouchers, coupons cost, and additional product cost.

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The service recovery paradox (SRP) is a situation where it’s claimed that post-recovery satisfaction is greater than a service failure when customers receive good service recovery or after-sales service. There are conflicting results from the literature available on SRP. The one supporting SRP claims that a low-impact service failure and subsequent prompt recovery lead to higher satisfaction and vice versa. Hence, we can narrow down further on the impact of service failure on the value of the product or service paid by the consumer. To elaborate this with examples –

a) A customer buys a Premium sedan and to his fate, the car breaks down or starts showing issues after 6months of use. Every time the user takes it to the service center, he is assured of prompt and good service. However, the customer is not satisfied with the product failing time and again, even though the service recovery is good.

b) A customer is using amazon service to buy his day-to-day groceries and is happy with the timely and accurate delivery. It seldom happens that his orders are misplaced; however, rest assured the issue is fixed within 1-2 days upon registering a complaint. In this case, the dissatisfaction of the customer is low due to the value he/she is ready to pay for the product or service

All published answers have correctly explained the Service Recovery Paradox by providing examples that are mostly driven by personal experiences. Some answers have also highlighted the negatives associated with the paradox thereby suggesting that being right the first time is the best option for the organization. Rajesh's answer critically evaluates the paradox in entirety along with an example and hence has been selected as the winner.

Great attempt by all participants!