Blogs

When my wife and I checked into our hotel following a 9 hour drive to Lake Placid last Fall, the front desk agent  informed us that our room wasn’t ready but should be shortly. 😐

We understood and took the time to purvey the hotel grounds, stretch our legs, and scan the downtown district.

But when we returned a couple of hours later, our room was still not ready. 

Our mood changed from upbeat to somber. 😣

Empathizing with our situation, the agent offered us an upgraded suite with a fireplace, porch, and full kitchen at no extra charge.

And just like that, our mood snapped back. 😄😄😄

The experience that we originally expected failed.

In general, when that happens, customer loyalty plummets, right?

Well, not according to the service recovery paradox.

The term service recovery paradox was first coined in 1992 by McCollough and Bharadwaj who described a situation when customers post-failure satisfaction exceeded pre-failure satisfaction.

The SERVICE RECOVERY PARADOX contends that effective service recovery can go beyond merely maintaining customer satisfaction, but can also elevate it to a higher level, winning customers and engendering long term customer loyalty.

They defined it as "a situation in which a consumer has experienced a problem which has been satisfactorily resolved, and where the consumer subsequently rates their satisfaction to be equal to or greater than that in which no problem had occurred."

But far too often, companies miss an huge opportunity to reduce customer churn.

According to The Profitable Art of Service Recovery,  published by Hart, Sasser, and Heskett in HBR, “When the inevitable problems arise, customers are almost always disappointed. The typical service delivery system is completely unprepared to deal with exceptions. Studies we’ve done show that more than half of all efforts to respond to customer complaints actually reinforce negative reactions to a service.”

So what?

The Service Recovery Paradox is NOT a brand new concept. But the stakes are higher because customer, especially in the digital world, are less tolerant, less patient, and more demanding.

According to Digital Information World, 86% of customers are willing to switch brands after one bad experience.  A bad experience could mean a decrease in customer retention. 

There are two paths a company can take:

1. Ignore the problem and suggest the problem isn’t worth fixing
2. Develop a service recovery strategy for key touch points along the customer journey throughout the customer lifecycle

Everyone makes mistakes.

How you respond to them has a direct impact on customer retention rates and, in turn, your bottom line.

What service recovery strategies have you implemented?