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Wednesday, September 29, 2021

Service Incidents and Failures Can Actually Present Opportunities for Firms by John Gironda * [37]

                                                                  Photo Credit: Clay Banks

While most firms should strive to provide their customers with the best experience possible at all times, service incidents and failures will occur from time to time. Although these issues aren’t ideal, they do present companies with opportunities as well. Obviously, companies should not make it a habit of experiencing ongoing service incidents and failures with customers. However, in the hopefully rare times in which they do occur, if companies are able to rectify the situation, many times this ends up with customers actually being happier than they would have if things went off completely without a hitch to begin with.

This might not sound quite right at first, but if we think about it for a moment, it should make more sense. If everything goes very smoothly during a service encounter, it should lead to happy and satisfied customers, which is a very good thing. Nevertheless, when there are incidents of service failures or dissatisfied customers, and there will inevitably be at some point, this gives firms the opportunity to show customers that they care by doing what it takes to get things fixed and possibly go above and beyond in order to make things right. By doing this, companies can turn dissatisfied customers to not only satisfied customers, but also delighted ones at that.

This is because consumers tend to remember any hiccups (i.e., service incidents or failures) that occur during their interactions with companies. These hiccups can go a multitude of ways. One way is that a company does not rectify the situation and people leave as unhappy dissatisfied customers, or now ex-customers in many cases. When this happens, people tend to keep this negative feeling with them, recalling it and thinking twice the next time they consider doing business with a company. In addition, consumers may tell friends, family, and other individuals online or in-person about their poor experience, leading to negative word-of-mouth for the company. A second way that a service incident can go, is that the firm does what is necessary to make things right with the customer. In this case, customers will remember that the incident happened, but will also carry positive feelings with them, recalling that the company cared about their experience and satisfaction, and made sure it did what it could to remedy the situation.

Good companies understand this, which is related to a concept in marketing called customer lifetime value. That is, the entire stream of purchases that a customer will make with a company over the course of their lifetime. By keeping customers happy and doing what it takes to correct incidents when they occur, companies stand a much better chance of keeping loyal repeat customers for longer periods of time.

In some cases, this may mean taking a short-term loss on a particular transaction with a customer to keep them happy and retain them for years to come. This is because in order to fix a service failure or incident and retain a customer, it may be necessary for companies to compensate customers for the issue that occurred. Perhaps the customer was inconvenienced by a long wait time for their order, which can happen at a variety of businesses, from restaurants to online retailers. Additionally, perhaps there was an inability to fully accommodate a customer’s request, or the customer simply did not like a particular product and would like a refund.

In terms of customer compensation for inconvenience caused by service incidents, a little bit of compensation can go a very long way in terms of being meaningful to customers. These can be things as simple as taking something off of a customer’s bill, giving the customer an additional item for free, a discount voucher for a future purchase, or additional points towards the company’s loyalty program. Clearly, the type of compensation needs to be commensurate with the type of incident that occurred. However, as the old adage goes, many times it’s the thought that counts more than anything. Additionally, another important factor in the exchange is speed. Incidents should be corrected as quickly as possible, which also means that companies should empower employees and give them some autonomy and leeway to make things right promptly without having to wait on approval for every little thing, within reason of course.

What are your thoughts on this? Do you agree that service incidents can actually present an opportunity for firms? Can you think of any positive examples of times when an incident occurred and a company went out of its way to remedy the situation for you? What impact did that have on you and your future relationship with that company? Please share your thoughts in the comments section below.

 

John Gironda, Ph.D., is an Assistant Professor of Marketing at the University of North Carolina Wilmington. His teaching and research interests include digital and social media marketing, consumer behavior, marketing strategy, consumer privacy issues, and integrated marketing communications. He can be reached at: girondaj@uncw.edu

 


7 comments:

  1. This post is very simple to read and appreciate without leaving any details out. Great work! omnichannel contact center solution

    ReplyDelete
  2. Great post Dr. Gironda! I do agree that service accidents can actually present an opportunity for firms to create long time customer retention. Although companies would like every consumer experience to go smoothly with no errors, there is always a chance that something can go wrong. In which case, Companies should be prepared to remedy any incident quickly and efficiently to increase they're customers lifetime value with their company.

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  3. Dear Dr. Gironda, I enjoyed reading your post! I agree wholeheartedly that hiccups do occur, and people remember how a company rectifies the error. Just today, I made an order from Publix Delivery and the strawberries that I ordered were rotten. Their approach was extraordinary, especially because everything was done through clicks in an application. Publix refunded the whole amount within minutes. I found myself very thankful because they trusted me when I said the strawberries arrived rotten.

    ReplyDelete
  4. Hi Dr. Gironda!

    I absolutely love and agree with your post! At some point in any industry and company, mistakes are bound to be made. I believe that how the business handles the situation matters the most, it can either go really south or smoothly. For me, even when mistakes are made I don't complain and just deal with it but as for some other customers, it can be much more difficult; if handled correctly, situations can be resolved. Companies should be thorough with running through a variety of scenarios that can happen and how their employees should deal with it, Chick-fil-A is a great example of their instant management issues with any issues they run in-store & the drive thru.

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  5. Dr. Gironda, I do believe that service incidents can be a great opportunity for a company to build a relationship with a customer, but it is also a moment that could make the company lose a customer. A moment like this could be a double edged sword for the company. A time where a company made a mistake and fixed it was when I was taking a a flight with Spirit airlines and they had us waiting for 5 hours for our flight because they did not have the personnel to staff the flight. They gave everyone flight vouchers to make up for their mistake. This made me like spirit airlines a bit more than I did before and I fly with them almost exclusively now.

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  6. Dr. Gironda, this was a well written article that brought up several valid points. I do believe that when there is something that goes wrong when being serviced by a company that it is a make or break moment for them. This is a great opportunity for the company to show who they really are and wether or not they actually care. This much like my flight with Spirit Airlines a few months ago. They delayed our flight for 5 hours because they did not have the required amount people to ensure they can fly. They gave everyone on the flight a flight credit as a result of the incident. While some people may not want to fly with Spirit again, I on the other hand have been flying with them almost exclusively since that incident.

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  7. Very interesting and thought provoking post, Dr. Gironda. Threats and failures indeed do create opportunities for growth. In the case of service incidents and failures, there exists an opportunity to grow the customer relationship and/or enhance the customer's perception of the company's customer service quality. As you mentioned, capitalizing on this opportunity is extremely valuable over the long-term, especially as it pertains to customer lifetime value.

    ReplyDelete

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