The Service Recovery Paradox

There is an unusual phenomenon that is well-known in customer service whereby customer satisfaction and loyalty increases after the customer has a problem. Per Wikipedia, “the service recovery paradox is a situation where a customer thinks more highly of a company after it has corrected a problem with their service, compared to how he or she would regard the company if no service failure had happened.”

Can that be true? Research has shown the service recovery paradox does exist. But before you rush out and start creating customer problems to increase satisfaction: it is real, but it does not work equally well in every situation.

Vincent P Magnini, John B.Ford, Edward P. Markowski, an d Earls D. Honeycutt, in their paper “The service recovery paradox: justifiable theory or smoldering myth?” found that the impact of service recovery effect is moderated by several attributes of the service failure:

  • It doesn’t work as well for customers who have prior failures.
  • It doesn’t work as well for big failures.
  • It works just as well for old customers as new customers.
  • It works better if the customer believes it was beyond your control.
  • It works better if customers perceive the issue was not reasonably foreseeable.

Therefore, the service recovery paradox exists, but only as a special response to certain situations and not as an overall strategy for customer service delivery!

There is the story of the bakery that provided a special holiday bread for a religious holiday. Customers would order the bread in advance, to be sure to have it for a holiday. One year, due to a mechanical failure, the breads were not acceptable. Customers were contacted and told that the bakery would not be able to provide their holiday bread. Worse, due to the late date, customers were unlikely to be able to get the breads from other sources, either.

The bakery management pulled out all the stops to get the machines fixed and re-made the breads. They then drove the breads to their customers’ homes and delivered them late the evening before the holiday. Just in time! But further, they gave each customer a free holiday dessert, a bouquet of flowers, a coupon for their next visit, and a hand-written note of apology for the inconvenience. And, of course, they did not charge for the bread!

Clearly, this was exceptional service recovery. According to Joshua Liebman, there are several aspects to service recovery that must be included, as the bakery did:

  1. Compensate directly to the service recovery. The bakery delivered the bread.
  2. Assess and anticipate all other damages. Because this was an important religious holiday, the bakery recognized the need to communicate personally with customers.
  3. Address all of the damages individually. Aside from the bread, the bakery delivered items to enhance the holiday celebration.
  4. Express concern to the guest that you are aware of and regret all inconveniences that have occurred and are occurring. The hand-written note of apology did this.
  5. Offer additional compensation or “freebie” – something that the guest will enjoy, of little or no cost to the company. To be honest, the dessert delivered would probably have ended up in a discount pile anyway! And the flowers were not at all expensive.
  6. Express a sincere and genuine invitation to return. The coupon invited customers back to the bakery.

While it is important to have a comprehensive service recovery strategy, it is even more important to learn from service failures – and prevent them from happening again. Let’s hope our bakery scheduled preventive maintenance on all machines in the weeks before important customer holidays!

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