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Winning in Service Markets Series, Vol. 11: Designing Complaint Handling and Service Recovery Strategies


Abstract and Figures

The first unspoken law of service quality and productivity is: Do it right the first time. However, chances are that the customers may not be always satisfied with some of the services they receive. How well a firm handles complaints and resolves problems frequently determines whether it builds customer loyalty or it should just watch its customers take their business elsewhere. Design Complaint Handling and Service Recovery Strategies is the 11th book in the Winning in Service Markets series by services marketing expert Jochen Wirtz to cover the key aspects of services marketing and management based on sound academic evidence and knowledge.
Content may be subject to copyright.
Jochen Wirtz
Designing Complaint
Handling and Service
Recovery Strategies
Winning in Service Markets Series: Vol. 11
WS Professional
Y0013 sc
The rst unspoken law of service quality and productivity is: Do it right the rst time.
However, chances are that the customers may not be always satised with some of
the services they receive. How well a rm handles complaints and resolves problems
frequently determines whether it builds customer loyalty or it should just watch its
customers take their business elsewhere. Design Complaint Handling and Service
Recovery Strategies is the 11th book in the Winning in Service Markets series by
services marketing expert Jochen Wirtz to cover the key aspects of services marketing
and management based on sound academic evidence and knowledge.
Winning in Service Markets is a highly practical book. I love the comprehensive
coverage of services marketing and the rigor. Also, it is easy to read and full of
interesting, best practice examples.I recommend this book to everyone working in
a service organization.
Jan Swartz
President, Princess Cruises
Winning in Service Markets provides a set of useful frameworks and prescriptions
rooted in both practice and research. As such, it represents a refreshing alternative
to the prevailing literature available to managers who are looking for insights rooted
in sound theory.A must read for any practicing manager in the service economy.
Leonard A. Schlesinger
Baker Foundation Professor, Harvard Business School
Winning in Service Markets Series
Series Editor: Jochen Wirtz (National University of Singapore, Singapore)
The Winning in Service Markets Series covers the key aspects of services marketing
and management based on sound academic evidence and knowledge. The books in
this series is written by services marketing expert Jochen Wirtz, author of globally
leading textbook for Services Marketing. Each book in the series covers dierent
themes in the study of services marketing and management, is accessible, practical
and presented in an easy-to-read format for busy practitioners and eMBA students.
Service Quality and Productivity Management
by Jochen Wirtz
Building a World Class Service Organization
by Jochen Wirtz
Vol. 1 Understanding Service Consumers
by Jochen Wirtz
Vol. 2 Positioning Services in Competitive Markets
by Jochen Wirtz
Vol. 3 Developing Service Products and Brands
by Jochen Wirtz
Vol. 4 Pricing Services and Revenue Management
by Jochen Wirtz
Vol. 5 Service Marketing Communications
by Jochen Wirtz
Vol. 6 Designing Customer Service Processes
by Jochen Wirtz
Vol. 7 Balancing Capacity and Demand in Service Operations
by Jochen Wirtz
Vol. 8 Crafting the Service Environment
by Jochen Wirtz
Vol. 9 Managing People for Service Advantage
by Jochen Wirtz
Vol. 10 Managing Customer Relationships and Building Loyalty
by Jochen Wirtz
Vol. 11 Designing Complaint Handling and Service Recovery Strategies
by Jochen Wirtz
*More information on this series can also be found at:
Karimah - Y0013 - Design Complaint Handling and Service Recovery Strategies.indd 1 14-07-17 11:04:18 AM
Jochen Wirtz
Designing Complaint
Handling and Service
Recovery Strategies
Winning in Service Markets Series: Vol. 11
WS Professional
Published by
WS Professional, an imprint of
World Scientic Publishing Co. Pte. Ltd.
5 Toh Tuck Link, Singapore 596224
USA oce: 27 Warren Street, Suite 401-402, Hackensack, NJ 07601
UK oce: 57 Shelton Street, Covent Garden, London WC2H 9HE
For orders of individual copies, course adoptions, and bulk purchases:
For orders of individual chapters and customized course packs:
For adaptations or translation rights and permissions to reprint;
Winning in Service Markets Series — Vol. 11
Copyright © 2018 by Jochen Wirtz
All rights reserved.
ISBN 9781944659417 (mobile book)
Desk Editor: Karimah Samsudin
Printed in Singapore
Karimah - Y0013 - Design Complaint Handling and Service Recovery Strategies.indd 2 14-07-17 11:04:19 AM
To my past and future EMBA and Executive Program participants.
I have been teaching EMBA and Executive Programs for over
20 years. is Winning in Service Markets Series is dedicated to you, the
participants from these programs. You brought so much knowledge and
experience to the classroom, and this series synthesizes this learning for future
EMBA candidates and managers who want to know how to bring their service
organizations to the next level.
e main objective of this series is to cover the key aspects of services
marketing and management, and that is based on sound academic
research. erefore, I used the globally leading text book I co-authored
with Professor Christopher Lovelock (Title: Services Marketing: People,
Technology, Strategy, 8th edition) as a base for this series, and adapted and
rewrote it for managers. is is a unique approach.
is series aims to aims to bridge the all-too-frequent gap between
cutting edge academic research and theory, and management practice.
at is, it provides a strongly managerial perspective, yet is rooted in solid
academic research, complemented by memorable frameworks.
In particular, creating and marketing value in today’s increasingly
service and knowledge-intensive economy requires an understanding of
the powerful design and packaging of intangible benets and products,
high-quality service operations and customer information management
processes, a pool of motivated and competent front-line employees,
building and maintaining a loyal and protable customer base, and
the development and implementation of a coherent service strategy to
transform these assets into improved business performance. is series
aims to provide the knowledge required to deliver these.
Winning in Service Markets comprises of the following volume:
Vol 1: Understanding Service Consumers
Vol 2: Positioning Services in Competitive Markets
Vol 3: Developing Service Products and Brands
Vol 4: Pricing Services and Revenue Management
Vol 5: Service Marketing Communications
Vol 6: Designing Customer Service Processes
Vol 7: Balancing Capacity and Demand in Service Operations
Vol 8: Craing the Service Environment
Vol 9: Managing People for Service Advantage
Vol 10: Managing Customer Relationships and Building Loyalty
Vol 11: Designing Complaint Handling and Service Recovery
Vol 12: Service Quality and Productivity Management
Vol 13: Building A World-Class Service Organization
Dedication 3
Preface 4
Introduction 7
Customer Complaining Behavior 10
Customer response options to service failure
Understanding customer complaining behaviour
What do customers expect once they have made a complaint?
Customer Responses to Effective Service Recovery 15
Impact of effective service recovery on customer loyalty
The service recovery paradox
Principles of effective Service Recovery Systems 18
Make it easy for customers to give feedback
Enable effective service recovery
How generous should compensation be?
Dealing with complaining customers
Service guarantees 28
The power of service guarantees
How to design service guarantees
Is full satisfaction the best you can guarantee?
Is it always beneficial to introduce a service guarantee?
Discouraging abuse and opportunistic customer behaviour 36
Seven types of jaycustomer
Consequences of dysfunctional customer behaviour
Dealing with customer fraud
Conclusion 52
Summary 53
Endnotes 58
About the Author 66
Acknowledgments 67
e rst unspoken law of service quality and productivity is: Do it right
the rst time. However, chances are that the customers may not be always
satised with some of the services they receive. How well a rm handles
complaints and resolves problems frequently determines whether it
builds customer loyalty or it should just watch its customers take their
business elsewhere. Design Complaint Handling and Service Recovery
Strategies is the 11th book in the Winning in Service Markets series
by services marketing expert Jochen Wirtz to cover the key aspects of
services marketing and management based on sound academic evidence
and knowledge.
Design Complaint
Handling and Service
Recovery Strategies
A complaint is a gift.
Claus Møller
management consultant and author
Customers don’t expect you to be perfect. They do expect you to
fix things when they go wrong.
Donald Porter
V.P. British Airways
To err is human; to recover, divine.
Christopher Hart, James Heskett, and Earl Sasser
current and former professors at Harvard Business School
(paraphrasing 18th century poet Alexander Pope)
10 · Winning in Service Markets
e rst unspoken law of service quality and productivity is: Do it right
the rst time. However, the fact that failures continue to occur cannot
be ignored, oen for reasons outside of the organization’s control
such.1 Many “moments of truth” in service encounters are vulnerable
to breakdowns. Distinctive service characteristics such as real-time
performance, customer involvement, and people as part of the product
can greatly increase the chances of service failures. How well a rm
handles complaints and resolves problems frequently determines whether
it builds customer loyalty or it should just watch its customers take their
business elsewhere (Figure 1).
Customer Response Options to Service Failure
Chances are that the customers may not be always satised with some
of the services they receive. How do they respond to their dissatisfaction
with these services? Do they complain informally to an employee, ask
to speak to the manager, or le a formal complaint? Or perhaps just
mutter darkly to themselves, grumble to friends and family, and choose
an alternative supplier the next time they need a similar type of service?
However, there are few customers who do not complain to the rm
about poor service. Research around the globe has shown that most people
will choose not to complain, especially if they think it will do no good.
Figure 2 depicts the courses of action a customer may take in response to
a service failure. is model suggests at least three major steps:
(1) Take some form of public action (including complaining to the
rm or to a third party, such as customer advocacy groups,
consumer aairs or regulatory agencies, or even take the matter
to the civil or criminal courts).
(2) Take some form of private action (including abandoning the
(3) Take no action (Figure 3).
It is important to remember that a customer can take any one or a
combination of actions. Managers need to be aware that the impact of
a defection can go far beyond the loss of that customer’s future revenue
stream. Angry customers oen tell other people about their problems,2
Design Complaint Handling and Service Recovery Strategies · 11
Customer Complaining
Why do customers complain?
• Obtain restitution or compensation
• Vent anger
• Help to improve the service
• For altruistic reasons
What proportion of unhappy
customers complains?
• 5%–10% complain
Why do unhappy customers not
• It takes time and effort
• The payoff is uncertain
• Complaining can be unpleasant
Who is most likely to complain?
• Higher socioeconomic class
• Customers with more product
Where do customers complain?
• Vast majority of complaints are
made at the point of service
provision (face-to-face or over the
• Only a small proportion of
complaints is sent via email, social
media, websites, or letters
Customer Expectations Once a Complaint Is Made
Customers expect fair treatment along three dimensions:
Procedural justice: Customers expect a convenient,
responsive, and flexible service recovery process
Interactional justice: The recovery effort must be seen as
genuine, honest, and polite
Outcome justice: The restitution has to reflect the customer
loss and inconveniences suffered
Customer Responses to Service
• Take public action (complain to
the firm, to a third party, take legal
• Take private action (switch provider,
spread negative word-of-mouth)
• Take no action
Customer Responses to an Effective Service Recovery
Avoids switching, restores confidence in the firm
The Service Recovery Paradox: an excellent recovery can
even result in higher satisfaction and loyalty than if a service
was delivered as promised
Principles of Effective Service Recovery Systems
Make it easy for customers to provide feedback and reduce
customer complaint barriers
Enable effective service recovery: Make it (1) proactive,
(2) planned, (3) trained, and (4) empowered
Establish appropriate compensation levels: Set based on the
(1 ) positioning of the firm, (2) severity of the service failure,
and the (3) importance of the customer. Target for “well-
dosed generosity”
Dealing with Complaining Customers:
Act fast
Acknowledge customer’s feelings
Do not argue
Show understanding
Clarify the facts
Give customer the benefit of the doubt
Propose steps to solve the problem
Keep the customer informed
Consider compensation
Persevere to regain customer goodwill
Improve the service system
Service Guarantees
• Institutionalize professional complaint
handling & service recovery
• Drive improvement of processes
• Design: (1) unconditional, (2) easy to
understand, (3) meaningful, (4) easy to
invoke, (5) easy to collect on, and (6)
• Unsuitable for firms with (1) a reputation
for excellence, (2) poor quality service, and
(3) uncontrollable quality due to external
factors (e.g., weather)
There are 7 types of
• The Cheat
• The Thief
• The Rule Breaker
• The Belligerent
• The Family Feuders
• The Vandal
• The Deadbeat
• Jaycustomers cause
problems for firms and
can spoil the service
experience of other
• Firms need to keep
track and manage their
behavior, including, as a
last resort, blacklisting
them from using the
firm’s facilities.
Figure 1: Organizing framework for managing complaints and service recovery.
12 · Winning in Service Markets
Figure 3: Some customers may just be frustrated but do not take any action to
complain, as seen here in an interaction with an online service.
Any One or a Combination of
These Responses Is Possible
Service Encounter
Is Unsatisfactory
Take Some Form
of Public Action
Complain to the
Service Firm
Complain to a
Third Party
Take Legal Action
to Seek Redress
(switch provider)
Take Some Form
of Private Action
Take No Action
Figure 2: Customer response categories to service failures.
Design Complaint Handling and Service Recovery Strategies · 13
and the Internet allows for unhappy customers to reach thousands of
people by posting complaints on bulletin boards, blogs, and even setting
up their own websites to talk about their bad experiences with specic
Understanding Customer Complaining Behavior
To be able to eectively deal with dissatised and complaining customers,
managers need to understand the key aspects of complaining behavior,
starting with the questions posed below.
Why Do Customers Complain? In general, studies of consumer
complaining behavior have identied four main purposes for complaining:
(1) Obtain restitution or compensation. Consumers oen complain to
recover some economic loss by seeking a refund, compensation,
and/or have the service performed again.3
(2) Vent their anger. Some customers complain to rebuild self-
esteem and/or to release their anger and frustration. When
service processes are bureaucratic and unreasonable, or when
employees are rude, deliberately intimidating, or apparently
uncaring, the customers’ self-esteem, self-worth or sense of
fairness can be negatively aected. ey may become angry and
(3) Help to improve the service. When customers are highly involved
with a service (e.g., at a college, an alumni association, or their
main banking connection), they give feedback to try and
contribute towards service improvements.
(4) For altruistic reasons. Some customers are motivated by altruistic
reasons. ey want to spare other customers from experiencing
the same shortcomings, and they may feel bad if they fail to
draw attention to a problem that will raise diculties for others
if it remains unnoticed and uncorrected.
What Proportion of Unhappy Customers Complain? Research shows
that on average, only 5–10% of customers who have been unhappy with a
service actually complain.4 Sometimes the percentage is far lower. A review
of the records of a public bus company showed that formal complaints
occurred at the rate of about three complaints for every million passenger
14 · Winning in Service Markets
trips. Assuming two trips a day, a person would need 1, 370 years (roughly
27 lifetimes) to make a million trips. In other words, the rate of complaints
was incredibly low, especially when public bus companies are rarely
known for service excellence. Although only a minority of dissatised
customers complain, there is evidence that consumers across the world
are becoming better informed, more self-condent, and more assertive
about seeking satisfactory outcomes for their complaints.
Why Do Unhappy Customers Not Complain? A number of studies
have identied a number of reasons why customers do not complain.
Customers may not want to take the time to write a letter, send an
e-mail, ll in a form or make a phone call, particularly if they do not
see the service as being important enough to be worth the eort. Many
customers see the payo as uncertain and believe that no one would be
concerned about their problem or would be willing to deal with it, and
that complaining is simply not worth their while. In some situations,
people simply do not know where to go or what to do. Also, many people
feel that complaining is unpleasant and may be afraid of confrontation,
especially if the complaint involves someone whom the customer knows
and may have to deal with again.5
Finally, complaining behavior can be inuenced by role perceptions
and social norms. Customers are less likely to voice complaints in service
situations in which they perceive they have “low power” (the ability to
inuence or control the transaction).6 is is particularly true when the
problem involves professional service providers such as doctors, lawyers
or architects. Social norms tend to discourage customer criticism of such
Who Is Most Likely to Complain? Research ndings consistently
show that people in higher socio-economic levels are more likely to
complain than those in the lower levels. ey are better educated, have
higher income, and are more socially involved, and this gives them the
condence, knowledge and motivation to speak up when they encounter
problems.7 Furthermore, those who complain also tend to be more
knowledgeable about the product in question.
Where Do Customers Complain? Studies show that the majority of
complaints are made at the place where the service was received. One of
the authors of this book completed a consulting project developing and
implementing a customer feedback system. He found that an amazing
Design Complaint Handling and Service Recovery Strategies · 15
99% of customer feedback was given face-to-face or over the phone to
customer service representatives. Less than 1% of all complaints were
submitted via rms’ websites, social media pages, email, letters, or feedback
cards. A survey of airline passengers found that only 3% of respondents
who were unhappy with their meal actually complained about it, and they
all complained to the ight attendants. None of them complained to the
company’s headquarters or to a consumer aairs oce.8 Also, customers
tend to use interactive channels such as face-to-face, or the telephone
when they want a problem to be xed, but use non-interactive channels
to complain (e.g., email or websites) when they mainly want to vent their
anger and frustration.9
In practice, even when customers do complain, managers oen do
not hear about the complaints made to frontline employees. Without a
formal customer feedback system, only a tiny proportion of the complaints
may reach corporate headquarters.10 If unhappy customers have already
used other channels of complaint but their problem is not solved, they are
more likely to turn to online public complaining. is is due to “double
deviation. e service performance already caused dissatisfaction in the
rst instance, and the resolution of the problem also failed.11
What do Customers Expect Once ey Have Made a Complaint?
Whenever a service failure occurs, people expect to be treated fairly.
However, research has shown that many customers feel that they have
not been treated fairly nor received adequate compensation. When this
happens, their reactions tend to be immediate, emotional and enduring.
In contrast, outcomes that are perceived as fair have a positive impact on
customer satisfaction.12
Stephen Tax and Stephen Brown found that as much as 85% of the
variation in the satisfaction with a service recovery was determined by
three dimensions of fairness (Figure 4):13
Procedural justice refers to the policies and rules that any customer
has to go through to seek fairness. Customers expect the rm to
take responsibility, which is the key to the start of a fair procedure,
followed by a convenient and responsive recovery process. at
includes exibility of the system and consideration of customer
inputs into the recovery process.
16 · Winning in Service Markets
Interactional justice involves the employees of the rm who provide
the service recovery and their behavior toward the customer. It is
important to give an explanation for the failure and make an eort
to resolve the problem. e recovery eort must also be seen as
genuine, honest, and polite.
Outcome justice concerns the restitution or compensation that a
customer receives as a result of the losses and inconveniences caused
by the service failure. is includes compensation for not only the
failure, but also for the time, eort, and energy spent during the
process of service recovery.
“ank Heavens for Complainers” was the provocative title of an article
about customer complaining behavior, which also featured a successful
manager exclaiming, “ank goodness I’ve got a dissatised customer
on the phone! e ones I worry about are the ones I never hear from.14
Customers who do complain give a rm the chance to correct its problems
(including some the rm may not even know of), restore relationships
with the complainer, and improve future satisfaction for all.
Service recovery is a term for the systematic eorts of a rm to
correct a problem following a service failure and to retain a customer’s
Figure 4: Three dimensions of perceived fairness in service recovery processes.
Customer Satisfaction With the Service Recovery
Complaint Handling and Service Recovery Process
Justice Dimensions of the Service Recovery Process
Source: Adapted from Stephen S. Tax and Stephen W. Brown, “Recovering and Learning from Service Failure,” Sloan Management
Review 49, no. 1 (Fall 1998), pp. 75–88.
Design Complaint Handling and Service Recovery Strategies · 17
goodwill. Service-recovery eorts play an important role in achieving (or
restoring) customer satisfaction and loyalty.15 In every organization, things
that occur may have a negative impact on relationships with customers.
e true test of a rms commitment to customer satisfaction and service
quality is not in the advertising promises, but in the way it responds when
things go wrong for the customer. Although complaints tend to have a
negative eect on service personnel’s commitment to customer service,
employees with a positive attitude toward service and their own jobs are
more likely to explore additional ways in which they can help customers
and view complaints as a potential source of improvement.16
Eective service recovery requires thoughtful procedures for
resolving problems and handling disgruntled customers. It is critical for
rms to have eective recovery strategies, as even a single service problem
under the following conditions can destroy a customers condence in a
• Failure is totally outrageous (e.g., blatant dishonesty on the part of
the supplier).
• Problem ts a pattern of failure rather than being an isolated incident.
• Recovery eorts are weak, serving to compound the original problem
rather than correct it.17
e risk of defection is high, especially when there are variety of
competing alternatives available. One study of customer switching
behavior in service industries found that close to 60% of all respondents
who reported changing suppliers did so because of a service failure;
25% cited failures in the core service, 19% reported an unsatisfactory
encounter with an employee, 10% reported an unsatisfactory response to
a prior service failure, and 4% described unethical behavior on the part
of the provider.18
Impact of Eective Service Recovery on Customer Loyalty
When complaints are resolved satisfactorily, there is a much higher chance
that the customers involved will remain loyal. In fact, research has shown
that complainants who are satised with the service-recovery experience
are 15 times more likely to recommend a company than dissatised
18 · Winning in Service Markets
complainants.19 TARP research found that intentions to repurchase
dierent types of products ranged between 9–37% when customers were
dissatised but did not complain. For a major complaint, the retention
rate increased from 9% when dissatised customers did not complain to
19% if the customer complained and the company oered a sympathetic
ear but was unable to resolve the complaint to the satisfaction of the
customer. If the complaint could be resolved to the satisfaction of the
customer, the retention rate jumped to 54%. e highest retention rate
of 82% was achieved when problems were xed quickly, typically on the
Complaint handling should be seen as a prot center, not a cost
center. When a dissatised customer defects, the rm loses more than
just the value of the next transaction. It may also lose a long-term stream
of prots from that customer and from anyone else who is deterred from
patronizing that rm as a result of negative comments from an unhappy
friend. However, many organizations have yet to buy into the concept that
it pays to invest in service recovery designed to protect those long-term
e Service Recovery Paradox
e service recovery paradox describes the phenomenon where customers
who experience an excellent service recovery aer a failure feel even more
satised than customers who had no problem in the rst place.22 For
example, a passenger may arrive at the check-in counter and nd there
are no seats for him due to overbooking, even though he has a conrmed
seat. To recover the service, the passenger is upgraded to a business class
seat, at no additional cost. e customer ends up being more satised
than before the problem had occurred.
e service-recovery paradox may lead to the thinking that it may be
good for customers to experience service failure so they can be delighted
as a result of an excellent service recovery. However, this approach would
be too expensive for the rm. It is also important to note that the service-
recovery paradox does not always apply. In fact, research has shown
that the service-recovery paradox is far from universal.23 For example,
a study of repeated service failures in a retail banking context showed
that the service-recovery paradox held for the rst service failure that was
Design Complaint Handling and Service Recovery Strategies · 19
recovered to customers’ full satisfaction.24 However, if a second service
failure occurred, the paradox disappeared. It seems that customers
may forgive a rm once, but become disillusioned if failures recur. e
study also showed that customers’ expectations were raised aer they
experienced a very good recovery; thus, excellent recovery becomes the
standard they expect for dealing with future failures.
Whether a customer comes out delighted from a service recovery
may also depend on the severity and “recoverability” of the failure — no
one can replace spoiled wedding photos, a ruined holiday, or eliminate
the consequences of a debilitating injury caused by service equipment. In
such situations, it is hard to imagine anyone being truly delighted even
when the most professional service recovery is conducted. Compare these
examples with a lost hotel reservation for which recovery is an upgrade to
a better room, or even a suite. When poor service is recovered by delivery
of a superior product, the customer is usually delighted and will probably
hope for another lost reservation in the future.
e best strategy is to do it right the rst time. As Michael Hargrove
puts it, “Service recovery is turning a service failure into an opportunity
you wish you never had.25 Unfortunately, empirical evidence shows that
some 40–60% of customers reported dissatisfaction with the service-
recovery processes they experienced.26
Recognizing that current customers are a valuable asset base, managers
need to develop eective procedures for service recovery following
unsatisfactory experiences. Unfortunately, many service recoveries fail
and some of the common causes for failure are shown in Service Insights 1.
e three guiding principles for how to get it right are as follows: (1) make
it easy for customers to give feedback, (2) enable eective service recovery,
and (3) establish appropriate compensation levels. A fourth principle,
learning from customer feedback and driving service improvements, is
discussed in Volume 12 in the context of customer feedback systems. e
components of an eective service-recovery system are shown in Figure
20 · Winning in Service Markets
Common Service Recovery Mistakes
Here are some typical service recovery mistakes made by many
• Managers disregard evidence that shows that service recovery
provides a signicant nancial return. In recent years, many
organizations have focused on cost cutting, paying only lip
service to retain their most protable customers. On top of that,
they have also lost sight of the need to respect all their customers.
Companies do not invest enough in actions that would prevent
serv ice issues. Ideally, service planners address potential problems
before they become customer problems. Although preventive
measures do not eliminate the need for good service recovery
systems, they greatly reduce the burden on frontline sta and the
service recovery system in its entirety.
Customer service employees fail to display good attitudes. e
three most important things in service recovery are attitude,
attitude and attitude. No matter how well-designed and well-
planned the service recovery system is, it would not work well
without the friendly and proverbial smile-in-the-voice attitude
from frontline sta.
Organizations fail to make it easy for customers to complain or
give feedback. Although some improvement can be seen, such as
hotels and restaurants oering comment cards and links on their
websites and apps, little is done to communicate their simplicity
and value to customers. Research shows that a large proportion
of customers are unaware of the existence of a proper feedback
system that could help them get their problems solved.
Source: Adapted from Rod Stiefbold, “Dissatisfied Customers Requires Service Recovery Plans,” Marketing News 37,
issue 22 (October 27, 2003): 44-45.
Design Complaint Handling and Service Recovery Strategies · 21
Make it Easy for Customers to Give Feedback
How can managers overcome unhappy customers’ reluctance to complain
about service failures? e best way is to directly address the reasons for
their reluctance. Table 1 gives an overview of potential measures that can
be taken to overcome these reasons identied earlier. Many companies
have improved their complaint-collection procedures by adding special
toll-free phone lines, links on their websites and social media pages,
and clearly-displayed customer comment cards in their branches.
In their customer communications, some companies feature service
improvements that were the direct result of customer feedback under the
motto “You told us, and we responded”.
Enable Eective Service Recovery
Recovering from service failures takes more than just pious expressions
of determination to resolve any problems that may occur. It requires
commitment, planning, and clear guidelines. Specically, eective
service recovery should be: (1) proactive, (2) planned, (3) trained, and
(4) empowered.
Figure 5: Components of an effective service recovery system.
Do the Job Right the
First Time
Effective Complaint
Increased Satisfaction
and Loyalty
Identify Service
Resolve Complaints
Learn From the
Recovery Experience
Conduct Research
Monitor Complaints
Develop a “Complaints as
Opportunity” Culture
Develop Effective System
and Training in Complaints
Conduct a Root-Cause
+ =
Close the Loop via Feedback
Source: Christopher H. Lovelock, Paul G. Patterson, and Jochen Wirtz, Services Marketing: An Asia-Pacific and Australian Perspective,
6th edition (Sydney: Pearson Australia, 2015), p. 419.
22 · Winning in Service Markets
Service Recovery Should Be Proactive. Service recovery is ideally
initiated on the spot, preferably before customers have a chance to
complain (Service Insights 1). Service personnel should be sensitive to
signs of dissatisfaction, and ask whether customers might be experiencing
a problem. For example, the waiter may ask a guest who has only eaten
half of his dinner: “Is everything all right, sir?” e guest may say, “Yes,
thank you, I am not very hungry”, or “e steak is well done but I had
asked for medium rare. e second response then gives the waiter a
chance to recover the service, rather than have an unhappy diner leave
the restaurant and potentially not return.
Recovery Procedures Need to Be Planned. Contingency plans have to
be developed for service failures, especially for those that occur regularly
and cannot be designed out of the system.28 For example, revenue
management practices in the travel and hospitality industries oen
result in overbooking, and travelers are denied boarding or hotel guests
are “walked” even though they had conrmed seats or reservations.
To simplify the task of frontline sta, rms should identify the most
Table 1: Strategies to reduce customer complaint barriers.
Complaint Barriers for
Dissatisfied Customers Strategies to Reduce These Barriers
• Difficult to find the right
complaint procedure
• Effort, for example, writing and
mailing a letter
Make feedback easy and convenient:
• Put customer service hotline numbers, email
the website and/or postal addresses on all
customer communications materials (letters,
bills, brochures, website, phone book, yellow
pages listings, etc.)
Doubtful payoff
• Uncertain whether any or what
action will be taken by the
firm to address the issue the
customer is unhappy with
Reassure customers that their feedback will be
taken seriously and will pay off:
• Have service recovery procedures in place
and communicate this to customers, for
example, in customer newsletter and website
• Feature service improvements that resulted
from customer feedback
• Fear of being treated rudely
• Fear of being hassled
• Feeling embarrassed
Make providing feedback a positive experience:
• Thank customers for their feedback (can be
done publicly and in general by addressing
the entire customer base)
• Train service employees not to hassle and to
make customers feel comfortable
• Allow for anonymous feedback
Design Complaint Handling and Service Recovery Strategies · 23
common service problems such as overbooking, and then develop
solution sets for employees to follow. In contact centers, the customer
service representatives have prepared scripts to guide them in a service
recovery situation.
Recovery Skills Must Be Taught.29 As a customer, you may quickly
feel insecure at the point of service failure because things are not turning
out as expected; so you look to an employee for assistance. However, are
they willing and able to help you? Eective training builds condence
and competence among frontline sta, enabling them to turn distress into
delight. With eective training of how to handle recovery solution sets for
routine service failures (see Service Insights 2) and for non-routine service
failures, frontline sta can turn distress into delight with condence and
Recovery Requires Empowered Employees. Service recovery eorts
should be exible and employees should be empowered to use their
judgment and communication skills to develop solutions that will satisfy
complaining customers.30 is is especially true for out-of-the-ordinary
failures for which a rm may not have developed and trained solution
sets. Employees need to be able to make decisions and spend money
in order to resolve service problems promptly and recover customer
goodwill. At the Ritz-Carlton and Sheraton hotels, employees are given
the freedom to be proactive, rather than reactive. ey take ownership
of the situation and help resolve customers’ problems to the best of their
ability. In this day and age where online public complaining is gaining
popularity, employees may even be empowered to respond online; for
example, to complaints in the form of tweets, by tweeting back with a
solution to resolve the problem.31
Effective Service Recovery in Action
e lobby is deserted. It is not hard to overhear the conversation
between the front desk receptionist at the Marriott Long Wharf
Hotel in Boston and the late-arriving guest.
“Yes, Dr. Jones, we’ve been expecting you. I know you are
scheduled to be here for three nights. I’m sorry to tell you, sir, but
24 · Winning in Service Markets
we are booked solid tonight. A large number of guests we assumed
were checking out did not. Where is your meeting tomorrow, sir?
e doctor told the receptionist where it was.
“at’s near the Omni Parker House! ats not very far from
here. Let me call them and get you a room for the evening. I’ll be
right back”.
A few minutes later the receptionist returned with the good
“ey’re holding a room for you at the Omni Parker House,
sir. And, of course, we’ll pick up the tab. I’ll forward any phone
calls that come here for you. Here’s a letter that will explain the
situation and expedite your check-in, along with my business card
so you can call me directly here at the front desk if you have any
e doctor’s mood was moving from exasperation towards
calm. However, the receptionist was not nished with the
encounter. He reached into the cash drawer. “Here is a $50 bill.
at should more than cover your cab fare from here to the Parker
House and back again in the morning. We don’t have a problem
tomorrow night, just tonight. And here’s a coupon that will get you
complimentary continental breakfast on our concierge level on
the h oor tomorrow morning… and again, I am so sorry this
h a p p e n e d ”.
As the doctor walks away, the hotel’s night manager turns to
the receptionist, “Give him about 15 minutes and then call to make
sure everything went okay”.
A week later when it was still a peak period for hotels in that
city, the same guest who had overheard the exchange is in a taxi,
en route to the same hotel. Along the way, he tells about the great
service recovery episode he had witnessed the week before. e
two travelers arrive at the hotel and make their way to the front
desk, ready to check in.
ey are greeted with unexpected news: “I am so sorry gentle-
men. I know you were scheduled here for two nights. But we are
booked solid tonight. Where is your meeting scheduled tomorrow?”
Design Complaint Handling and Service Recovery Strategies · 25
e would-be guests exchange a rueful glance as they give the
receptionist their future plans. “at’s near the Méridien. Let me
call over there and see if I can get you a room. It won’t but take a
minute. As the receptionist walks away, the tale teller says, “I’ll bet
he comes back with a letter and a business card”.
Sure enough, the receptionist returns to deliver the solution; it
is not a robotic script but all the elements from the previous weeks
show are on display. What the tale teller thought was pure initiative
from front desk receptionist the previous week, he now realizes was
a planned, seemingly spontaneous yet predetermined response to a
specic category of service problem.
Adapted from: Ron Zemke and Chip R. Bell, Knock Your Socks Off Service Recovery. New York: AMACOM, 2000, pp.
How Generous Should Compensation be?
Vastly dierent costs are associated with possible recovery strategies. How
much compensation should a rm oer when there has been a service
failure, or would an apology be sucient instead? e following rules of
thumb can help managers to answer these questions:
• What is the positioning of your rm? If a rm is known for service
excellence and charges a premium price for quality, then customers
will expect service failures to be rare, so the rm should make a
demonstrable eort to recover the few failures that do occur and
be prepared to oer something of signicant value. However, in a
mass market business, customers are likely to accept an apology and
rework of the service.
How severe was the service failure? e general guideline is “let
the punishment t the crime. Customers expect little for minor
inconveniences (in this case, oen a sincere apology will do), but
a much more signicant compensation if there was major damage
in terms of time, eort, annoyance, or anxiety was created by the
26 · Winning in Service Markets
• Who is the aected customer? Long-term customers and those who
spend heavily at a service provider expect more, and it is worth
making an eort to save their business. One-time customers tend
to be less demanding, and have less economic importance to the
rm. Hence, compensation can be less, but should still be fair. ere
is always the possibility that a rst-time user will become a repeat
customer if he or she is treated well.
e overall rule of thumb for compensation at service failures
should be “well-dosed generosity”. Being perceived as stingy adds insult
to injury, and the rm will probably be better o apologizing than
oering a minimal compensation. Overly-generous compensation is not
only expensive, customers may even interpret such a response negatively
by raising questions in their minds about the soundness of the business
and leading them to become suspicious about the underlying motives.
Customers may worry about the implications for the employee as well as
for the business. Also, over-generosity does not seem to result in higher
repeat purchase rates than simply oering a fair compensation.33 ere is
also a risk that a reputation for over-generosity may encourage dishonest
customers to actively ‘seek’ service failures.34 In fact, what customers
really want is oen just a satisfactory solution to their service problem
rather than bells and whistles!35
Dealing with Complaining Customers
Both managers and frontline employees must be prepared to deal
with distressed customers, including jaycustomers who can become
confrontational and behave in unacceptable ways towards service
personnel who oen are not at fault in any way.
Good interactive skills combined with training and on-the-spot
thinking are critical for frontline employees to deal with such situations.
Service Insights 3 provides specic guidelines for eective problem
resolution, designed to help calm upset customers and to deliver a
resolution that they will see as fair and satisfying.36
Design Complaint Handling and Service Recovery Strategies · 27
Guidelines for the Frontline:
How to Handle Complaining Customers
and Recover from a Service Failure
1. Act fast. If the complaint is made during service delivery,
then time is of the essence to achieve a full recovery. When
complaints are made aer the fact, many companies have
established policies of responding within 24 hours, or
sooner. Even when full resolution is likely to take longer, fast
acknowledgment remains very important.
2. Acknowledge the customer’s feelings. Do this either tacitly or
explicitly (for example, “I can understand why you’re upset”).
is action helps to build rapport, the rst step in rebuilding a
bruised relationship.
3. Do not argue with customers. e goal should be to gather facts
to reach a mutually acceptable solution, not to win a debate or
prove that the customer is wrong. Arguing gets in the way of
listening and seldom diuses anger.
4. Show that you understand the problem from each customers
point of view. Seeing situations through the customers’ eyes is
the only way to understand what they think has gone wrong
and why they are upset. Service personnel should avoid
jumping to conclusions with their own interpretations.
5. Clarify the facts and sort out the cause. A failure may result from
ineciency of service, misunderstanding by customers, or the
misbehavior of a third party. If you have done something wrong,
apologize immediately in order to win the understanding and
trust of the customer. e more the customer can forgive
you, the less he or she will expect to be compensated. Do
not be defensive; reacting defensively may suggest that the
organization has something to hide or is reluctant to fully look
into the situation.
6. Give customers the benet of the doubt. Not all customers
are truthful and not all complaints are genuine. However,
28 · Winning in Service Markets
customers should be treated as though they have a valid
complaint until clear evidence proves that it is not true. If a
lot of money is at stake (as in insurance claims or potential
lawsuits), careful investigation needs to be carried out. If the
amount involved is small, it may not be worth haggling over a
refund or other compensation. However, it is still a good idea
to check the records to see if there is a past history of dubious
complaints by the same customer.
7. Propose the steps needed to solve the problem. When instant
solutions are not immediately available, tell customers how the
rm intends to take action to deal with the problem. is also
sets expectations about the time involved, so rms should be
careful not to overpromise!
8. Keep customers informed of progress. Nobody likes being le in
the dark. Uncertainty causes people to be anxious and stressed.
People tend to be more accepting if they know what’s going
on and receive periodic progress reports. erefore, people
should be kept informed about what is going on regularly.
9. Consider compensation. When customers do not receive the
service outcomes they believe they have paid for or have
suered serious inconvenience and/or loss of time and money
because the service failed, either a monetary payment or
some other compensation in kind (e.g., an upgrade on a ight
or a free dessert in a restaurant) is appropriate. is type of
recovery strategy may also reduce the risk of legal action by an
angry customer. Service guarantees oen lay out in advance
what such compensation will be, and the rm should ensure
that all guarantees are met.
10. Persevere to regain customer goodwill. When customers have
been disappointed, one of the hardest things to do is to restore
their condence and keep the relationship going. Perseverance
may be required to defuse customers’ anger and to convince
them that actions are being taken to avoid a recurrence of the
problem. Truly exceptional recovery eorts can be extremely
eective in building loyalty and referrals.
Design Complaint Handling and Service Recovery Strategies · 29
11. Self-check the service delivery system and improve it. Aer the
customer has le, you should check to see whether the service
failure was caused by accidental mistakes or system defects.
Take advantage of every complaint to perfect the whole service
system. Even if the complaint is found to be a result of a
misunderstanding by customer, this implies that some part of
your communication system is ineective.
One way for particularly customer-focused rms to institutionalize
professional complaint handling and eective service recovery is through
oering service guarantees. In fact, a growing number of companies oer
customers a service guarantee, promising that if service delivery fails to
meet pre-dened standards, the customer will be entitled one or more
forms of compensation, such as an easy-to-claim replacement, refund
or credit. A well-designed service guarantee not only facilitates eective
service recovery, but also institutionalizes learning from service failures
and subsequent system improvements.37
e Power of Service Guarantees
Service guarantees are powerful tools for both promoting and achieving
service quality for the following reasons:38
(1) ey force rms to focus on what their customers want and
expect in each element of the service.
(2) ey set clear standards, telling customers and employees alike
what the company stands for. Payouts to compensate customers
for poor service cause managers to take guarantees seriously as
they highlight the nancial costs of quality failures.
(3) ey require the development of systems for generating
meaningful customer feedback and acting on it.
(4) ey force service organizations to understand why they fail
and encourage them to identify and overcome potential fail
30 · Winning in Service Markets
(5) ey build “marketing muscle” by reducing the risk of the
purchase decision and building long-term loyalty.
From the customers perspective, the primary function of service
guarantees is to lower the perceived risks associated with purchase.39
e presence of a guarantee may also make it easier for customers to
complain and they will more likely do so, because they will anticipate that
frontline employees will be prepared to resolve the problem and provide
appropriate compensation. Sara Bjőrlin Lidén and Per Skålén found that
even when dissatised customers were unaware that a service guarantee
existed before making their complaint, they were positively impressed to
learn that the company has a pre-planned procedure for handling failures
and to nd that their complaints were taken seriously.40
e benets of service guarantees can be seen clearly in the case of
Hampton Inn’s “100% Hampton Guarantee” (“If you’re not 100% satised,
you don’t pay”; see Figure 6). As a business-building program, Hamptons
strategy of oering to refund the cost of the room to a guest who expresses
dissatisfaction has attracted new customers and also served as a powerful
retention device. People choose to stay at a Hampton Inn because they
are condent they will be satised. At least as important, the guarantee
has become a vital tool to help managers identify new opportunities for
quality improvement.
Figure 6: Hampton Inn includes its “100% satisfaction guaranteed” in its advertising.
Design Complaint Handling and Service Recovery Strategies · 31
In discussing the impact on sta and managers, the vice president–
marketing of Hampton Inn stated, “Designing the guarantee made us
understand what made guests satised, rather than what we thought made
them satised”. It became imperative that everyone from reservationists
and frontline employees, to general managers and personnel at corporate
headquarters, listen carefully to guests, anticipate their needs to the
greatest extent possible, and remedy problems quickly so that guests were
satised with the solution. Viewing a hotel’s function in this customer-
centric way had a profound impact on the way the rm conducted
e guarantee “turned up the pressure in the hose, as one manager
put it, showing where “leaks” existed, and providing the nancial incentive
to plug them. As a result, the “100% Hampton Guarantee” has had an
important impact on product consistency and service delivery across the
Hampton Inn chain, and it showed a dramatically positive eect on its
nancial performance. 41
How to Design Service Guarantees
Some guarantees are simple and unconditional. Others appear to have
been written by lawyers and contain many restrictions. e examples in
Service Insights 4 give an idea about which guarantees instill trust and
condence, and would make a customer like to do business with a rm.
Examples of Service Guarantees
United States Postal Service Express Mail Guarantee
Service Guarantee: Express Mail international mailings are not
covered by this service agreement. Military shipments delayed
due to customs inspections are also excluded. If the shipment is
mailed at a designated USPS Express Mail facility on or before
the specied deposit time for overnight delivery to the addressee,
delivery to the addressee or agent will be attempted before the
applicable guaranteed time. Signature of the addressee’s agent, or
delivery employee is required upon delivery. If a delivery attempt
32 · Winning in Service Markets
is not made by the guaranteed time and the mailer les a claim for
a refund, the USPS will refund the postage unless the delay was
caused by: proper retention for law enforcement purposes; strike
or work stoppage; late deposit of shipment; forwarding, return,
incorrect address or incorrect ZIP code; delay or cancellation
of ights; governmental action beyond the control of the Postal
Service or air carriers; war, insurrection or civil disturbance;
breakdowns of a substantial portion of the USPS transportation
network resulting from events or factors outside the control of the
Postal Service or Acts of God.
Source: Printed on back of Express Mail receipt, January 2006. (Note that USPS has dramatically improved its
guarantee since.)
L. L. Bean’s Guarantee
100% Guaranteed. Our products are guaranteed to give 100%
satisfaction in every way. Return anything purchased from us at any
time if it proves otherwise. We do not want you to have anything
from LL Bean that is not completely satisfactory.
Our guarantee is based on something as simple as a handshake
— the deal that you’ll be satised with a purchase, and if you are
not, we’ll make it right. We guarantee that we’ll hold up our end
of the bargain. It’s just how we do business. If your purchase isn’t
completely satisfactory, we’re happy to accept your exchange or
return at any time.
Source: Printed in all L. L. Bean catalogs and on the company’s website,,
accessed 26 August 2016.
MFA Group Inc. (a Professional Recruitment Agency)
We “put our money where our mouth is, in two ways:
1. Money back: We oer an unconditional money back guarantee
— if at any point during the search process you are unhappy
with progress, simply address the fact with us and if you are
still not 100% satised aer that discussion, we will cheerfully
and unconditionally, refund every cent you have paid as a
retainer. No quibble, no hassle, guaranteed period.
Design Complaint Handling and Service Recovery Strategies · 33
2. Twelve-month candidate guarantee: All candidates placed by us
are guaranteed for a full 12 months. If, during this period they
leave your rm, for any reason whatsoever, we will conduct
an additional search, completely free of charge, until a suitable
replacement has been found.
Source: MGA Group’s website,, accessed 1 June, 2009.
The Bugs Burger Bug Killer Guarantee
(a Pest Control Company)
You don’t owe us a penny until all the pests on your premises
have been eradicated.
If you’re ever dissatised with the BBBK’s service you will receive
a refund for as much as 12 months of service — plus fees for
another exterminator of your choice for the next year.
If a guest spots a pest on your premises, the exterminator will
pay for the guest’s meal or room, send a letter of apology, and pay
for a future meal or stay.
If your premises are closed down because of the presence of
roaches or rodents, BBBK will pay any nes, as well as all lost
prot, plus $5000.
Source: Reproduced in Christopher W. Hart,The Power of Unconditional Service Guarantees.” Harvard Business
Review (July-August 1990).
All three service guarantees — from LL Bean, MFA Group and BBBK
— are powerful, unconditional, and instill trust. e other guarantee is
weakened by the many conditions attached to it. Hart argues that service
guarantees should be designed to meet the following criteria:42
(1) Whatever is promised in the guarantee must be totally
unconditional and there should not be any element of surprise
for the customer.
(2) Easy to understand and communicate to the customer so that
he is clearly aware of the benets that can be gained from the
34 · Winning in Service Markets
(3) Meaningful to the customer in that the guarantee is on something
important to the customer and the compensation should be
more than adequate to cover the service failure.43
(4) It should be easy for the customer to invoke the guarantee.
(5) If a service failure occurs, the customer should be able to easily
collect on the guarantee without any problems.
(6) e guarantee should be credible and believable (Figure 7).
Is Full Satisfaction the Best You Can Guarantee?
Full satisfaction guarantees have generally been considered the best
possible design. However, it has been suggested that the ambiguity
associated with such guarantees can lead to the discounting of their
perceived value. For example, customers may raise questions such as
“What does full satisfaction mean?” or “Can I invoke a guarantee when
I am dissatised, although the fault does not lie with the service rm?”44
Attribute-specic guarantees (e.g., guaranteed delivery within 24 hours)
are highly specic and therefore do not suer from ambiguity, although
their coverage is not comprehensive and limits their appeal. A hybrid
version of the full satisfaction and attribute-specic guarantee, referred
to as the “combined guarantee”, addresses this issue. It combines the wide
scope of a full-satisfaction guarantee with the low uncertainty of attribute-
specic performance standards. e combined guarantee has been shown
to be superior to the pure full-satisfaction or attribute-specic guarantee
Figure 7: To leave a clear stamp of service quality on customers, the guarantee must
be unconditional, meaningful, credible, easily understood, invoked and collectable.
Design Complaint Handling and Service Recovery Strategies · 35
Term Guarantee Scope Example
Single attribute-specific
One key attribute of
the service is covered
by the guarantee.
“Any of three specified popular
pizzas is guaranteed to be served
within 10 minutes of ordering on
working days between 12 am
and 2 pm. If the pizza is late, the
customer’s next order is free.”
A few important
attributes of the
service are covered
by the guarantee.
Minneapolis Marriott’s guarantee:
“Our quality commitment to you is
to provide:
• a friendly, efficient check-in;
• a clean, comfortable room,
where everything works;
• a friendly efficient check-out.
If we, in your opinion, do not
deliver on this commitment,
we will give you $20 in cash.
No questions asked. It is your
All aspects of the
service are covered
by the guarantee.
There are no
Lands’ End’s guarantee: “If you
are not completely satisfied with
any item you buy from us, at any
time during your use of it, return
it and we will refund your full
purchase price. We mean every
word of it.
Whatever. Whenever. Always.
But to make sure this is perfectly
clear, we’ve decided to simplify it
further. GUARANTEED. Period.”
Combined guarantee All aspects of the
service are covered
by the full-satisfaction
promise of the
guarantee. Explicit
minimum performance
standards on
important attributes
are included in the
guarantee to reduce
Datapro Information Services
guarantees “to deliver the
report on time, to high quality
standards, and to the contents
outlined in this proposal. Should
we fail to deliver according to
this guarantee, or should you be
dissatisfied with any aspect of
our work, you can deduct any
amount from the final payment
which is deemed as fair.”
Table 2: Types of Service Guarantees.
Source: Wirtz, J. and Kum, D (2002). “Designing Service Guarantees — Is Full Satisfaction the Best You Can Guarantee?” Journal of
Services Marketing, Vol. 15, No. 14, pp. 282–299.
36 · Winning in Service Markets
designs.45 Specic performance standards are guaranteed (e.g., on-time
delivery), but should the consumer be dissatised with any other element
of the service, the full-satisfaction coverage of the combined guarantee
applies. Table 2 shows examples of various types of guarantees.
Is It Always Benecial to Introduce a Service Guarantee?
Managers should think carefully about their rms strengths and
weaknesses when deciding whether or not to introduce a service
guarantee. ere are a number of situations in which a guarantee may not
be appropriate:46
Companies that already have a strong reputation for service
excellence may not need a guarantee. In fact, it can be incongruent
with their image to oer one as it might confuse the market.47 Rathe r,
best practice service rms will be expected to do what’s right without
oering a service guarantee.
In contrast, a rm whose service is currently poor must rst work to
improve its quality to a level above what is guaranteed. Otherwise,
too many customers will invoke the guarantee with serious cost
• Service rms whose quality is truly uncontrollable due to external
forces would be foolish to consider a guarantee. For example, when
Amtrak realized that it was paying out substantial refunds because it
lacked sucient control over its railroad infrastructure, it was forced
to drop a service guarantee that included the reimbursement of fares
in the event of unpunctual train service.
In a market where consumers see little nancial, personal, or
physiological risk associated with purchasing and using a service, a
guarantee adds little value but still costs money to design, implement,
and manage.
In markets where there is little perceived dierence in service quality
among competing rms, the rst rm to institute a guarantee may also be
able to obtain a rst-mover advantage and create value dierentiation for
its services. If more than one competitor already have guarantees in place,
oering one may become a qualier for the industry, and the only real
Design Complaint Handling and Service Recovery Strategies · 37
way to make an impact is to launch a highly distinctive guarantee beyond
what is already oered by competitors.48
roughout this volume, rms are advocated to welcome complaints
and invocations of service guarantees and even encourage them. While
discussing the importance of professional complaint handling and service
recovery, it is acknowledged that not all complaints are honest. When
rms have generous service recovery policies or oer guarantees, there
is always the fear that some customers may take advantage of them. Also,
not all complaining customers are right or reasonable in their behavior,
and some may actually be the cause of complaints by other customers.49
Such people are referred to as jaycustomers.
Visitors to North America from other English-speaking countries
are oen puzzled by the term “jaywalker”, a distinctively American word
used to describe people who cross streets at unauthorized places or in
a dangerous manner. e prex “jay” comes from a 19th-century slang
for “a stupid person. A jaycustomer is dened as someone who acts in a
thoughtless or abusive way, causing problems for the rm, its employees
and other customers.
Customers who act in uncooperative or abusive ways are a problem
for any organization. However, they have even more potential for
mischief in service businesses, particularly those in which many other
customers are present in the same service environment. As known from
personal experience, other peoples behavior can aect your enjoyment
of a service. If you like classical music and attend symphony concerts,
you expect audience members to keep quiet during the performance,
and to not spoil the experience for others by talking, coughing loudly or
failing to turn o their cell phones. In contrast, a silent audience would be
deadly during a rock concert or team sports event, where active audience
participation adds to the excitement. However, there is a ne line between
spectator enthusiasm and abusive behavior by supporters of rival sports
teams. Firms that fail to deal eectively with customer misbehaviors risk
damaging their relationships with all the other customers they would like
to keep.
38 · Winning in Service Markets
However, opinions on this topic seem to polarize around two
opposing views. One is denial: “the customer is king and can do no
wrong”. e other view sees the marketplace of customers as positively
overpopulated with nasty people who cannot be trusted to behave in ways
that self-respecting service providers should expect and require. e rst
viewpoint has received wide publicity in gung-ho management books
and in motivational presentations to captive groups of employees. e
second view oen appears to be dominant among cynical managers and
frontline employees who have been burned at some point by customer
misbehaviors. As with many opposing viewpoints, there are important
grains of truth in both perspectives. What is clear, however, is that no self-
respecting rm wants an ongoing relationship with an abusive customer.
Every service has its share of jaycustomers. ey are undesirable. At
best, a rm should avoid attracting them in the rst place, and at worst, a
rm needs to control or prevent their abusive behavior.
Seven Types of Jaycustomers50
Dening a problem is the rst step in resolving it. Seven broad categories
of jaycustomers have been identied and given generic names, but many
customer contact personnel have also come up with their own special
e Cheat. ere are many ways in which customers can cheat
service rms. Cheating ranges from writing complaint letters with the sole
purpose of exploiting service recovery policies and cheating on service
guarantees, to inating or faking insurance claims and “wardrobing” (e.g.,
using an evening dress or tuxedo for an evening and then returning it back
to the retailer).51 Fake returns have become more common and socially
accepted, especially so with online retailers. One company reported that
1% of its customers who bought ve or more items sent back 90% or more
of their purchases!52 e following quotes describe the thinking of these
customers nicely in other contexts:
On checking in to a hotel I noticed that they had a ‘100% satisfaction
or your money back’ guarantee, I just couldn’t resist the opportunity
to take advantage of it, so on checking out I told the receptionist that
I wanted a refund as the sound of the trac kept me awake all night.
Design Complaint Handling and Service Recovery Strategies · 39
ey gave me a refund, no questions asked. ese companies can be
so stupid they need to be more alert.53
I’ve complained that service was too slow, too quick, too hot, too
cold, too bright, too dark, too friendly, too impersonal, too public, too
private… it doesn’t matter really, as long as you enclose a receipt with
your letter, you just get back a standard letter and gi coupon.54
Firms cannot easily check whether a customer is faking dissatisfaction
or truly is unhappy. At the end of this section, we will discuss how to deal
with this type of consumer fraud.
e ief. e thief jaycustomer has no intention of paying and sets
out to steal goods and services (or to pay less than full price by switching
price tickets, or contesting bills on baseless grounds). Shopliing is a major
problem in retail stores. What retailers euphemistically call “shrinkage” is
estimated to cost them huge sums of money in annual revenues. Many
services lend themselves to clever schemes for avoiding payment. For
those with technical skills, it is sometimes possible to bypass electricity
meters, access telephone lines free of charge, or bypass normal cable TV
feeds. Riding free on public transportation, sneaking into movie theaters,
or not paying for restaurant meals are also popular, not forgetting the
use of fraudulent forms of payment such as using stolen credit cards or
checks drawn on accounts without any funds. Finding out how people
steal a service is the rst step in preventing the or catching thieves and,
where appropriate, prosecuting them. However, managers should try
not to alienate honest customers by degrading their service experiences.
Provision must also be made for honest but absent-minded customers
who forget to pay.
e Rule Breaker. Just as highways need safety regulations (including
“Don’t Jaywalk”), many service businesses need to establish rules of
behavior for customers to guide them safely through the various steps
of the service process. Some of these rules are imposed by government
agencies for health and safety reasons. e sign found in many restaurants
that states “No shirt, no shoes, no service” demonstrates a health-related
regulation. Air travel provides one of the best examples of rules designed
to ensure safety; there are few other environments outside prison where
healthy, mentally competent, adult customers are quite so constrained
(albeit for good reason).
40 · Winning in Service Markets
In addition to enforcing government regulations, suppliers
oen impose their own rules to facilitate smooth operations, avoid
unreasonable demands on employees, prevent misuse of products and
facilities, protect themselves legally, and discourage individual customers
from misbehaving. For instance, ski resorts are strict on careless skiers
who pose risks to both themselves and others. Collisions can cause
serious injury and even death. As such, ski patrol members must be
safety-oriented and sometimes take on a policing role. Just as dangerous
drivers can lose their licenses, dangerous skiers can lose their li tickets.
For example, at Vail and Beaver Creek in Colorado, ski patrollers once
revoked nearly 400 li tickets in just a single weekend. At Winter Park
near Denver, skiers who lose their passes for dangerous behavior may
have to attend a 45-minute safety class before they can get their passes
back. Ski patrollers at Vermont’s Okemo Mountain may issue warnings to
reckless skiers by attaching a bright orange sticker to their li tickets. If
pulled over again for inappropriate behavior, such skiers may be escorted
o the mountain and banned for a day or more. “We’re not trying to be
Gestapos on the slopes”, says the resort’s marketing director, “just trying
to educate people”.
How should a rm deal with rule breakers? Much depends on which
rules have been broken. In the case of legally enforceable ones — the,
bad debts, or trying to take guns on an aircra — the courses of action
need to be laid down explicitly to protect employees and to punish or
discourage wrongdoing by customers.
Company rules are a little more ambiguous. Are they really necessary
in the rst place? If not, the rm should get rid of them. Do they deal
with health and safety? If so, educating customers about the rules should
reduce the need for taking corrective action. e same is true for rules
designed to protect the comfort and enjoyment of all customers. ere are
also unwritten social norms such as “thou shalt not cut in line, although
this is a much stronger cultural expectation in the US or Canada than
in many countries, as any visitor to Paris or Hong Kong Disneyland can
attest! Other customers can oen be relied upon to help service personnel
enforce rules that aect everybody else; they may even take the initiative
in doing so.
ere are risks attached to making lots of rules. e rm may become
too inexible and make it appear bureaucratic and overbearing. Instead of
Design Complaint Handling and Service Recovery Strategies · 41
being customer-oriented, employees become like police ocers, making
sure that customers follow all the rules. However, the fewer the rules, the
clearer the important ones can be.
e Belligerent. A type of customer probably seen in a store, at the
airport, in a hotel or restaurant — red in the face and shouting angrily, or
perhaps icily calm and mouthing insults, threats and obscenities. ings
do not always work as they should: machines break down, service is
clumsy, customers are ignored, a ight is delayed, an order is delivered
incorrectly, sta are unhelpful, or a promise is broken. Perhaps the
customer in question is expressing resentment at being told to abide by
the rules. Service personnel are oen abused, even when they are not
to blame. If an employee lacks the power to resolve the problem, the
belligerent may become still angrier, even to the point of physical attack.
Unfortunately, when angry customers rant at service personnel, the
latter sometimes respond in kind, thus escalating the confrontation and
reducing the likelihood of resolution.
Drunkenness and drug abuse add extra layers of complication.
Organizations that care about their employees go to great eorts to
develop skills in dealing with these dicult situations. Training exercises
that involve role-playing help employees develop the self-condence and
assertiveness needed to deal with upset, belligerent customers (sometimes
referred to as “irates”). Employees also need to learn how to defuse anger,
calm anxiety, and comfort distress (particularly when there is good reason
for the customer to be upset with the organization’s performance).
“We seem to live in an age of rage”, declared Stephen Grove, Raymond
Fisk, and Joby John, noting a general decline in civility.55 ey suggest
that rage behaviors are learned via socialization as appropriate responses
to certain situations. Anger and dissatisfaction are qualitatively dierent
emotions. Whereas dissatised customers had a feeling of non-fulllment
or “missing out” and wanted to nd out who or what was responsible for
the event, angry customers were thinking how unfair the situation was,
sought to get back at the organization, and wanted to hurt someone.56 e
problem of “Air Rage” has attracted particular attention in recent years
due to the risks it poses to innocent people (Service Insights 5).57
42 · Winning in Service Markets
Air Rage: Unruly Passengers Pose a Continuing Problem
Joining the term “road rage” — coined in 1988 to describe angry,
aggressive drivers who threaten other road users — is “air rage,
describing the behavior of violent, unruly passengers who endanger
ight attendants, pilots and other passengers. Incidents of air rage
are perpetrated by only a tiny fraction of all airline passengers —
reportedly about 5,000 times a year — but each incident in the air
may aect the comfort and safety of hundreds of other people.
Although terrorism is an ongoing concern, out-of-control
passengers pose a serious threat to safety too. On a ight from
Orlando, Florida to London, a drunken passenger smashed a video
screen and began ramming a window, telling fellow passengers
they were about to “get sucked out and die. e crew strapped him
down and the aircra made an unscheduled landing in Bangor,
Maine, where US marshals arrested him. Another unscheduled
stop in Bangor involved a drug smuggler ying from Jamaica to
the Netherlands. When a balloon lled with cocaine ruptured in
his stomach, he went berserk, pounding a bathroom door to pieces
and grabbing a female passenger by the throat.
On a ight from London to Spain, a passenger who was
already drunk at the time of boarding became angry when a
ight attendant told him not to smoke in the lavatory and then
refused to serve him another drink. Later, he smashed her over
the head with a duty-free vodka bottle before being restrained by
other passengers (she required 18 stitches to close the wound).
Other dangerous incidents have included throwing hot coee at
ight attendants, head-butting a co-pilot, trying to break into the
cockpit, throwing a ight attendant across three rows of seats, and
attempting to open an emergency door in ight. On a US domestic
ight with a tragic outcome, a violent passenger was restrained and
ultimately suocated by other passengers aer he kicked through
the cockpit door of an airliner 20 minutes before it was scheduled
to land in Salt Lake City.
Design Complaint Handling and Service Recovery Strategies · 43
A growing number of carriers are taking air rage perpetrators
to court. Northwest Airlines permanently blacklisted three
violent travelers from ying on its aircra. British Airways gives
out “warning cards” to any passenger getting dangerously out of
control. Celebrities are not immune to air rage. Rock star Courtney
Love blamed her “potty mouth” aer being arrested on arrival in
London for disruptive behavior on board a ight from Los Angeles.
Some airlines carry physical restraints to subdue out-of-control
passengers until they can be handed over to airport authorities.
In April 2000, the US Congress increased the civil penalty
for air rage from $1,100 to $25,000 in an attempt to discourage
passengers from misbehaving. Criminal penalties — a $10,000
ne and up to 20 years in jail — can also be imposed for the most
serious incidents. Some airlines have been reluctant to publicize this
information for fear of appearing confrontational or intimidating.
However, the visible implementation of anti-terrorist security
precautions have made it more acceptable to tighten enforcement
of procedures designed to control and punish air rage.
What causes air rage? Psychological feelings of a loss of
control, or problems with authority gures may be causal factors
for angry behavior in many service settings. Researchers suggest
that air travel, in particular, has become increasingly stressful as a
result of crowding and longer ights; the airlines themselves may
have contributed to the problem by squeezing rows of seats more
tightly together and failing to explain delays. Findings suggest that
risk factors for air travel stress include anxiety and an anger-prone
personality; they also show that traveling on unfamiliar routes is
more stressful than traveling on a familiar one. Another factor may
be restrictions on smoking. However, alcohol abuse underlies a
majority of incidents!
Airlines are training their employees to handle violent
individuals and to spot problem passengers before they start
causing serious problems. Some carriers oer travelers specic
suggestions on how to relax during long ights. Some airlines
have also considered oering nicotine patches to passengers
44 · Winning in Service Markets
who are desperate for a smoke but are not allowed to light up.
Increased security in the air may be curtailing rage behavior on
board ights, but concern continues to grow about passenger rage
on the ground. An Australian survey of airport employees found
that 96% of airport sta had experienced air rage at work: 31% of
agents experienced some form of air rage daily, and 15% of agents
reported that they had been physically touched or assaulted by a
Based on information from multiple sources, including: Daniel Eisenberg, “Acting Up in the Air,” Time, 21 December
1998; “Air Rage Capital: Bangor Becomes Nation’s Flight Problem Drop Point,The Baltimore Sun, syndicated article,
September, 1999; Melanie Trottman and Chip Cummins, “Passenger’s Death Prompts Calls for Improved ‘Air Rage’
Procedures,The Wall Street Journal, 26 September 2000; Blair J. Berkley and Mohammad Ala, “Identifying and
Controlling Threatening Airline Passengers, Cornell Hotel and Restaurant Administration Quarterly 42 (August-
September) 2001: 6-24; , accessed 26 August 2016.
What should an employee do when an aggressive customer brushes
o attempts to defuse the situation? In a public environment, one priority
should be to move the person away from other customers. Sometimes
supervisors may have to settle disagreements between customers and sta
members; at other times, they need to support the employees actions. If
a customer has physically attacked an employee, then it may be necessary
to summon security ocers or the police. Some rms try to conceal such
events, fearing bad publicity. Others however, feel obliged to make a public
stand on behalf of their employees, such as the Body Shop manager who
ordered an ill-tempered customer out of the store, telling her: “I won’t
stand for your rudeness to my sta.
Telephone rudeness poses a dierent challenge. Service personnel
have been known to hang up on angry customers, but that action does not
resolve the problem. For instance, bank customers tend to get upset upon
learning that checks have been returned because the account is overdrawn
(which means they have broken the rules), or that a request for a loan
has been denied. One approach for handling customers who continue to
shout at a telephone-based employee is for the latter to say rmly: “is
conversation isn’t getting us anywhere. Why don’t I call you back in a few
minutes when you’ve had time to digest the information?” In many cases,
taking a break to think (and cool down) is exactly whats needed.
Design Complaint Handling and Service Recovery Strategies · 45
e Family Feuders. People who get into arguments with members
of their own family — or worse, with other customers — make up a
subcategory of belligerents we call “family feuders. Employee intervention
may calm the situation or actually make it worse. Some situations require
detailed analysis and a carefully thought out response. Others, such as
customers starting a food ght in an upscale restaurant, require an almost
immediate response. Service managers in these situations need to be
prepared to think on their feet and act fast.
e Vandal. So drinks are poured into bank cash machines; grati
are scrawled on both interior and exterior surfaces; burn holes from
cigarettes scar carpets, tablecloths, and bedcovers; bus seats are slashed and
hotel furniture broken; customers’ cars are vandalized; glass is smashed
and fabrics are torn — the list is endless. Customers do not cause all of the
damage, of course. Bored or drunk young people are the source of much
exterior vandalism. Disgruntled employees have been known to commit
sabotage. Much of the problem does originate with paying customers
who choose to misbehave. Alcohol and drugs are sometimes the cause,
at other times psychological problems may contribute, and carelessness
can play a role. ere are also occasions when unhappy customers, feeling
mistreated by the service rm, try to take revenge in some way.
Figure 8: Installing surveillance cameras in public car parks can discourage
46 · Winning in Service Markets
e best cure for vandalism is prevention. Improved security
discourages some vandals (Figure 8). Good lighting helps, as well as
open design of public areas. Companies can choose vandal-resistant
surfaces and protective coverings for equipment, and rugged furnishings.
Educating customers to use equipment properly (rather than ghting with
it) and providing warnings about fragile objects can reduce the likelihood
of abuse or careless handling. Finally, there are economic sanctions:
security deposits or signed agreements in which customers agree to pay
for any damage that they cause.
What should managers do if prevention fails and damage is done? If
the perpetrator is caught, they should rst clarify whether there are any
extenuating circumstances (because accidents do happen). Sanctions for
deliberate damage can range from a warning to prosecution. As far as
the physical damage itself is concerned, it is best to x it fast (within any
constraints imposed by legal or insurance considerations). e general
manager of a bus company had the right idea when he said: “If one of
our buses is vandalized, whether it’s a broken window, a slashed seat, or
grati on the ceiling, we take it out of service immediately so nobody sees
it. Otherwise you just give the same idea to ve other characters who were
too dumb to think of it in the rst place”!
e Deadbeat. Leaving aside those individuals who never intended
to pay in the rst place (our term for them is “the thief”), there are many
reasons why customers fail to pay for services they have received. ey
are the ones who delay payment. Once again, preventive action is better
than a cure. A growing number of rms insist on pre-payment. Any form
of ticket sale is a good example of this. Direct marketing organizations
ask for your credit card number as they take your order, as do most
hotels when you make a reservation. e next best thing is to present the
customer with a bill immediately on completion of service. If the bill is to
be sent by mail, the rm should send it fast, while the service is still fresh
in the customer’s mind.
Not every apparent delinquent is a hopeless deadbeat. Perhaps there
is a good reason for the delay and acceptable payment arrangements can
be worked out. A key question is whether such a personalized approach
can be cost justied, relative to the results obtained by purchasing the
services of a collection agency. ere may be other considerations too. If
the client’s problems are only temporary, what is the long-term value of
Design Complaint Handling and Service Recovery Strategies · 47
maintaining the relationship? Will it create positive goodwill and word-
of-mouth to help the customer work things out? ese decisions are
judgment calls, but if creating and maintaining long-term relationships is
the rms ultimate goal, they are worth exploring.
Consequences of Dysfunctional Customer Behavior
Dysfunctional customer behavior has consequences for frontline sta,
other customers, and the organization itself.58 Employees who are abused
may not only nd their mood or temper negatively aected in the short
run, but may eventually suer long-term psychological damage. eir
own behavior too may take on negative dimensions, such as taking
revenge on abusive customers. Sta morale can be hurt, with implications
for both productivity and quality.59
e consequences for customers can take both positive and negative
forms. Other customers may rally to the support of an employee whom
they perceive as having been abused; however, bad behavior can also be
contagious, leading a bad situation to escalate as others join in. More
broadly, being exposed to negative incidents can spoil the consumption
experience for many customers. Companies suer nancially when
demotivated employees no longer work as eciently and eectively as
before, or when employees are forced to take medical leave. ere may
also be direct nancial losses from restoring stolen or damaged property,
legal costs and paying fraudulent claims.
As suggested in the earlier discussion of air rage, the nature of
jaycustomer behavior is likely to be shaped by the characteristics of the
service industry in which it occurs. Service Insights 13.6 reports on a study
of jaycustomers in the hospitality industry.
Categorizing Jaycustomers in Hotels, Restaurants, and Bars
To learn more about dysfunctional customer behavior in the
hospitality industry, Lloyd Harris and Kate Reynolds developed
a research project to identify and categorize dierent types of
misconduct. Open-ended interviews, typically lasting one hour (but
sometimes longer) were conducted with 31 managers, 46 frontline
48 · Winning in Service Markets
employees, and 29 customers. ese interviews took place in 19
hotels (all of which had restaurants and bars), 13 restaurants, and
16 bars. A purposive sampling plan was employed, with the goal of
selecting informants with extensive participation in and insights
of service encounters. All informants had encountered — or had
perpetrated — what could be considered as jaycustomer behavior
and were invited to give details of specic incidents. In total, the
106 respondents generated 417 critical incidents.
Based on analysis of these incidents, Harris and Reynolds
codied eight types of behavior:
1. Compensation letter writers who deliberately and fraudulently
wrote to centralized customer service departments with largely
unjustied complaints in anticipation of receiving a check or
gi voucher.
2. Undesirable customers whose behavior fell into three subgroups:
(a) irritating behavior by “jaykids” and “jayfamilies”; (b)
criminal behavior, typically involving drug sales or prostitution;
and (c) homeless individuals who used an organization’s
facilities and stole other customers’ refreshments.
3. Property abusers who vandalized facilities and stole items,
oen to keep as souvenirs.
Table 3: Percentage of Respondents Reporting Incidents by Category.
Category Employees (%) Customers (%)
Compensation letter writers 30 20
Undesirable customers 39 47
Property abusers 51 20
[Off-duty] service workers 11 11
Vindictive customers 30 22
Oral abusers 92 70
Physical abusers 49 20
Sexual predators 38 0
Source: Lloyd C. Harris and Kate L. Reynolds (2004), “Jaycustomer Behavior: An Exploration of Types and Motives in
the Hospitality Industry,” Journal of Ser vices Marketing, Vol. 18, No. 5, pp. 339–357.
Design Complaint Handling and Service Recovery Strategies · 49
4. (O-duty) service workers who know how to work the system
to their own advantage as customers and deliberately disrupt
service encounters, either for nancial gain or simply to cause
problems for frontline sta.
5. Vindictive customers who are violent towards people or
property, possibly because of some perceived injustice.
6. Oral abusers include professional complainers seeking
compensation, and “ego hunters” who take pleasure in
oending frontline sta and other customers.
7. Physical abusers who physically harm frontline sta.
8. Sexual predators — oen acting in groups — engage in
sexual harassment of frontline personnel either verbally or
Some of these behaviors, such as letter writing and property
abuse, are covert in nature (that is, not evident to others at the time
they are committed). Certain underlying causes assert themselves
across multiple categories; they include desire for personal gain,
drunkenness, personal psychological problems, and negative
group dynamics.
Table 3 shows the percentage of employees and customers
reporting incidents within each category. Rather remarkably, with
the exception of the “undesirable customers” category, the incidents
in the customer column are all self-reports of the respondents’ own
e verbatim reports of jaycustomer behavior recorded in
this study make for somber, even scary reading. In particular, they
demonstrate especially the challenges posed to management and
sta by manipulative customers seeking personal nancial gain,
and by the abusive behavior of individuals, sometimes acting
in groups and fueled by alcohol, who appear unconstrained by
traditional societal norms.
Source: Lloyd C. Harris and Kate L. Reynolds, “Jaycustomer Behavior: An Exploration of Types and Motives in the
Hospitality Industry,” Journal of Ser vices Marketing 18, No. 5, 2004, 339-357.
50 · Winning in Service Markets
Dealing with Customer Fraud
Dishonest customers can take advantage of generous service recovery
strategies, service guarantees, or simply a strong customer orientation
in a number of ways. For example, they may steal from the rm, refuse
to pay for the service, fake dissatisfaction, purposefully cause service
failures to occur, or overstate losses at the time of genuine service failures.
What steps can a rm take to protect itself against opportunistic customer
Treating customers with suspicion is likely to alienate them,
especially in situations of service failure. e president of TARP notes:
Our research has found that premeditated rip-os represent 1–2% of
the customer base in most organizations. However, most organizations
defend themselves against unscrupulous customers by… treating the
98% of honest customers like crooks to catch the 2% who are crooks.60
Using this knowledge, the working assumptions should be, “If in
doubt, believe the customer”. However, as Service Insights 7 shows, it’s
crucial to keep track of customers who repeatedly “experience service
failures, and ask for compensation or invoke the rm’s service guarantee.
For example, one Asian airline found that the same customer lost his
suitcase on three consecutive ights. e chances of this truly happening
are probably lower than winning in the national lottery, so frontline sta
were made aware of this individual. e next time he checked in his
suitcase, the check-in sta followed the video image of the suitcase almost
from check-in to pick up at the baggage claim carrousel at the traveler’s
destination. It turned out that a companion collected the suitcase and
took it away while the traveler again made his way to the lost baggage
counter to report his missing suitcase. is time, the police were waiting
for him and his friend.
In another example, Continental Airlines consolidated some 45
separate customer databases into a single data warehouse to improve
service and to also detect customer fraud. e airline found one customer
who received 20 bereavement fares in 12 months o the same dead
To be able to eectively detect consumer fraud, maintaining a central
database of all compensation payments, service recoveries, returned goods,
Design Complaint Handling and Service Recovery Strategies · 51
and any other benets given to customers based on special circumstances
are needed (i.e., such transactions cannot be retained only at the local
or branch level, but must be captured in a centralized system), and it is
important to merge customer data across departments and channels for
detecting unusual transactions and the systems that allow them.61
Research has shown that customers who think they were treated
unfairly in any way (refer to our earlier discussion regarding distributive,
procedural and interactive fairness) are much more likely to take
advantage of a rm’s service recovery eort. In addition, consumers tend
to take advantage of large rms more oen than small ones — customers
think that large rms can easily aord the recovery costs. Also, one-
time customers are much more likely to cheat than loyal customers, and
customers who do not have a personal relationship with service employees
are more likely to take advantage of service recovery policies.
Service guarantees are oen used as payouts in service recovery, and
it has been shown that the amount of a guarantee payout (e.g., whether
it is a 10% or 100% money-back guarantee) had no eect on consumer
cheating. It seems that customers who cheat for a 100% refund also cheat
for 10%, and that customer who does not cheat for 10% also would not
do so for 100%. However, repeat purchase intention signicantly reduced
cheating intent. A further nding was that customers were also reluctant
to cheat if the service quality provided was truly high compared to when
it was just satisfactory.62
ese ndings suggest a number of important managerial
(1) Firms should ensure that their service recovery procedures are
(2) Large rms should recognize that consumers are more likely to
cheat on them and have robust fraud detection systems in place.
(3) Firms can implement and thus reap the bigger marketing
benets of 100% money-back guarantees without worrying that
the large payouts would increase cheating by much.
(4) Guarantees can be oered to regular customers or as part of a
membership program, because repeat customers are unlikely to
cheat on service guarantees.
52 · Winning in Service Markets
(5) Truly excellent services rms have less to worry about cheating
than the average service provider.
Tracking Down Guests Who Cheat
As part of its guarantee tracking system, Hampton Inn has developed
ways to identify guests who appeared to be cheating, using aliases
or various dissatisfaction problems to invoke the guarantee
repeatedly in order to get the cost of their room refunded. Guests
showing high invocation trends receive personalized attention and
follow-up from the company’s Guest Assistance Team. Wherever
possible, senior managers telephone these guests to ask about their
recent stays. e conversation might go as follows: “Hello, Mr.
Jones. I’m the director of guest assistance at Hampton Inn, and I see
that you’ve had some diculty with the last four properties you’ve
visited. Since we take our guarantee very seriously, I thought I’d
give you a call and nd out what the problems were.
e typical response is dead silence! Sometimes the silence is
followed by questions of how headquarters could possibly know
about their problems. ese calls have their humorous moments
as well. One individual, who had invoked the guarantee 17 times
in what appeared to be a trip that took him across the US and back
was asked, “Where do you like to stay when you travel?” “Hampton
Inn, came the enthusiastic response. “But, said the executive
making the call, “Our records show that the last seventeen times
you have stayed at a Hampton Inn, you have invoked the 100%
Satisfaction Guarantee”. “ats why I like them!” proclaimed the
guest (who turned out to be a long-distance truck driver on a per
diem for his accommodation expenses).
Source: Christopher W. Hart and Elizabeth Long, Extraordinary Guarantees (New York: AMACOM, 1997).
Design Complaint Handling and Service Recovery Strategies · 53
Encouraging customer feedback provides an important means of
increasing customer satisfaction and retention. It is an opportunity to get
into the hearts and minds of the customer. In all but the worst instances,
complaining customers are indicating that they want to continue their
relationship with the rm, but also that all is not well and they expect
the company to make things right. Here, service rms need to develop
eective strategies to recover from service failures so that they can
maintain customer goodwill. at is vital for the long-term success of the
Having professional and generous service recovery systems does
not mean “the customer is always right” and that the rm is open to
customer abuse. Rather, it is important for the benet of all (i.e., other
customers, service employees, and the service rm) to eectively deal
with jaycustomers.
54 · Winning in Service Markets
1. Customer Dissatisfaction
When customers are dissatised, they have several alternatives. ey can
take some form of:
Public action (e.g., complain to the rm, a third party, or even take
legal action).
Private action (e.g., switch to another provider and/or spread
negative word-of-mouth).
Take no action.
2. Recovering from a Service Failure
To eectively recover from a service failure, rms need to understand
customer complaining behavior and motivations and also what customers
expect in response.
Customers typically complain for any combination of the following
four reasons; they want:
– restitution or compensation
– vent their anger
– help to improve the service
– spare other customers from experiencing the same problems (i.e.,
they complain for altruistic reasons).
• In practice, most dissatised customers do not complain as they may
not know where to complain, and nd it takes too much eort and is
unpleasant, and perceive the payos of their eort as uncertain.
e people who are most likely to complain tend to be better
educated, have higher income, are more socially involved, and have
more product knowledge.
Customers are most likely to complain at the point of service
provision (face-to-face and over the phone). Only a small proportion
of complaints is made via other channels such as email, social media,
websites, or letters.
Design Complaint Handling and Service Recovery Strategies · 55
3. e ree Dimensions of Fairness
Once customers make a complaint, they expect rms to deal with them in
a fair manner along three dimensions of fairness:
Procedural fairness — customers expect the rm to have a
convenient, responsive, and exible service recovery process.
• Interactional justice — customers expect an honest explanation, a
genuine eort to solve the problem, and polite treatment.
• Outcome justice — customers expect a compensation that reects
the loss and inconvenience suered as a result of the service failure.
4. e Importance of Service Recovery
Eective service recovery can avoid customer switching and restore
condence in the rm in many cases. When customers complain, they
give the rm a chance to correct problems, restore the relationship with
the complainer, and improve future satisfaction. Service recovery is
therefore an important opportunity to retain a valued customer.
5. e Service Recovery Paradox
e service recovery paradox describes the phenomenon where customers
who experience an excellent service recovery aer a failure feel even more
satised than customers who had no problem in the rst place. However,
it is important to note that this paradox does not always apply. It is still
best to get it right the rst time rather than providing expensive service
re c overy.
6. Eective Service Recovery Systems
Eective service recovery systems should:
• Make it easy for customers to give feedback (e.g., provide hotline
numbers, email addresses, and social media channels on all
communications materials) and encourage them to provide
56 · Winning in Service Markets
Enable eective service recovery by making it
– Proactive
– Pre-planned
– Trained
– Empowered
• Establish appropriate compensation levels. Compensation should be
higher if
– a rm is known for service excellence
– the service failure is serious
– the customer is important to the rm
7. Handling Customer Complaints
e guidelines for frontline employees to eectively handle customer
complaints and service recovery include:
Acting fast
Acknowledging the customer’s feelings
Not arguing with the customer
• Showing that you understand the problem from the customer’s point
of view
Clarifying the truth and sort out the cause
Giving customers the benet of doubt
Proposing the steps needed to solve the problem
Keeping customers informed of progress
Considering compensation
Persevering to regain customer goodwill
Checking the service delivery system and improving it
8. Service Guarantees
Service guarantees are a powerful way to institutionalize professional
complaint handling and service recovery. Service guarantees set clear
standards for the rm, and they also reduce customers’ risk perceptions
and can build long-term loyalty.
Design Complaint Handling and Service Recovery Strategies · 57
9. Designing Service Guarantees
Service guarantees should be designed to be:
• Unconditional
Easy to understand and communicate
Meaningful to the customer
Easy to invoke
Easy to collect on
• Credible
10. Oering Service Guarantees
Not all rms stand to gain from service guarantees. Specically, rms
should be careful in oering service guarantees when:
ey already have a reputation for service excellence
Service quality is too low and has to be improved rst
Aspects of service quality are uncontrollable because of external
factors (e.g., the weather)
Customers perceive low risk when buying the service.
11. Jaycustomers
Not all customers are honest, polite and reasonable. Some may want to take
advantage of service recovery situations, and others may inconvenience
and stress frontline employees and other customers alike. Such customers
are called jaycustomers.
ere are seven groups of jaycustomers:
– the Cheat
– the ief
– the Rule Breaker
– the Belligerent
– the Family Feuders
– the Vandal
– the Deadbeat
58 · Winning in Service Markets
• Dierent types of jaycustomers cause dierent problems for rms
and may spoil the service experience of other customers. Hence,
rms need to manage their behavior, even if that means keeping
track of how oen a customer invokes a service guarantee, or as a
last resort, blacklisting them from using the rm’s facilities.
1 Even failures by other customers also have an impact on how a rm’s customers feel
about the rm, see Wen-Hsien Huang (2010), “Other-Customer Failure: Eects of
Perceived Employee Eort and Compensation on Complainer and Non-Complainer
Service Evaluations,Journal of Service Management, Vol. 21, No. 2, pp. 191–211.
2 Roger Bougie, Rik Pieters, and Marcel Zeelenberg, “Angry Customers Don’t Come
Back, ey Get Back: e Experience and Behavioral Implications of Anger and
Dissatisfaction in Service,Journal of the Academy of Marketing Science, 31, No. 4
(2003): 377–393; Florian v. Wangenheim, “Postswitching Negative Word of Mouth,
Journal of Service Research, 8, No. 1 (2005): 67–78.
3 For research on cognitive and aective drivers of complaining behavior see: Jean-
Charles Chebat, Moshe Davidow, and Isabelle Codjovi, “Silent Voices: Why Some
Dissatised Consumers Fail to Complain,Journal of Service Research, 7, No. 4
(2005): 328–342.
4 Stephen S. Tax and Stephen W. Brown “Recovering and Learning from Service
Failure, Sloan Management Review, 49, No. 1 (Fall 1998): 75–88.
5 A large body of literature has examined consumer complaining behavior. Important
studies include: Jean-Charles Chebat, Moshe Davidow and Isabelle Codjovi, “Silent
Voices: Why Some Dissatised Consumers Fail to Complain,Journal of Service
Research, 7, No. 4 (2005): 328–342; Nancy Stephens and Kevin P. Gwinner, “Why
Don’t Some People Complain? A Cognitive-Emotive Process Model of Consumer
Complaining Behavior,” Journal of the Academy of Marketing Science, 26, No. 3
(1998): 172–189; Kelli Bodey and Debra Grace, “Segmenting Service “Complainers”
and “Non-Complainers” on the Basis of Consumer Characters,Journal of Services
Marketing, 20, No. 3 (2006): 178–187.
6 Cathy Goodwin and B.J. Verhage, “Role Perceptions of Services: A Cross-Cultural
Comparison with Behavioral Implications,Journal of Economic Psychology, 10
(1990): 543–558.
7 Nancy Stephens, “Complaining,” in Handbook of Services Marketing and
Management, Teresa A. Swartz & Dawn Iacobucci (eds.), (California: ousand
Oaks, Sage Publications, 2000), 291; Alex M. Susskind (2015), “Communication
Richness: Why some Guest Complaints Go Right to the Top — and Others Don’t,
Cornell Hospitality Quarterly, Vol. 56, No. 3, pp. 320–331.
8 John Goodman, “Basic Facts on Customer Complaint Behavior and the Impact of
Service on the Bottom Line,Competitive Advantage, June 1999, pp. 1–5.
9 Anna Mattila and Jochen Wirtz, “Consumer Complaining to Firms: e
Determinants of Channel Choice,Journal of Services Marketing, 18, No. 2 (2004):
147–155; Kaisa Snellman and Tiina Vihtkari, “Customer Complaining Behavior in
Technology-based Service Encounters,International Journal of Service Industry
60 · Winning in Service Markets
Management, 14, No. 2 (2003): 217–231; Terri Shapiro and Jennifer Nieman-
Gonder, “Eect of Communication Mode in Justice-Based Service Recovery.
Managing Service Quality, 16, No. 2 (2006): 124–144.
10 Technical Assistance Research Programs Institute (TARP), Consumer Complaint
Handling in America; An Update Study, Part II (Washington DC: TARP and US
Oce of Consumer Aairs, April 1986).
11 omas M. Tripp and Yany Gregoire, “When Unhappy Customers Strike Back
on the Internet,MIT Sloan Management Review, 52, No. 3 (Spring 2011): 37–44;
Sven Tuzovic, “Frequent (Flier) Frustration and the Dark Side of Word-of-Web:
Exploring Online Dysfunctional Behavior in Online Feedback Forums,Journal of
Services Marketing, 24, No. 6 (2010): 446–457.
12 Kathleen Seiders and Leonard L. Berry, “Service Fairness: What it is and Why it
Matters,Academy of Management Executive, 12, No. 2 (1990): 8–20.
For review on complaint handling and customer satisfaction, see Katja Gelbrich
and Holger Roschk, “A Meta-Analysis of Organizational Complaint Handling and
Customer Responses,Journal of Service Research, 14, No. 1 (2011): 24–43.
See also Klaus Schoefer and Adamantios Diamantopoulos (2008), “e Role of
Emotions in Transaction Perceptions of (In)Justice into Postcomplaint Behavioral
Responses,Journal of Service Research, Vol. 11, No. 1, pp. 91–103; Yany Grégoire
and Robert J. Fisher (2008), “Customer Betrayal and Retaliation: When Your Best
Customers Become Your Worst Enemies,Journal of the Academy of Marketing
Science, Vol. 36, No. 2, pp. 247–261; Zheng Fang, Xueming Luo, and Minghua
Jiang (2012), “Quantifying the Dynamic Eects of Service Recovery on Customer
Satisfaction: Evidence from Chinese Mobile Phone Markets, Journal of Service
Research, Vol. 16, No. 3, pp. 341–355; Ana Belén del Río-Lanza, Rodolfo Vázquez-
Casielles, Ana María Díaz-Martín (2009), “Satisfaction with Service Recovery:
Perceived Justice and Emotional Responses”, Journal of Business Research, Vol. 62,
Vol. 8, pp. 775–781.
13 Stephen S. Tax and Stephen W. Brown “Recovering and Learning from Service
Failure, Sloan Management Review, 49, No. 1 (Fall 1998): 75–88;
See also Tor Wallin Andreassen, “Antecedents of Service Recovery,European
Journal of Marketing, 34, No. 1 and 2 (2000): 156–175; Ko de Ruyter and Martin
Wetzel, “Customer Equity Considerations in Service Recovery,International
Journal of Service Industry Management, 13, No. 1 (2002): 91–108; Janet R. McColl-
Kennedy and Beverley A. Sparks, “Application of Fairness eory to Service Failures
and Service Recovery,Journal of Service Research, 5, No. 3 (2003): 251–266;
Jochen Wirtz and Anna Mattila, “Consumer Responses to Compensation, Speed
of Recovery and Apology Aer a Service Failure,International Journal of Service
Industry Management, 15, No. 2 (2004): 150–166.
For a meta-analysis of the eects of fairness on consumer responses, see:
Chiara Orsingher, Sara Valentini, and Matteo de Angelis (2010), “A Meta-Analysis
of Satisfaction with Complaint Handling in Services”, Journal of the Academy of
Marketing Science, Vol. 38, No. 2, pp. 169–186.
Endnotes · 61
14 Oren Harari, “ank Heavens for Complainers,Management Review, (March
1997): 25–29.
15 Tom DeWitt, Doan T. Nguyen, and Roger Marshall, “Exploring Customer Loyalty
Following Service Recovery,Journal of Service Research, Vol. 10, No. 3 (2008): 269–
16 Simon J. Bell and James A. Luddington, “Coping with Customer Complaints.
Journal of Service Research, 8, No. 3 (February 2006): 221–233.
17 Leonard L. Berry, On Great Service: A Framework for Action (New York: e Free
Press, 1995), p. 94.
For a meta-analysis on the customer attribution process and how to eectively
manage customer attributions of service failures see: Yves Van Vaerenbergh,
Chiara Orsingher, Iris Vermeir, and Bart Larivière (2014), “A Meta-Analysis of
Relationships Linking Service Failure Attributions to Customer Outcomes”, Journal
of Service Research, Vol. 17, No. 4, pp. 381–398.
18 Susan M. Keaveney, “Customer Switching Behavior in Service Industries: An
Exploratory Study,” Journal of Marketing, 59 (April 1995): 71–82.
19 Customer Care Measurement & Consulting (CCMC), 2007 National Customer Rage
Study, Customer Care Alliance, 2007.
20 Technical Assistance Research Programs Institute (TARP), Consumer Complaint
Handling in America; An Update Study, Part II (Washington DC: TARP and US
Oce of Consumer Aairs, April 1986). Since this study, CCMC and W. P.
Carey School of Business, Arizona State University (ASU) have conducted six
follow-on studies, known as the “Customer Rage Studies”, to explore important,
emerging trends in the customer experience related to complaining behavior
and service recovery. For highlights of the latest study, “e 2013 Customer Rage
Study”, see
Not addressing a service failure or dissatisfaction with a service recovery eort
has been shown to result in various negative customer responses, including revenge,
rage, and opportunistic behaviors; Yany Grègoire, Daniel Laufer and omas M.
Tripp (2010), “A Comprehensive Model of Customer Direct and Indirect Revenge:
Understanding the Eects of Perceived Greed and Customer Power”, Journal of the
Academy of Marketing Science, Vol. 38, No. 6, pp. 738–758.
21 For a discussion on how to quantify complaint management protability, see: Bernd
Stauss and Andreas Schoeler, “Complaint Management Protability: What do
Complaint Managers Know?” Managing Service Quality, 14, No. 2/3 (2004): 147–
For a comprehensive treatment of all aspects of eective complaint management
see Bernd Stauss and Wolfgang Seidel, Complaint Management: e Heart of CRM
(Mason, Ohio: omson, 2004); and Janelle Barlow and Claus Mǿller, A Complaint
is a Gi. 2nd ed., San Francisco, CA: Berrett-Koehler Publishers, 2008.
62 · Winning in Service Markets
22 Celso Augusto de Matos, Jorge Luiz Henrique, and Carlos Alberto Vargas Rossi,
“Service Recovery Paradox: A Meta-Analysis,Journal of Service Research, Vol. 10,
No. 1 (2007): 60–77; Randi Priluck and Vishal Lala, “e Impact of the Recovery
Paradox on Retailer-Customer Relationships, Managing Service Quality, Vol. 19,
No. 1 (2009): 42–59.
23 Stefan Michel and Matthew L. Meuter, “e Service Recovery Paradox: True but
Overrated?” International Journal of Service Industry Management, Vol. 19, No. 4
(2008): 441–457.
Other studies also conrmed that the service recovery paradox does not hold
universally; Tor Wallin Andreassen, “From Disgust to Delight: Do Customers
Hold a Grudge?” Journal of Service Research, 4, No. 1 (2001): 39–49; Michael A.
McCollough, Leonard L. Berry and Manjit S. Yadav, “An Empirical Investigation
of Customer Satisfaction aer Service Failure and Recovery,Journal of Service
Research, 3, No. 2 (2000): 121–137; James G. Maxhamm III, “Service Recovery’s
Inuence on Consumer Satisfaction, Positive Word-of-Mouth, and Purchase
Intentions,Journal of Business Research, 54 (2001): 11–24; Chihyung Ok, Ki-Joon
Back and Carol W. Shankin, “Mixed Findings on the Service Recovery Paradox,e
Service Industries Journal, Vol. 27, No. 5 (2007): 671–686.
24 James G. Maxham III and Richard G. Netemeyer, “A Longitudinal Study of
Complaining Customers’ Evaluations of Multiple Service Failures and Recovery
Eorts,Journal of Marketing, 66, No. 4 (2002): 57–72.
25 Michael Hargrove, cited in Ron Kaufman, UP! Your Service (Singapore: Ron
Kaufman Plc. Ltd., 2005): 225.
26 Steven S. Tax and Steven W. Brown (1998), “Recovering and Learning from
Service Failure”, Sloan Management Review, Vol. 40, No. 1, pp. 75–88; Stephen S.
Tax, Stephen W. Brown, and Murali Chandrashekaran, “Customer Evaluation of
Service Complaint Experiences: Implications for Relationship Marketing,Journal
of Marketing, 62, No. 2 (Spring 1998): 60–76.
For a study in the online environment, see: Betsy B. Holloway and Sharon E.
Beatty, “Service Failure in Online Retailing: A Recovery Opportunity,Journal of
Service Research, 6, No. 1 (2003): 92–105.
27 For a discussion on how to quantify complaint management protability see: Bernd
Stauss and Andreas Schoeler, “Complaint Management Protability: What do
Complaint Managers Know?” Managing Service Quality, 14, No. 2/3 (2004): 147–
For a comprehensive treatment of all aspects of eective complaint management,
see Bernd Stauss and Wolfgang Seidel, Complaint Management: e Heart of CRM
(Mason, Ohio: omson, 2004); and Janelle Barlow and Claus Mǿller, A Complaint
is a Gi. 2nd ed., San Francisco, CA: Berrett-Koehler Publishers, 2008.
28 Christian Homburg and Andreas Fürst, “How Organizational Complaint Handling
Drives Customer Loyalty: An Analysis of the Mechanistic and the Organic
Approach,Journal of Marketing, 69, (July 2005): 95–114.
Endnotes · 63
29 Ron Zemke and Chip R. Bell, Knock Your Socks O Service Recovery, (New York:
AMACOM, 2000), p. 60.
30 Barbara R. Lewis, “Customer Care in Services,” in Understanding Services
Management, eds. W.J. Glynn and J.G. Barnes (UK: Chichester, Wiley 1995), pp.
Prior rapport between employees and customers has also been shown to
improve service recovery satisfaction, see: Tom DeWitt and Michael K. Brady,
“Rethinking Service Recovery Strategies: e Eect of Rapport on Customer
Responses to Service Failure,Journal of Service Research, 6, No. 2 (2003): 193–207.
31 Josh Berno and Ted Schadler, “Empowered,Harvard Business Rev iew, July–August
(2010): 95–101.
32 e incremental impact of increasing compensation depends on whether customer
accept the value proposition of the service delivered (i.e., the service provided value-
in-use to the customer). If not, high levels of compensation are required to achieve
post-complaint satisfaction; see: Katja Gelbrich, Jana Gäthke and Yany Grégoire
(2015), “How Much Compensation Should a Firm Oer for a Flawed Service? An
Examination of the Nonlinear Eects of Compensation on Satisfaction, Journal of
Service Research, Vol. 18, No. 1, pp. 107–123.
33 Rhonda Mack, Rene Mueller, John Crotts, and Amanda Broderick, “Perceptions,
Corrections and Defections: Implications for Service Recovery in the Restaurant
I n du st ry,” Managing Service Quality, 10, No. 6 (2000): 339–46.
34 Jochen Wirtz and Janet R. McColl-Kennedy, “Opportunistic Customer Claiming
During Service Recovery,Journal of the Academy of Marketing Science, 38, No. 5
(2010): 654–675.
35 Matthew Dixon, Karen Freeman and Nicholas Toman (2010), “Stop Trying to
Delight Your Customers: To Really Win their Loyalty, forget the bells and whistles
and just solve their problems”, Harvard Business Review, Vol. 88, No. 7/8, pp. 116–
36 A comprehensive assessment tool of service recovery performance comprises of the
following nine dimensions: (1) Apology, (2) Compensation, (3) Explanation, (4)
Follow-up, (5) Facilitation, (6) Speed of Response, (7) Courtesy, (8) Eort, and (9)
Problem-solving. e tool is called CURE scale (CUstomer REcovery scale), which
organizations can use to identify the impact of these service recovery actions on
customer responses; see: Rania Mostafa, Cristiana R. Lages, and Maria Sääksjärvi
(2014), “e CURE Scale: A Multidimensional Measure of Service Recovery
Strategy”, Journal of Services Marketing, Vol. 28, No. 4, pp. 300–310.
37 For an excellent review of extant academic literature on service guarantees see: Jens
Hogreve and Dwayne D. Gremler, “Twenty Years of Service Guarantee Research,
Journal of Service Research, Vol. 11, No. 4 (2009): 322–343.
64 · Winning in Service Markets
38 Christopher W. L Hart, “e Power of Unconditional Service Guarantees,Harvard
Business Review, (July–August 1988), pp. 54–62.
39 L.A. Tucci and J. Talaga, “Service guarantees and consumers’ evaluation of services.
Journal of Services Marketing, 11, No. 1 (1997), 10–18; Amy Ostrom and Dawn
Iacobucci, “e Eect of Guarantees on Consumers’ Evaluation of Services,Journal
of Services Marketing, 12, No. 5 (1998), pp. 362–78.
40 Sara Bjőrlin Lidén and Per Skålén, “e Eect of Service Guarantees on Service
R e co v er y,” International Journal of Service Industry Management, 14, No. 1, (2003),
pp. 36–58.
41 Christopher W. Hart and Elizabeth Long, Extraordinary Guarantees, (New York:
AMACOM, 1997).
42 Christopher W. Hart, “e Power of Unconditional Service Guarantees.
43 For a scientic discussion on the optimal guarantee payout amount, see: Tim
Baker and David A. Collier, “e Economic Payout Model for Service Guarantees,
Decision Sciences, 36, No. 2 (2005): 197–220).
44 McDougall, Gordon H., Terence Levesque and Peter VanderPlaat, “Designing the
Service Guarantee: Unconditional or Specic?” Journal of Services Marketing, 12,
No. 4 (1998): 278–293; Jochen Wirtz, “Development of a Service Guarantee Model,
Asia Pacic Journal of Management, 15, No. 1 (1998): 51–75.
45 Jochen Wirtz and Doreen Kum, “Designing Service Guarantees — Is Full Satisfaction
the Best You can Guarantee?” Journal of Services Marketing, 15, No. 4 (2001): 282–
46 Amy L. Ostrom and Christopher Hart, “Service Guarantee: Research and Practice,
in Handbook of Services Marketing and Management, ed. T. Schwartz and D.
Iacobucci (California: ousand Oaks, Sage Publications, 2000), pp. 299–316.
47 Jochen Wirtz, Doreen Kum and Khai Sheang Lee (2000), “Should a Firm with a
Reputation for Outstanding Service Quality Oer a Service Guarantee?” Journal of
Services Marketing, Vol. 14, No. 6, pp. 502–512.
For the impact of implicit service guarantees on business performance see:
Hyunju Shin and Alexander E. Ellinger (2013), “e Eect of Implicit Service
Guarantees on Business Performance, Journal of Services Marketing, Vol. 27,
No. 6, pp. 431–442.
48 For a decision support model and whether to have a service guarantee, and if yes, on
how to design and implement it, see: Louis Fabien, “Design and Implementation of
a Service Guarantee,Journal of Services Marketing, 19, No. 1 (2005): 33–38.
49 A large body of literature has examined the behavior of jaycustomers. Important
studies include: Ray Fisk, Stephen Grove, Lloyd C. Harris, Kate L. Daunt, Dominique
Endnotes · 65
Keee, Rebekah Russell-Bennett and Jochen Wirtz, “Customers Behaving Badly:
A State of the Art Review, Research Agenda and Implications for Practitioners,
Journal of Services Marketing, 24, No. 6 (2010): 417–429; Lloyd C. Harris and Kate
L. Reynolds, “Jaycustomer Behavior: An Exploration of Types and Motives in the
Hospitality Industry, Journal of Services Marketing, 18, No. 5 (2004): 339–357; Kate
L. Reynolds and Lloyd C. Harris, “Dysfunctional Customer Behavior Severity: An
Empirical Examination,Journal of Retailing, 85, No. 3 (2009): 321–335; Kate L.
Daunt and Harris C. Lloyd, “Customers Acting Badly: Evidence from the Hospitality
I n du st ry,” Journal of Business Research, 64, No. 10 (2011): 1034–1042.
50 is section is adapted and updated from Christopher Lovelock, Product Plus. New
York: McGraw-Hill, 1994, Chap. 15. For an additional discussion of jaycustomers,
see Leonard L. Berry and Kathleen Seiders (2008), “Serving Unfair Customers”,
Business Horizons, Vol. 51, No. 1, pp. 29–37.
51 ere is a large literature on opportunistic customer behavior. Important studies
include: Harris, Lloyd C. and Kate L. Reynolds (2003), “e Consequences of
Dysfunctional Customer Behavior”, Journal of Service Research, 6(2), 144–161;
Jochen Wirtz and Janet R. McColl-Kennedy (2010), “Opportunistic Customer
Claiming During Service Recovery,Journal of the Academy of Marketing Science,
Vol. 38, No. 5, 654–675; Chu Wujin, Eitan Gerstner and James D. Hess (1998),
“Managing Dissatisfaction: How to Decrease Customer Opportunism by Partial
Refunds,Journal of Service Research, Vol. 1, No. 2, pp. 140–155.
Important research exploring opportunism in the B2B context includes:
Steven H. Seggie, David A. Grith, and Sandy D. Jap (2013), “Passive and Active
Opportunism in Interorganizational Exchange, Journal of Marketing, Vol. 77, No. 6,
pp. 73–90; Qiong Wang, Julie Juan Li, William T. Ross Jr., Christopher W. Craighead
(2013), “e Interplay of Drivers and Deterrents of Opportunism in Buyer-
Supplier Relationships”, Journal of the Academy of Marketing Science, Vol. 41, No. 1,
pp. 111–131. Lloyd C. Harris, “Fraudulent Return Proclivity: An Empirical
Analysis, Journal of Retailing, 84, No. 4, (2008): 461–476. Some customers are out
to take full advantage of return policies.
52 e Economist (2013), “Online Retailing, Return to Santa: E-commerce Firms have a
Hard Core of Costly, Impossible-to-please Customers”, 21 December 2013, p. 103.
53 Kate L. Reynolds and Lloyd C. Harris (2005), “When Service Failure is Not Service
Failure: An Exploration of the Forms and Motives of “Illegitimate” Customer
Complaining,Journal of Services Marketing, Vol. 19, No. 5, p. 326.
54 Harris, Lloyd C. and Kate L. Reynolds (2004), “Jaycustomer Behavior: An
Exploration of Types and Motives in the Hospitality Industry”, Journal of Services
Marketing, Vol. 18, No. 5, p. 339.
55 Stephen J. Grove, Raymond P. Fisk, and Joby John, “Surviving in the Age of Rage,
Marketing Management, March/April 2004, pp. 41–46.
66 · Winning in Service Markets
56 Roger Bougie, Rik Pieters, and Marcel Zeelenberg, Angry Customers Don’t Come
Back, ey Get Back: e Experience and Behavioral Implications of Anger and
Dissatisfaction in Services,Journal of the Academy of Marketing Science, 31, No. 4,
2003: 377–393.
Further important studies on customer rage include: Jiraporn
Surachartkumtonkun, Paul G. Patternson, and Janet R. McColl-Kennedy (2013),
“Customer Rage Back-Story: Linking Needs-Based Cognitive Appraisal to Service
Failure Type”, Journal of Retailing, Vol. 89, No. 1, pp. 72–87; omas M. Tripp and
Yany Grégoire (2011), “When Unhappy Customers Strike Back on the Internet”,
Sloan Management Review, Vol. 52, No. 3, pp. 1–10; Stephen J. Grove, Gregory M.
Pickett, Scott A. Jones, and Michael J. Dorsch (2012), “Spectator Rage as the Dark
Side of Engaging Sport Fans: Implications for Service Marketers”, Journal of Service
Research, Vol. 15, No. 1, pp. 3–20.
57 Blair J. Berkley and Mohammad Ala, “Identifying and Controlling reatening
Airline Passengers, Cornell Hotel and Restaurant Administration Quarterly, 42,
August–September 2001: 6–24.
58 Lloyd C. Harris and Kate L. Reynolds, “e Consequences of Dysfunctional
Customer Behavior,Journal of Service Research, 6, November 2003: 144–161; Lloyd
C. Harris and Kate L. Reynolds, “Jaycustomer Behavior: An Exploration of Types
and Motives in the Hospitality Industry,Journal of Services Marketing, 18, No. 5,
2004: 339–357.
59 Recent research has explored how rms can help their frontline employees to deal
with the job stress related to illegitimate and unreasonable dysfunctional customer
behavior: Taeshik Gong, Youjae Yi, and Jin Nam Choi (2014), “Helping Employees
Deal with Dysfunctional Customers: Employee Perceived Justice Mechanism,
Journal of Service Research, Vol. 17, No. 1, pp. 102–116.
60 John Goodman, quoted in “Improving Service Doesn’t Always Require Big
I n v es t me nt ,” e Service Edge, (July–August, 1990): 3.
61 Jill Grin, “What Your Worst Customers Teach You About Loyalty,” 24 January
2006,n5.asp; accessed on 22 August 2016.
62 Jochen Wirtz and Doreen Kum, “Consumer Cheating on Service Guarantees,
Journal of the Academy of Marketing Science; 32, No. 2. (2004): 159–175; Jochen
Wirtz and Janet R. McColl-Kennedy, “Opportunistic Customer Claiming During
Service Recovery,Journal of the Academy of Marketing Science, 38, No. 5, (2010):
654–675; Heejung Ro and June Wong (2012), “Customer Opportunistic Complaints
Management: A Critical Incident Approach,International Journal of Hospitality
Management, Vol. 31, No. 2, pp. 419–427.
For additional research on how to manage opportunistic customers and
jaycustomers, see: Lloyd C. Harris and Kate Daunt (2013), “Managing Customer
Misbehavior: Challenges and Strategies, Journal of Services Marketing, Vol. 27, No.
4, pp. 281–293.
Jochen Wirtz is Professor of Marketing and Vice Dean,
Graduate Studies, at the National University of Singapore
(NUS), and an international fellow of the Service Research
Center at Karlstad University, Sweden. Furthermore, he is the
founding director of the dual degree UCLA–NUS Executive
MBA Program (ranked globally #6 in the Financial Times
2016 EMBA rankings) and international fellow of the Service
Research Center at Karlstad University, Sweden, and Academic Scholar at the
Cornell Institute for Healthy Futures (CIHF) at Cornell University, USA. Dr.
Wirtz holds a PhD in services marketing from the London Business School and
has worked in the eld of services for over 25 years.
Professor Wirtz’s research focuses on service marketing and has been
published in over 200 academic articles, book chapters and industry reports. He
is an author or co-author of more than 10 books, including Services Marketing —
People, Technology, Strategy (8th edition) (World Scientic, 2016), co-authored with
Professor Lovelock, which has become one of the world’s leading services marketing
text book that has been translated and adapted for more than 26 countries and
regions, and with sales of some 800,000 copies.
In recognition of his excellence in teaching and research, Professor Wirtz has
received more than 40 awards, including the prestigious Academy of Marketing
Science (AMS) 2012 Outstanding Marketing Teacher Award (the highest
recognition of teaching excellence of AMS globally), and the top university-level
Outstanding Educator Award at NUS. He was also the winner of the inaugural
Outstanding Service Researcher Award 2010, and the Best Practical Implications
Award 2009, both by Emerald Group Publications.
Professor Wirtz was a banker and took the banking exam at Chamber of
Commerce and Industry in Munich. He has since been an active management
consultant, working with international consulting rms including Accenture,
Arthur D. Little and KPMG, and major service rms in the areas of strategy,
business development and customer feedback systems. He has also been involved
in several start-ups including in Accellion (, Angeloop
(, TranscribeMe (, and Up! Your
Service (
Originally from Germany, Professor Wirtz spent seven years in London
before moving to Asia. Today, he shuttles between Asia, the US and Europe. For
further information, see
First, I would like to thank my mentor, friend and co-author Professor
Christopher Lovelock. Since rst meeting in 1992, he has become a dear friend
who has had signicant inuence on my thinking and development. We have
worked together on a variety of projects, including cases, articles, conference
papers, and several books. Winning in Service Markets is, in fact, derived from
our best-selling textbook, Services Marketing: People, Technology, Strategy, 8th
edition. I am eternally grateful to Christopher for his friendship and support.
Although it’s impossible to mention everyone who has contributed in some
way to this book through their research, their contributions and discussions
at the many academic conferences where we have met, as collaborators on
various research projects, and as friends who have always been ready to
discuss, criticize, and provide feedback and suggestions. I particularly want to
express my appreciation to the following: Tor Andreassen, Norwegian School
of Management; John Bateson of Cass Business School; Leonard Berry of
Texas A&M University; David Bowen of underbird Graduate School of
Management; Richard Chase of the University of Southern California; Jayanta
Chatterjee of Indian Institute of Technology at Kanpur, India; James Heskett,
Earl Sasser and Leonard Schlesinger, all of Harvard Business School; Bo
Edvardsson of University of Karlstad; Pierre Eiglier of Université d’Aix-Marseille
III; Michael Ehret of Nottingham Trent University; Raymond Fisk of the Texas
State University; Christian Grönroos of the Swedish School of Economics in
Finland; Miguel Angelo Hemzo, Universidade de São Paulo, Brazil; Irene Ng of
University of Warwick; Jay Kandampully of Ohio State University; Ron Kaufman
of UP! Your Service; Sheryl Kimes of Cornell University; Tim Keiningham of
Rockbridge Associate; Jos Lemmink of Maastricht University; Xiongwen Lu of
Fudan University, China; Paul Maglio of University of California, Merced, USA;
Anna Mattila of Pennsylvania State University; Ulrich Orth of Kiel University;
Chiara Orsingher of University of Bologna; A. “Parsu” Parasuraman of University
of Miami; Paul Patterson of the University of New South Wales, Australia; Anat
Rafaeli of Technion-Israeli Institute of Technology, Roland Rust of the University
of Maryland; Benjamin Schneider formerly of the University of Maryland; Jim
Spohrer of IBM; Javier Reynoso of Tec de Monterrey, Mexico; Christopher Tang
of UCLA; Rodoula Tsiotsou of University of Macedonia; and Valarie Zeithaml of
the University of North Carolina.
Finally, Id like to thank you, the reader of this book, for your interest in
this exciting and fast-evolving eld of services management and marketing. If
you have any feedback, please contact me via www. I’d love to
hear from you!
Suitable for:
Polytechnic Students
Undergraduate Students
Services Marketing is available for various audiences:
Services Marketing Series
The content in terms of core theory, models and frameworks is largely the same
across these publications. However, they are presented and designed to fit their
particular target audiences.
Services Marketing is available in some 26 languages and adaptations for key
markets around the world.
Essentials of
Services Marketing
Winning in Service Markets:
Success Through People,
Technology Strategy
Services Marketing:
People, Technology, Strategy
Suitable for:
Advanced Undergraduate Students
Master’s-Level/MBA Students
Suitable for:
Executive Program/EMBA Participants
Practitioners/Senior Management
Available in the following formats:
• Paperback
• E-book
Available in the following formats:
• Hardcover
• Paperback
• E-book
Bundle of Paperback & E-book
Rental 6 months
Available in the following formats:
• Hardcover
• Paperback
• E-book
Bundle of Paperback & E-book
Winning in Service Markets Series
Key chapters of Winning in Service
Markets are available as stand-alone
publications in e-book and paperback:
Vol. 1: Understanding Service
Vol. 2: Positioning Services in
Competitive Markets
Vol. 3: Developing Service Products
& Brands
Vol. 4: Pricing Services & Revenue
Vol. 5: Service Marketing
Vol. 6: Designing Customer Service
Vol. 7: Balancing Demand & Capacity
in Service Operations
Vol. 8: Crafting the Service
Vol. 9: Managing People for Service
Vol. 10: Managing Customer
Relationships & Building
Vol. 11: Designing Complaint Handling
& Service Recovery
Vol. 12: Service Quality & Productivity
Vol. 13: Building a World Class
Service Organization
(Assessment Tool)
For orders of individual copies, course adoptions, bulk purchases:
For orders for individual chapters, customized course packs:
For adaptions or translation rights, permissions to reprint:
For further information see:
For questions regarding contents: Jochen Wirtz,
Published by Pearson Education
SM8_Endlims_10042015_maha.indd 784 11/3/16 9:09 am
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Master Class Video:
Building Customer Loyalty
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    
  
... It strengthens an organisation's culture of service excellence and elevates individual and team responsibility to perform services at a high-quality level. Improving services quality reduces the consumers' risk perception, enhancing the trust in the relationship between them and companies, which positively affect their satisfaction and loyalty in the long run (Walk, 2018;Wirtz, 2018;Crisafulli and Singh, 2016). ...
... Another essential characteristic of a good SG is to be meaningful (Berry, 2019;Wirtz, 2018;Van Vaerenbergh et al., 2014). Consumers expect to be rewarded significantly in the event of dissatisfaction, loss of time or inconvenience (Chen and Chen, 2017). ...
... Consumers expect to be rewarded significantly in the event of dissatisfaction, loss of time or inconvenience (Chen and Chen, 2017). According to Wirtz (2018), an excellent SG is meaningful when attending to two aspects: (1) ensuring that companies will effectively deliver the attributes of services considered essential by customers (e.g. fast delivery, fast check-in or check-out) and (2) be financially significant to customers when the company does not provide the service as contracted (e.g. ...
Purpose Companies' relationship with their customers through e-commerce platforms has increased considerably in the past few years, bringing new challenges concerning service guarantees (SG). This study aims to propose a framework of the relations between customers' expectations on SG, their negative experiences and their attitudes and behavioural intentions towards an e-commerce platform. Design/methodology/approach The research had a qualitative and descriptive approach. Testimonials from clients of an online e-commerce platform were obtained through interviews via videoconference and non-participant observation on a complaints website in Brazil. The testimonies were analysed through content analysis. Findings The customer expectations regarding the SG offered by the e-commerce platform are congruent with the five categories of the theory that support this research. Customer testimonials on the complaints site show that their negative experiences with the e-commerce platform generated negative emotional, cognitive and behavioural responses towards the company. A framework was proposed, including customers' expectations regarding SG, their negative experiences and their repercussions on clients' attitudes and behavioural intentions. Originality/value This article is the only that contemplates customers' expectations about SG in an e-commerce platform, relating them to attitudes and behavioural intentions. Thus, its framework demonstrates the relationships between customer expectations about SGs, their negative experiences and attitudinal and behavioural repercussions. This article brings academic and managerial contributions for companies and managers of e-commerce platforms. It contributes to clients and consumer protection associations by revealing problems they face with SG on e-commerce platforms. This research can be used by those responsible for elaborating laws and public policies to regulate and inspect the relationships between e-commerce platforms and their customers.
Full-text available
With civility on a seemingly downward path, customer rage has become a common problem for many service organizations. This article discusses "the four Ts of customer rage," which include the targets of customer rage behavior, the influence of temperament on customers expressing rage, the triggers that spark customers' rage, and the treatments for preventing or managing customer rage. In this environment, smart service managers are doing all they can to improve the service environment for their customers.
Full-text available
Despite everyone’s best efforts, restaurant service falls short at times. In those situations, guests perceive a service failure, and many complain. This study of 513 guests in three U.S. markets examines the guest characteristics that seem to drive the channel used for those complaints. Using a framework of media richness theory, the study found that guests who are more educated, more likely to complain, more frustrated, and in need of greater information about the service failure will typically take their complaint directly to management, either face-to-face or via written communication. On the other hand, those who are less educated or less frustrated will instead complain to line staff or use corporate guest-comment cards. Some of these findings appear not to support media richness theory, as face-to-face complaints are the richest channel (whether to line staff or management). However, it appears that for this sample of restaurant guests, the idea of taking it to the top (both in person or in writing) is important, particularly for frustrated, educated guests. Keywords: food and food service; operations; multi-unit restaurant management; complaint communication, customer satisfaction;Media Richness Theory.
Full-text available
Customer rage is a complex phenomenon that is beginning to receive attention from researchers and practitioners. To date, research into the phenomenon has focused exclusively on its occurrence within a failed service context; however, rage may also occur in nonfailure situations as a negative by-product of an organization’s efforts to engage the customer at an emotional level. As a service entity, the live sporting event is characterized by a number of features which make it particularly susceptible to acts of rage. This article examines rage within the context of spectator sport by utilizing a framework that is capable of organizing and focusing attention upon those factors that shape a fan’s consumption experience and render spectator sport, and services in general, susceptible to rage. Services marketers may be unable to eliminate all incidents of spectator rage, especially those that arise when a customer becomes excessively and emotionally absorbed with the service encounter. Nevertheless, fans’ propensity to rage may be reduced by understanding the factors that contribute to it and by carefully designing servicescapes and vigilantly managing customer interactions to generate exhilarating, yet nonaggressive, customer experiences.
Many companies consider investments in complaint handling as means of increasing customer commitment and building customer loyalty. Firms are not well informed, however, on how to deal successfully with service failures or the impact of complaint handling strategies. In this study, the authors find that a majority of complaining customers were dissatisfied with recent complaint handling experiences. Using justice theory, the authors also demonstrate that customers evaluate complaint incidents in terms of the outcomes they receive, the procedures used to arrive at the outcomes, and the nature of the interpersonal treatment during the process. In turn, the authors develop and test competing hypotheses regarding the interplay between satisfaction with complaint handling and prior experience in shaping customer trust and commitment. The results support a quasi “brand equity” perspective—whereas satisfaction with complaint handling has a direct impact on trust and commitment, prior positive experiences mitigate, to a limited extent, the effects of poor complaint handling. Implications for managers and scholars are discussed.
This article examines how firms in interorganizational relationships respond differently to active and passive opportunism and observes how these opportunism forms erode satisfaction with the performance of these relationships. The multimethod approach of two experiments and one longitudinal field study demonstrate that firms tolerate more passive opportunism than active opportunism (Study 1) and that transaction costs play a mediating role between opportunism form and satisfaction with performance of the relationship (Study 2). Finally, the field study reveals that, over time, passive opportunism has a more corrosive impact on satisfaction with performance than active opportunism (Study 3). Together, the findings underscore the importance of distinguishing passive and active opportunism and the need to develop a better understanding of its management and consequences.
Several recent publications (including this one) have started off discussions of why customer service and quality are important by recounting basic facts describing customer behavior and the impact of service on market actions such as repurchase and word of mouth. Normally, the attribution for these facts is, "Research has shown." A number of these basic facts are based upon research originally conducted by TARP in the 1970s. TARP has since replicated the research in almost every industry and 20 countries, and has found the basic fact to still hold, even in the late 1990s. Unfortunately, the basic source is often lost and worse, the facts have often been garbled or confused. Finally, data and facts have been attributed to TARP that are outright wrong! The following is the Truth According To TARP (or should I say The World According to TARP!) 1 First published in Competitive Advantage, June 1999, pp. 1-5. 2 John Goodman is president of e-Satisfy and was formerly President of TARP. E-Satisfy can be reached at 1300 Wilson Boulevard, Suite 950, Arlington, VA 22209; 703-524-1456;
Although noncomplaining dissatisfied consumers represent a vast majority of the dissatisfied consumers, they have not yet received adequate attention from marketing researchers. To understand the paradoxical combination of dissatisfaction and absence of complaint, the authors use the Lazarus cognitive-emotive model of coping with situational challenge. They added a moderator, the Seeking Redress Propensity (SRP) to this model and then developed a theoretical model and a set of hypotheses. A sample of consumers who had experienced a negative incident with the bank were administered a questionnaire by telephone. The sample was designed in such a way that half of them had complained and half had not. It was found that SRP is a significant moderator. In addition, SRP is shown to be strongly related to the likelihood of complaining. Lazarus’s model is basically supported, mostly for the customers scoring higher on SRP. Theoretical and managerial implications are proposed.
Previous research emphasizes the benefits of generous refunds as part of overall complaint management service policy, yet recent empirical evidence suggests that many retailers have concerns about abusive returns and hesitate to fully compensate dissatisfied customers. We present an analysis of three refund policies-no questions asked, no refunds, and verifiable problems only-and show that no questions asked is the most efficient way to handle consumer opportunism.