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In my experience most organisations do not understand the subject of Service Recovery. And even amongst those that do, there are very few that do anything worthwhile about it. That's obviously great news for those few organisations that do practice Service Recovery well. I would expect it provides them with a powerful source of competitive advantage and helps then build strong customer loyalty. But I think many more organisations should do something about this fantastic loyalty building technique so I hope this paper will help make that happen.

Before I go into any explanation of what Service Recovery is and how it works it will probably help if I explain a bit about the Science behind it. Daniel Kahneman, the Nobel Prize winning psychologist, tells us that we don't make decisions about future behaviours (customer loyalty is a future behaviour) based on the actual experiences we have; we make those decisions based on our memories of those experiences - which are rarely the same as the actual experience. So what matters most when we are trying to build customer loyalty are not the actual experiences customers have but the memories they keep of them. (There's more about this in my paper Make it Memorable)

Daniel Kahneman also tells us that there are three things most likely to create strong, lasting, decision influencing memories are -

Changes- these are unexpected things that happen differently to how we expected them to. To put this into simple, loyalty building language, because we want them to be positively different (better), I call them Pleasant Surprises.

Significant Events- these are moments that are memorable because they trigger strong sensations within us. To put this into simple, loyalty building language, because we want anyone in the organisation to understand them, I call them Magical Moments.

Endings- a strong ending to an experience can become the only memorable part of the whole experience and will often override everything else that happened. So to put this too into simple, loyalty building language, as it is the ending to any experience, I call this a Last(ing) Impression.

Research has shown that Service Recovery is one of the most memorable experiences a customer can have, and that it is a very powerful loyalty builder. My own experience of asking people over the years to give me examples of what they view as great service experiences backs this up because most of the examples I am given are not of great service but of great service recovery. The Science from Daniel Kahneman explains why this is so because a good service recovery should hit all three of the memory making hot spots. It should be a pleasant surprise, it should create a magical moment and it should have a strong positive ending. So the science is solid; now lets look at how we do this in practice.

Service Recovery begins when something happens to cause a customer to be unhappy. It could be poor service, a late delivery, a faulty product, a wrong invoice, or anything else that might disappoint, inconvenience, irritate or upset a customer. Many organisations (or maybe just some of their employees) would view this as a part of the job that they most hate doing and they then behave accordingly. But smart organisations, and their employees, realise that these events create opportunities to show customers what a great organisation they are and just how much they value the customer's business and on-going loyalty. They too therefore behave accordingly; but of course their behaviour is very different to the others.

So what would be the typical behaviour of these smart organisations? In most cases it would take the form of the following five stages.

1. Make it easy for the customer to report the issue– let customers know that you want there feedback in any form they wish to provide it.

2. Listen very carefully to understand the issue– make sure all people that are likely to receive customer feed back, from compliments to complaints, are of the right character type for this work and are well trained in the right ways to behave.

3. Acknowledge the problem and agree the appropriate solution– let the customer know that you understand why this is a problem for them and agree with them what is the appropriate action you should take.

4. Fix the problem in the agreed manner– do whatever you have agreed to do for the customer and keep them fully informed of all progress or problems along the way.

5. Add an unexpected WOW– after doing what was agreed, add something else that the customer was not expecting you to do that they will both value and remember.

A very important point to note here is that no worthwhile recovery will have taken place until stage five is completed. Up to that point all that happens is that a problem is reported and then removed. That's good, but if we go back to the Science, up to that point the strongest and therefore overriding memory will have been the occurrence of the problem and the disappointment, irritation, inconvenience or upset it caused - its mere removal later will not have erased that memory. But if that is then followed by an unexpected WOW, so long as it is appropriate and done well, that will replace the negative memory with an even stronger, positive one.

Another important point is that good Service Recovery does not need you to "splash the cash". Its power has more to do with what you do and how you do it than how much you spend. Two simple rules are –

1. The more personal it is the more powerful it is.

2. You can't buy loyalty, you must earn it.

This means that having a list of things like chocolates, wine, book tokens, flowers, etc., that your colleagues may use when faced with finding a WOW to end a Service Recovery challenge may not be a bad idea, but its unlikely to be a good to great one. The best ideas only come from thinking about what that particular customer would most value and then doing or providing that. This of course means that the front line people, that should know most about the customers and are most likely to be presented with Service Recovery challenges, are the best people to decide what should be done and they should be empowered, resourced and trusted to do it. It also means that they must have the understanding and full support of their colleagues when they are engaged in any Service Recovery exercise.

The American service research specialists Technical Assistance Research Programmes (known as TARP) provide another bit of Science. They have done extensive research into the relative loyalty building power of different customer experiences and their memories of them and their latest findings indicate the following.

Imagine there was such a thing as a customer loyalty account, (something like a bank account but where a customer kept account of their ever changing loyalty towards their different suppliers). If it could be added to or subtracted from via what we'll call loyalty points, then the relative impact of different experiences would be -

Every positive WOW experience would add 1 loyalty point

Every negative OUCH experience would subtract 3 loyalty points

Every Service Recovery experience would add 6 loyalty points

So whichever way you look at, it Service Recovery is the most powerful loyalty builder there is. I therefore suggest you make sure that everyone in your organisation understands this and are educated, encouraged and empowered to always behave the right way when faced with any Service Recovery challenge.

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