Service Recovery 101: What is it, why you Need it & Strategies

Could you afford to lose half of your customers?

Because that’s what poor customer service costs you. Around 50% of customers will leave for another brand after just one bad experience.

Of course, problems will crop up no matter how much you’ve worked on continually improving your customer experience and customer service. They’re inevitable.

With these problems, however big or small, come customer complaints and unhappy customers.

For many businesses, customer complaints are just accepted as part of doing business. After all, you can’t please everyone.

But how much is this really costing them? Just that one customer or more?

The reality is, the average customer will tell 15 people about a negative experience. If it’s a particularly negative experience, you can bet in today’s internet driven world, they’ll also be posting bad reviews on Google, social media and more as well.

All this to say, the price of just one unhappy customer might be higher than you thought. But there is an alternative and it comes in the form of service recovery.

Service recovery deals with customer complaints effectively to create more loyal, profitable customers. In a sense, it looks at unhappy customers as an opportunity — something all businesses should be doing.

We’re here to guide you through it. We’ll be covering:

1. What is service recovery?

2. The service recovery paradox

3. Why service recovery is important

4. When do you need service recovery?

5. Service recovery examples

6. Tips for an effective service recovery process

7. 4 step service recovery strategy
   

What is service recovery?

Think about your typical complaint. How does your business handle it?

Do you do everything you can to resolve the issue with the customer or do you direct your customer service advisors to follow inflexible guidelines for every complaint?

Many businesses opt for the latter and it doesn’t work. They lose out on potential customer lifetime value as well as valuable word of mouth marketing.

The reality is a customer complaint will almost always highlight a problem with your business. It could be with your customer journey, your product or your staff. Whatever it is, it’s valuable to take the time to listen and – even more importantly – rectify the issue.

Why?

Because of service recovery. At its most basic level we can define service recovery as:

“The act of reaching out to customers with a negative customer experience in order to rectify the situation.”

It’s a pretty simple idea and many companies are already doing it without this label. But we know companies need to be actively working on service recovery with a clear process and strategy for the best results. But why?

Because of the service recovery paradox.

The service recovery paradox

The service recovery paradox is the theory that states customers who have a negative experience, but receive a prompt resolution, will be more loyal customers than those who had a straight-forward positive experience.

It sounds like one of those wildly untrue urban legends. But it’s been proven true time and time again.

The logic behind it is this: a bad customer experience gives businesses the opportunity to prove to a customer how much they value them.

Meanwhile customers who have a typical experience with a company have never been shown how much they’re valued so their loyalty will be less. Unless your customer experience is truly outstanding, they could get the same typical customer experience anywhere.

If we consider the service recovery paradox, then our unhappy customers aren’t just a cost of doing business. They’re a huge opportunity.

Why is service recovery important?

Even if we take the service recovery paradox out of the equation, service recovery is an incredibly important aspect all businesses need to be reviewing, analysing and measuring.

This is because modern consumers have higher expectations for customer service. The reality is, without a service recovery strategy, you won’t keep up with these expectations and you’ll be delivering a worse customer experience than your competitors.

To drive home our point on how service recovery is an expectation, not a benefit, let’s look at the statistics.

When all’s said and done, bad customer service costs UK businesses £234 billion a year in lost sales. It’s a whopper of a figure, but what’s behind it?

The reality is for most businesses their customer service hasn’t changed that much over the past decade and therein lies the problem — their customer’s expectations of service have. They just haven’t kept up.

This has led to somewhat of a poor customer service crisis in the UK. It’s wreaking havoc on businesses’ potential profitability and productivity.

Service recovery can help your business stand out from competitors with outstanding customer service and more loyal and profitable customers in return, as well as helping you continually improve issues that occur so they don’t happen again.

When do you need service recovery?

If you’re still not sure when your business could benefit from service recovery, here’s a couple of example scenarios which might help clarify things.

Negative third party reviews

It can seem like there’s an endless array of third party review sites now. From Google My Business to TrustPilot to Yelp, businesses are contending with plenty of places to monitor.

It’s lovely when the positive reviews roll in, but it isn’t always the case. Every business knows an unhappy customer is far more likely to leave a review than a happy one.

Instead of replying with a stock response or an empty apology, you can use a service recovery process here to actually attempt to resolve the issue at hand and hopefully, get the review amended to reflect that.

Not only does it benefit that one customer, but other customers can see how much you value your customers.

Low customer feedback scores

Service recovery doesn’t always start with an actual complaint. If you’re regularly collecting customer feedback (and you should be) then it could start with a poor or even mediocre feedback form.

These are valuable opportunities for you to prove to your customers that you really want their business and that their feedback matters.

Upset phone calls

Although some customers take straight to Twitter to air their grievances, many will give companies the benefit of the doubt first. Knowing how to handle an upset customer is all part of service recovery.

This isn’t about completely winging it, you need a set service recovery process in place for the best results for your customers and your brand.

Social media complaints

The power of social media has revolutionised the way customers can complain. It’s every company’s worst nightmare when a complaint goes viral and customers know it.

Doing so on a public forum means other potential customers are more likely to see and avoid the brand if they feel the response is poor.

Because of this, companies need to be on their A game when it comes to responding to social media complaints. Service recovery strategies can help you achieve this.

Service recovery examples

To prove our above point, let’s look at some companies absolutely smashing their customer service recovery game on Twitter.

Xbox

Xbox is setting the bar for customer experience and service recovery in the gaming industry, which shouldn’t come as a surprise when the company is owned by Microsoft.

They have a full 24/7 team dedicated to their Twitter account to not only respond to tweets, but to actively monitor for mentions. The latter is an outstanding example of proactive customer service, but their service recovery efforts are equally impressive.

They respond within minutes to all customer issues with thorough, helpful replies. They also follow up their suggested solutions to ensure the problems are permanently resolved.

It’s a great example of how to turn an unhappy customer into a lifelong customer who knows they’re valued.

JetBlue

Some airlines are renowned for their abysmal customer service, but JetBlue isn’t one of them.

We all know airlines have delays for a myriad of reasons, from weather conditions to maintenance issues. It’s an incredibly frustrating experience for customers with no information available beyond the knowledge of the flight being delayed, as well as being stuck in an airport.

So it’s no wonder airlines receive so many complaints. But this American airline sets the gold standard for responsiveness when it comes to dealing with social media complaints.

They almost always respond to unhappy customers within the hour, with useful responses like explaining the cause of the delay or letting them know how long the delay will be, as well as an apology.

This goes to show service recovery isn’t always about fixing the issue at hand. Customers don’t expect airlines to be able to control the weather. But they do expect to be kept up to date with the latest information, as well as for companies to hold themselves accountable and be responsive.

The latter is particularly pertinent if we link it back to our service recovery paradox because of a Harvard Business Study. This study showed companies that customers who have a complaint handled in five minutes or less went on to spend more on future purchases.

Adidas

Sports giant Adidas gave every brand a lesson in humility and accountability a few years ago after their infamous marketing snafu around the Boston Marathon.

As a reminder, they made the mother of all mistakes when they sent out an automated marketing email with the headline: “Congrats, you survived the Boston Marathon”.

It was an obvious oversight and insensitive to the horrendous bombing that had occurred at the marathon just five years prior. As far as mistakes go, while it was genuine, it was colossal and people were understandably outraged across social media platforms.

Adidas recognised this. They owned up to their mistake by issuing a public apology where they took accountability for their actions by stating it was thoughtless and insensitive and stating they were incredibly sorry.

This goes to show that companies can’t always take back their mistakes, but transparency and accountability are a vital part of service recovery.

Tips for an effective service recovery process

Now you know what service recovery is, why it’s important and what great service recovery looks like, you’re likely raring to go to implement a service recovery strategy in your own business. But hold your horses.

Before you implement a service recovery strategy, you need to lay the foundations within your business to allow your strategy to actually thrive. There’s a few simple foundations to implement first:

1. Hire selectively

2. Training and resources

3. Have a set complaints process

4. Measurement
   

Hire selectively

Your customer service staff are those on the frontlines, dealing with the issues at hand. As such, their communications skills need to be outstanding.

Having the right screening and hiring processes can help you get the best staff for the job with the right personality match.

Training and resources

From here, empower your staff with the right tools and help they need, whatever that might be. This could be in the form of regular customer service skills training for the whole team or helping individual staff with one on one training to do with a specific skill.

Similarly, staff should also have the right resources they need to help customers. They shouldn’t need to run around endless departments trying to chase up an answer for customers.

Have set processes created to make it easier for your staff to help your customers. If you haven’t got a process, create them as you need based on your staff’s suggestions.

Have a set complaints process

If you don’t already have a set complaints process, you need one. If you already have one, you need to review it.

A complaints process will look slightly different for every business. However, in general it will look something like:

1. Dedicated complaints staff or team to take ownership of complaints

2. Process to take action on complaints

3. Follow up routines with customers

4. Analysis of complaint and review of process to improve
   

Analysis and Measurement

Though this should be part of each complaint, your business also needs to take the time to review complaints together to identify patterns so you can make larger scale improvements to your business, allowing you to continually improve.

Not only this, but you need the tools and software that allow you to measure these improvements. This might be in the form of web analytics, customer service metrics or revenue intelligence metrics.

How do you perform service recovery: A 4 step service recovery strategy

Once you have those important foundations in place for your service recovery process, you can get into creating a service recovery strategy to help you turn unhappy customers into loyal, valuable ones.

Our 4 step service recovery strategy goes like so:

1. Listen

2. Accountability

3. Agree

4. Act
   

1. Listen

Start off with the obvious — hear your customers out.

This means actively listening, but also ensuring your employees actually have the time to hear customers out. If they’re so stressed and overworked that they can’t even focus on the call because they know there’s 50 others on hold, this needs resolving too.

Employees should have the time, energy and motivation to be able to give customers the due attention they need and deserve.

2. Accountability

Once a complaint has been heard, take accountability. Be empathetic, acknowledge the inconvenience or upset the company has caused and commit to rectifying it.

3. Agree

Discuss with a customer the various options for resolution. You can begin by referring to your normal complaints process and see if any of these would fit the circumstances.

However, often customers don’t feel like standard complaints resolutions fit their needs, so hear them out again. Ask customers what kind of resolution they’d like to see and work together to figure out a reasonable one where needed.

Employees should be empowered to be able to resolve complaints flexibly, as well as be able to escalate them with ease where needed.

4. Act

Now the customer has agreed to a resolution, follow through on it. Take the actions needed to follow through on the agreement you’ve come to.

For employees, this means taking ownership of the issue and following up all the necessary actions. It also means following up with the customer to keep them informed of any updates as needed.

For managers and business owners, like above, it means ensuring your employees have the time to actually be able to do this. If they’re completely overwhelmed, problems will pile up and they’ll be unable to effectively recover customers.

These four steps will help you deliver effective service recovery for every customer with unique and thoughtful solutions. Ultimately when it’s done right, it’ll help turn unhappy customers into lifelong customers.

Continuous improvement is a necessity

Service recovery is no longer an option for businesses. Customers expect companies to take accountability and act promptly to resolve customer service issues. Businesses need a robust foundation of process as well as a dedicated service recovery strategy to offer the best solutions and, in turn, have the best chance of increasing customer loyalty and lifetime value.

Awardaroo can help your business create and implement the changes you need with our unique and bespoke business improvement programme.