Recovering from service failure

Generating profit through greater customer satisfaction

s consumers become increasingly happy to complain about a product or service, so

A it has become more important for service providers to deal efficiently with
dissatisfied customers. As David Bamford and Tatiana Xystouri argue in their article
‘‘A case study of service failure and recovery within an international airline’’, there are strong
and complex links between customer satisfaction and profitability.
The ability to retain business through customer satisfaction is seen as essential in
encouraging expansion. At the heart of this philosophy is the maintenance of customer
loyalty. Service quality consists of the gap between what the customer expects and what is
received. This gap is separated out into four specific areas on the provider’s side: customer
expectations; management perceptions of consumer expectations; service quality
specifications; and actual service delivery.
The current emphasis on the improvement of the service encounter is being spurred by
factors which include the consumer’s increasing awareness and expectation of standards in
service; technological developments and sophistication; and competition within the
marketplace. In particular, computerization and technological innovation are radically
influencing the relationship between the business and the consumer. Technology offers a
business the opportunity to increase, and most importantly, differentiate, the quality of its
service in a competitive environment.

Benefiting from service recovery

The authors of this article make clear that a business’s recovery strategy can have dramatic
ramifications for its revenue and profitability. An example given is that of Hampton Inn, the
US hotel chain, which realized $11 million in additional revenue from the implementation of
an effective service guarantee, scoring the highest customer retention rate in the country.
This case helps to highlight the point made that, with the right research and subsequent
recovery planning regarding the delivery of services, the retention of a consumer base
(encouraging loyalty in their customers) impacts on the success of the organization.
Research by the Office of Fair Trading has demonstrated that when consumers complain
about an aspect of the service encounter, and the matter is subsequently resolved
satisfactorily, three quarters of those customers will return to the brand. However, if the
matter is not dealt with adequately, or is left completely unresolved, less than half will return.
From this, it is clear that there is profit to be made from customer loyalty.
An important factor in creating a system of efficient service delivery is the gathering of
information from dissatisfied customers. Unfortunately, only 5-10 percent of unhappy
consumers actually complain about their experiences. There are thought to be several
reasons for this, including the following:

DOI 10.1108/02580540610665525 VOL. 22 NO. 6 2006, pp. 37-39, Q Emerald Group Publishing Limited, ISSN 0258-0543 j STRATEGIC DIRECTION j PAGE 37
 ‘‘ An employee is more capable, and willing, to provide a higher
quality of customer care if he or she is happy with the work
being undertaken. ’’

B customers believe that the organization will not respond;

B they wish to avoid confrontation with the person responsible for the failure;
B they are uncertain about their rights and the obligations of the organization; and
B they have concerns over the cost and time of complaining.
These factors are hindrances to gathering the information required in order to structure a
successful recovery plan. The customer is the primary resource for collating this information,
and it is important for businesses to understand that it is not necessarily the initial service
failure or incident which leads to dissatisfaction, but the organization’s subsequent lack of
response to the situation. For this reason, a recovery program becomes crucial in
maintaining consumer loyalty.

Recovery methods
A happy customer, it would seem, begins with a happy employee. Bamford and Xystouri
make a connection between the provision of quality service, and employee satisfaction. An
employee is more capable, and willing, to provide a higher quality of customer care if he or
she is happy with the work being undertaken. There are a number of factors which will
contribute to employee satisfaction in the workplace, such as training; salary; advancement
opportunities; respectful treatment; teamwork; and the worker’s own perception of his ability
to meet customer expectations.
Certain structural practices within the organization may also be employed to improve
recovery-effectiveness, such as:
B hiring, training and empowerment;
B establishing service-recovery guidelines and standards; and
B providing effective responsiveness and customer access through call centers and
maintaining customer and product databases.
For a more market-driven approach to service recovery, there are different tools open
besides identifying and negotiating individual complaints. These include surveys; mystery
shopping; focus groups; customer and employee advisory panels; and service operating
performance data. Such research will provide the organization with the ability to identify
those areas in customer relationships which most urgently require a recovery strategy,
thereby influencing its overall profitability.

Service-profit chain
The service-profit chain argues that customer loyalty contributes directly to an increase in
profits; that loyalty stems from the customer’s satisfaction with the service system; and that
customer satisfaction is generated by satisfied, loyal and productive employees. When a
problem is dealt with effectively, there is a strong impact on customer satisfaction and
subsequently customer loyalty. By contrast, ineffective tackling of complaints can lead to the
creation of what the authors refer to as ‘‘terrorists’’, or customers who ‘‘actively pursue
opportunities to criticize the company’’.
Bamford and Xystouri provide examples from the airline industry of how well-conceived
recovery plans have lead directly to improved profitability, according to the service-profit
chain theory. Singapore Airlines (SIA), for example, continues to set the industry standard in
customer service. Their procedures follow models which are outlined in much of the service

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 literature, such as: a strategic focus on customers; adopting a ‘‘total company’’ approach to
service excellence; continuous benchmarking; and incremental improvements to the
system. The company also has active customer feedback systems, and promotes a
‘‘holistic’’ perspective, by which all staff look at all processes all the time in an effort to
identify areas for improvement.
British Airways launched their ‘‘Customer first’’ program in 1983 under the then chief
executive, Colin Marshall. This approach placed great emphasis on teamwork and on
understanding how each individual role in the organization contributed to the success of the
airline as a whole. They adopted the slogan: ‘‘Putting our customers first – if we don’t,
someone else will’’.
Finally, in 1983 SAS achieved a gross profit of $71 million on sales of $2 billion, despite the
industry as a whole losing a total of $1.7 billion. This success story was attributed largely to
an organizational commitment to improving the customer’s experience with the airline
through the so-called ‘‘moments of truth’’, that is, the moments of brief personal encounter
between a passenger and the service individual. All 27,000 employees were put through a
company-wide training program, from executives to baggage handlers, targeted to meeting
the needs of the customers.

Case-study and conclusions

The authors back up these claims of successful service recovery systems with a case-study
of an unnamed airline, in which data was evaluated against the airline’s profitability over a
four year period. In that time, the number of recorded complaints increased by 60 per cent,
while those offered compensation increased by 147 per cent. Complaints consistently
revolved around three main areas: delays; service interruptions; and the poor attitudes of
certain ground staff. Their overall findings confirmed the theory that a reliable ‘‘personal
touch’’ service is what the customers perceived as good service quality. To this end,
consistent training programs, designed to improve the attitudes of ground staff to the
customer, became a key issue within the airline.
This case-study provides strong evidence of the importance of an effective service-recovery
plan. Such a plan must have at the heart of it a level of employee satisfaction, commitment
and loyalty ‘‘as a result of senior management commitment, focus and drive’’. For a service
recovery strategy to be effective, it must be at once external (to the customer) and internal
(to the organization). Businesses can only improve their profitability by pursuing customer
happiness through that of their own workforce, as the examples given have clearly shown.

Comment
This review is of ‘‘A case study of service failure and recovery within an international airline’’,
Keywords: by David Bamford (UMIST) and Tatiana Xystouri (Ministry of Finance, Nicosia, Cyprus). The
Customer services quality, authors make a clear statement about the connection between quality customer care, the
Service failures, importance of a service recovery strategy and the profitability of an organization. The
Service improvements, content is accessible and concise, backed up by some complex but useful flow charts and
International travel, diagrams. The argument is successfully supported by their own case-study which only helps
Airlines highlight the main points of the discussion.

Reference
Bamford, D. and Xystouri, T. (2005), ‘‘A case study of service failure and recovery within an international
airline’’, Managing Service Quality, Vol. 15 No. 3, pp. 306-20, ISSN 0960-4529.

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