A Sweet Service Recovery Turned Sour

Then Sweet Again & Then Extra Sweet

The essence of service recovery is fairness. A customer has an issue with a company’s products or services and is looking for the company to treat him fairly. An intelligent company recognizes that treating customers fairly has long term benefits. Customers who know a company will handle legitimate complaints with fairness will be more loyal to the company than if they had no problem in the first place. These loyal, long-term customers are the most profitable.

On the other hand, poor complaint handling and service recovery add fuel to the fire. A company can turn a positive into a negative by not fully understanding all aspects of fairness. My recent interaction with Subaru of America demonstrates a good service recovery turned sour, as I’ll explain. My addendum at the end shows how they turned the service recovery sweet again.

But what is “fairness”? Stephen Tax and Stephen Brown in their 1998 Sloan Management Review article, “Recovering and Learning from Service Failure,” present three dimensions to fairness:

  • Fair Outcomes: Distributive Justice. The adequacy of any compensation offered for the problem the customer experienced.
  • Fair Processes: Procedural Justice. The policies applied and speed with which the issue was handled.
  • Fair Interactions: Interactional Justice. How you were treated during the process to resolve the problem.

Amy Smith, Ruth Bolton, and Janet Wagner (Marketing Science Institute, Report No. 98-100, “A Model of Customer Satisfaction with Service Encounters Involving Failure and Recovery”) make the point that the nature of the original problem dictates the most appropriate type of response. If the problem was service related, then the Interactional dimension — and possibly Procedural also — to the recovery is most important since the original problem likely related to how the customer was treated. If a customer didn’t get what they paid for, then the Distributive justice dimension becomes paramount. The customer expects fair compensation. Offering compensation for poor service may be unnecessary. An apology — offered quickly and initiated by the company — may suffice.

However, all three elements of fairness may well be in play during the recovery process. Lack of fairness in one dimension can destroy all the benefits gained from appropriate action on the other two. Let me illustrate with a personal example of my service recovery experience with Subaru of America and Subaru of New England.

I belong to the Subaru “cult.” I’ve owned no other car for 30 years. I live in New England, and they’re proven to be good, reliable winter cars. However, my 2000 Legacy wagon had a host of problems occur — you guessed it — just after the 60,000-mile warranty expired. The final problem at 72,000 miles was the differential seizing, a repair costing well over $3000. Ouch!  Plus, I was in Portland, Maine, 2 hours from home, but fortunately within 1/2 mile of the Maine Mall Motors Subaru dealership.

I contacted Subaru Customer Care in Cherry Hill, NJ, and the service recovery experience was pretty good. It did take them a week to make a decision on what compensation they would offer, but they did offer to cover effectively half the repair cost. The slowness was because Subaru of New England had to be involved in the decision-making. I’ll add that I had to call them to get status updates. Updates and the speed of decision were important because the repair shop could not initiate any repairs until Subaru of American made its determination. Why? Because the parts and labor would be billed differently. (Now isn’t that silly?) These accounting practices seriously impacted the delivery speed of the repair service.

My Customer Care agent also offered me an “Owner Loyalty Incentive” of $750 toward the purchase of a new Subaru bought within a year. (I put that in quotes for a reason explained below.)

Here is my initial evaluation along the three fairness dimensions using a 5-star scale:

Fair Outcomes: Distributive Justice. Pretty good compensation all included. However, as I reflected on the underlying cause of the problem, I actually felt more was justified. ***
Fair Processes: Procedural Justice. The procedures were in place and clear (to them). However, the decision-making process was slow. The slowness compounded the original problem since I was without a car for a longer period of time. ***
Fair Interactions: Interactional Justice. I was treated respectfully as a long term, loyal customer. However, I did not get updates in the promised timeframe, and I had to call to get the updates. ****

I called this a “soured” service recovery, yet a score of 3 out of 5 stars isn’t terrible. The bittersweet element came at the very conclusion of the process.

I decided I would buy a new 2007 Subaru Legacy Wagon, since Subaru will no longer be building this model. Here’s the power of good service: I bought the car at Maine Mall Motors, despite the 2-hour drive, in large part because that dealership had treated me so well when my car broke down. (Let me add that I love the car. I can’t believe how many small improvements they made in the design from my 2000 Legacy with little to no change in price.)

With new car in hand, I had to send in my bill of sale to get my “Owners Loyalty Incentive.” I enclosed a letter, thanking them but also explaining in writing the full history of my service experiences and why I now felt that the differential problem caused likely by uneven tire wear was truly the result of misleading information in the owners manual, poor advice and lack of advice by Subaru service people. At the end I gently nudged for a roof rack and corner moldings, a few hundred bucks more in compensation.

A week later I got the check with a cover letter.  It was a form letter that never referenced my letter. I found that odd.  Then I turned over the check. Above the signature line was this stamped statement:


The “Owner Loyalty Incentive” was not an owner loyalty incentive. It was a legal settlement. The misrepresentation — or lack of proper representation — is what truly bothered me. The agent never positioned the “incentive” as a legal settlement, and the form cover letter even refers to it as a “goodwill gesture.” In that moment they turned this from a decent, personal interaction that engendered deeper loyalty to a negative, arms-length legal transaction. The manner of doing this, this sleight of hand, I found truly offensive. (I’ll liken it to Radar O’Reilly on M*A*S*H slipping papers in front of Colonel Blake for his signature.)

I had revise my above evaluation on the 5-star scale for one dimension:

Fair Outcomes: Distributive Justice. I was treated respectfully as a long term, loyal customer. However, I did not get updates in the promised timeframe, and I had to call to get the updates. And they misrepresented the nature of the “Owner Loyalty Incentive.” *

Concurrent with this article I wrote to the senior management of Subaru of American and Subaru of New England. (See my note below on their response.) The critical message to them related this misrepresentation (likely promulgated by their lawyers):

Every bit of goodwill that you earned by treating me right was lost in that instant.

The positive Outcome and Procedural aspects of the service recovery were overwhelmed by that last Procedural action.  When my 2007 Legacy needs to be retired, will I look at Subarus? Yes. Will I look at other cars? Yes. Service Recovery turned sour.  How sad that we let lawyers mess up good business practices.

But then, Subaru righted the wrong…

September 2007.  An update…

Subaru Customer Care took my letter to heart in a fashion that I have never seen with any other company to which I have written.  Rather than just utter some hollow words — what I call “hollow empathy” — they acknowledged my point of view and have revised their procedures regarding the owners loyalty incentives.  How often have you ever heard of a company doing that? My faith in the company has been reaffirmed. They also extended an offer to me that helped right the wrong. Based upon my latest interaction, I have to change my ratings to 5 or 4 stars in all three phases of Service Recovery.

And I still love my new Legacy Wagon. I can only hope when this one needs to be retired, they have reinstituted this model.

February 2010.  A Further Update…

When my wife Audi A4 got to be too much of a headache, we bought a 2009 Subaru Legacy for her. I wrote back to the Subaru of America to give them a concrete example of the value of good service recovery practices. I expected maybe a short thank you note, but I got in addition to the note, a Subaru-logo travel cooler pack. That gesture bought loads of goodwill with me.