Making the Case for Service Recovery Strategies — Customer Retention

The goal of service recovery is to identify customers with issues and then to address those issues to the customers’ satisfaction to promote customer retention. However, service recovery doesn’t just happen. It is a systematic business process that must be designed properly and implemented in an organization. Perhaps more importantly, the organizational culture must be supportive of the central tenant of service recovery strategies — that customers are important and their voice has value.

Service Recovery at United Airlines

Summary: Effective service recovery at airlines should be second nature given how much practice they get, but at United, the bromides were plentiful, but meaningful explanations were sorely lacking. This article examines United’s service recovery efforts in the contexts of a service recovery model.

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Service recovery actions intrigue me. What actions do companies take when an upset customer complains? I’ve written elsewhere about the three principles against which the fairness of service recovery acts should be judged:

  • 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.

Stephen Tax and Stephen Brown presented these points in their 1998 Sloan Management Review article, “Recovering and Learning from Service Failure.”

There’s no industry that has more practice in service recovery than the airlines, and I guess this disproves the adage that “practice makes perfect”. As a frequent traveler, I enjoy The Middle Seat column in the WSJ. (Okay, I’m partial to it since Scott McCartney, the author of the column used an idea of mine for a column about how TSA has screwed up its Pre-Check security lines.) A recent Middle Seat column focused on the apologies that airlines provide when customers complain.  The gist of the article was:

Airlines say they try to make responses conversational and personal. They aim to apologize and acknowledge the problem, providing more information about the particular situation after research, then offering some compensation as a goodwill gesture, such as some frequent-flier miles.

[Note: the Wall Street Journal is a closed site, but if you search on “Trouble Selling Fliers on the Fast Airport Security Line” and“The Art of the Airline Apology”, you may be able to access the articles.]

By pure happenstance I had 2 complaints awaiting response from United, both from a flight in June to deliver a survey workshop in Dubai. And before you get the idea that I’m a constant complainer, these I believe are the first complaints I’ve filed with United. The responses from United border on comical in their hollowness. Let’s look at them against the benchmark of good service recovery principles.

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My first comment to United was about the brain-dead service design of its brand new service counter in Terminal B at Boston’s Logan airport. My flight to Newark was delayed so that I would miss my overseas connection — not a trivial issue. The physical design of the queues violates basic queuing principles by making it difficult for agents to serve any customers other than the customers in their immediate queue, and the supervisor on duty didn’t compensate for the poor design by shifting workers or customers.

The result was very longer waits for United’s premier customers — and no wait in the other customer queues at the counter. Some agents were standing at their counters doing nothing while a queue built up 25 feet away. A basic service principle is to take special care of your better customers — D’oh — and to build flexibility into the system to accommodate the random arrival pattern of customers. When they designed the physical counter, they should have thought about the implications for wait times the design could cause. Alas, they did not.

But here’s the response I got to my comment pointing the gross shortcomings

Thank you for contacting United Airlines regarding your June 6 experience in Boston.

Our goal is to provide a seamless experience from the moment you book your flight until you arrive safely at your destination. Based on your comments, and the inadequate handling you report we have room to improve. Please be assured we understand your concerns and that your comments have been forwarded to division senior management for internal review and necessary corrective action.

Mr. Van Bennekom, you are a valued MileagePlus Gold member, and we appreciate your business. In recognition of your loyalty, I will gladly add 7,500 goodwill miles to your MileagePlus account. Please visit to verify your mileage balance in five to seven business days.

We appreciate your loyalty and the offer of your expertise.  After all, a great customer deserves a great airline.

A bit over the top, and more importantly, I never got any follow-up from the management at Logan airport about how my concerns were being addressed in their system design. But that response is great compared to the response to my other issue.

On the day of my return flight home from Dubai, I saw that my reservation online was missing a segment — the flight from Dubai to Zurich on Swiss. (The entire itinerary was purchased through United.) So, I confirmed my itinerary with a United phone rep just 8 hours before departure. When I got to the airport to check in, my return itinerary had been cancelled. In my comment to United, I asked in all sincerity how this could happen and what I could do as a customer to make sure it didn’t happen to me in the future.

Here’s the vapid response.

Thank you for contacting United Airlines.

I appreciate your patience and offer my apology for a delayed response to your message.

Please accept our sincerest apologies for the many inconveniences that you endured with your reservation. We truly appreciate you taking the time to point out the issues that you faced as we work hard to correct problems brought to our attention. We understand how disappointing this was for you and we apologize for the factors that contributed to your overall dissatisfaction. Although we can’t explain or undo what you experienced, [my emphasis] we can work to correct it. This situation will be reviewed and addressed internally with our Senior Managers. Your concerns will be taken very seriously.

It is never our intent to inconvenience our most loyal customer, and I am very sorry your valid expectations were not met. Your feedback will help us evaluate what has happened and allow us to make necessary adjustments as it tells us what areas we need to improve on. We appreciate the time you took to share your experience with us and the opportunity to apologize for any inconvenience.

I understand that we can’t undo all that you have experienced but as a gesture of goodwill I will be crediting your account with 7,500 miles. We ask for your patience as it can take up to 14 business days for the miles to be credited to your account.

We at United apologize for the inconvenience and thank you for bringing this to our attention. As a loyal Premier Gold Elite member your business and satisfaction does matter to us.

Interestingly, Scott McCartney’s article says

United said it tries not to go overboard on the apology. “Generally we tell the customer we are sorry they did not have the experience they expected on United,” spokesman Rahsaan Johnson said. “We try to be empathetic to the customer but not sound insincere.”

Apparently, this agent didn’t get the message. I followed up on my key request.

Per my note, I would still like to know *how and why* my reservation was cancelled so that I can take steps as a passenger to make sure it doesn’t happen in the future.

The response to this was an auto respond. How can they not be able to explain how a reservation gets cancelled? It’s a transaction that was initiated by a computer program or an individual action. Just tell me the conditions that led to the action so I can try to identify and compensate for such a mistake in the future.

In fact, I learned that if you reply to an email from United Customer Care, you get this auto respond that has been mail merged with information from your case number.

Thank you again for taking time to let us know about your recent experience with United Airlines.

7500 bonus miles have been added to the MileagePlus account, XXX.

The reference for this item is: YYY

For current information on your MileagePlus balance, as well as information on the latest services available to you as a valued member of MileagePlus, please visit our website at

I did get a response two weeks later from the agent, telling me:

I am still trying to find out the answers to your concerns. Our Tech Support is still looking into the issues.

As I post this update yet another two weeks later, I still have not learned how to become a better customer.

So let’s evaluate these on the 3 requirements of good service recovery.

  • Fair Outcomes: Distributive Justice. The compensation was fine. I really didn’t care about any compensation. But what I really wanted was an explanation of the cancellation issue. (Is that Distributive or Interaction? A bit of both.) I try to be a smart customer and smart traveler. I really wanted to know how to avoid having this happen again in the future. Here’s the black eye for United from me. They haven’t given me any explanation whatsoever. Shame on United for that.
  • Fair Processes: Procedural Justice. Not an issue here.
  • Fair Interactions: Interactional Justice. I came away with the feeling that the replies were perfunctory and my feedback just vanishes into the ether. The replies didn’t instill greater loyalty in me for United. I have a fairly sensitive BS meter from 27 years of teaching, and it was flashing red reading the emails, especially the second one.

I know that United is not unique in hollow service recovery.  But what they’ve taught me is to expect little in the way of a substantive reply.

Fewer bromides. More real explanation.

Employees Strike in Support of a CEO?

Summary: Employees strike against CEOs all the time, but have you ever heard of employees going on strike in support of a CEO? Employees at the Market Basket supermarket chain in greater Boston have done just that in support of Arthur T. Demoulas, and customers are supporting the boycott. This is an odd event.

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Arty TI live in a state — Massachusetts — known for its quirks.  And right now we have a really quirky event transpiring.  A local company’s employees are on strike because of the CEO. What’s odd about that? They’re striking (or boycotting) in support of a fired CEO. And they’re not union employees, so they could all be fired today with little or no legal recourse.

The Market Basket supermarket chain has a long history of intra-family squabbles. The company is owned and run by cousins, grandchildren of the founder.  Such dissension is not uncommon in family businesses where ownership is split through the generations. In mid July the board of directors, controlled by cousins on one side of the family, dismissed the CEO Arthur T. Demoulas. (Arthur S. Demoulas is a cousin on the other side.)

The reaction of the employee base was immediate and strong. Not just store managers, but rank and file employees stopped showing up for work. Food wasn’t getting moved from the warehouse, so the store shelves have become more and more empty, especially of produce. Employees have been collecting petitions outside the stores for weeks on their own time and held mass rallies at the company’s headquarters.

All this because the CEO was fired.

I should add here that this is my preferred supermarket, especially after they opened a store quite near my house.  Before this store opening, I would take advantage of any trip that took me near one of the stores. So, I’m invested in this store surviving, but I’m honoring the employee boycott as is most of the customer base. (Maybe that fact is not so quirky for Massachusetts.) The nearby photo is of a sign outside “my” Market Basket in Hudson, Mass.

Unfortunately, the media has only covered the story that makes good headlines — employees striking for Arthur T, the CEO. The media has not really covered any of the back story. Arthur T.’s side of the family is not exactly wrapped in glory, and we haven’t learned what exactly led to Arthur T.’s dismissal. There are rumors of sweetheart real estate deals by Arthur T. Market Basket is a privately-held company so the financials are not public. The media therefore have to work harder to get all the back story. I guess it’s easier to cover employee rallys then really present the whole story.

But I have talked with the employees outside “my” store. They say that “Arty T.” wasn’t solely focused on profits. He paid employees well and is the driver behind taking lower margins for the products they sell. The “other Arthur” et al. who fired Arty T. want to drive up profit margins by raising prices and probably being less generous with employees.

market-basket-hudsonOf course, maybe Arty’s approach is the real profit maximizing one. Maybe his lower margins have created a hugely loyal customer base, leading to greater volume, and maybe his employee practices mean that customers get a more positive experience, garnering greater loyalty. I recently wrote about a similar story at Hilltop Steakhouse, which went for profits and sunk the company. Maybe if current management gets its way Market Basket will lose its competitive advantage and be less profitable.

The nearby photo is of the entrance to “my” Market Basket. All those slips of paper are register receipts that customers have put up from other supermarkets. Note that store management hasn’t taken them down or driven the employees from the store entrances. Those who run the company in the corporate offices are an island with little to no support from the employee base, including store managers. Corporate management may win the battle, but it may be of a bankrupt company.

As a business school professor, I watch what’s happening in the business community pretty closely. I can never recall a situation quite like this where employees put their jobs on the line like this to support a fired company president or CEO.

I’ve never met Arthur T. Demoulas, but the employees all speak about him in very high terms. He certainly has some leadership skills that are seldom seen in businesses — even if we don’t know the whole story. I guess the good news for him is that should he not get reinstated or successfully buy out his cousins, he could go on the lecture circuit.

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Update: August 28, 2014

The Market Basket board agreed to sell the company to Arthur T. for $1.5 billion. But this is not the end of the story.  How will Arthur T. manage the employees that have backed him so well? He will be hailed as a conquering hero right now. What happens if he has to make a tough decision down the road? At least, I can shop there again. But I’ll wait a week for the likely influx of returning patrons, and I suspect a lot of new shoppers will go there to see what all the hoopla was about.

Update: Early 2015

Chats with cashiers confirm that lots of people who had never shopped at Market Basket came to check it out because of all the news. So, the store is more crowded than before. Drats! I don’t think the whole contentious confrontation what an advertising gimmick, but maybe that’s how it’s worked out.

Complaint Identification: World Class CRM Surveys

The most important part of a customer satisfaction survey, arguably, is not even part of the survey. It’s what you do with the survey data that creates — or destroys — the value of the survey program. Don’t misconstrue my message. Good questionnaire design and unbiased survey administration are vital, and doing a mediocre job with those survey project elements will lead to poor or misleading data, but will they lead to customer dissatisfaction? Doubtful.

However, ignoring the message inherent in the survey feedback can fuel the fires of an already displeased customer. And sometimes that message isn’t buried subtly in a bunch of number but screams in plain black-and-white text. My recent experience with a Sears customer service and the subsequent IVR survey of theirs I took illustrates this gross mistake.

Survey programs should not be treated as an island in the sea of customer relationship management. If I may torture the metaphor a bit more, land bridges are needed tying all the elements of a CRM strategy together. A customer satisfaction survey is part of this network, but too often they are done in isolation.

Consider the typical goals of a customer survey program.

  1. Learn where you’ve performed badly so that you can correct those mistakes. (Hopefully, also you want to know where you’ve performed exceptionally well so that you can replicate those strong points.)
  2. Linked to the above, you want to measure individual performance to identify training needs and also likely to reward the good performers — and punish the bad.
  3. Identify shortcomings in operational processes and designs that aggravate customers.
  4. Develop trend lines of performance so that the impact of new operational initiatives can be measured.
  5. Identify specific customers with issues to allow engaging in service recovery assuming it’s not an anonymous survey.

For some bizarre reason the last goal is frequently missed.  If not recognized, then your survey program has a huge downside risk. In a transactional survey program which are almost never anonymous, this risk is magnified since the customer just had the experience with you and the displeasure — or anger — is quite high.

Imagine this scenario. A customer completes a transactional survey with low scores and highly critical comments in the open-ended text fields. As the owner of the survey program, what should you do? Home Depot’s approach in its transactional store visit survey is to tell customers you can enter comments here, but if you really want someone to read them, then call this number. In the customer service world, we call this a “cold transfer.”


Here’s a better idea: ignore them! And that’s what many companies do. Read about my Sears customer survey experience for the best of the bad practice in this area.

What should you do? Recognize the interconnected nature of all elements of a CRM strategy, and that a survey program is one element in that strategy. Any customer survey, but particularly a transactional survey, should include a “hot sheet” function where surveys with negative scores and/or comments are routed immediately to a manager for response. In a telephone survey environment, the interviewers should provide a “hot transfer” of the customer, that is, transfer the customer to a customer service agent introducing the customer to the agent with a brief explanation, or with a “warm transfer” where the agent dials the number but does no introduction.

Hot sheets and warm or hot transfers still aren’t enough. You need to have a service recovery program implemented concurrently with the survey program. Many companies launch a survey  and then find themselves in crisis mode reacting to customer issues presented in the surveys. Or worse, the companies just ignore the cries for help evoked in its surveys — as Sears does.

The goal of a survey program is to increase customer satisfaction, right? Isn’t it only logical to put all the tools in placed needed to positively effect customer service? Then why isn’t it done universally? Only two reasons exist: 1) ignorance, or 2) a total disregard for the customer.

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.

Lessons Learned from Service Recovery (Or Should Have Been Learned)

I recently wrote about the value of service recovery programs in sports enterprises. Ironically, I was writing that article while in the midst of a customer service and service recovery incident. The process — or lack thereof — that occurred illustrates some key lessons for organizations:

  • The need for properly conceived feedback programs
  • The need for proper and consistent execution of the feedback programs, especially in their complaint handing processes.

Briefly, let me recount the sequence of events — and non-events. This will help demonstrate the value that customer feedback and service recovery can bring to an organization as well as the ramifications of poor design and execution.

Like most business travelers, I frequent one or two hotel chains to build up the benefits under the loyalty programs.  During June, conference engagements led me to stay in two of the top-line properties in one of these chains. The name of one of those brands, Ritz Carlton, evokes the very essence of the gold standard in customer service.

As with the higher priced hotel brands, broadband internet access at this Ritz hotel had to be purchased for $9.95 per day. (An aside… why is it free at the cheaper hotels?) I purchased the service from both hotels, and I had almost the identical problem in each place. Several emails got rejected by the mail server of the recipient of the email messages. The reject messages indicated that the outgoing email server was the problem. In one case the mail server was on a spam watch list and in the other case the mail server was flagged as one that has been compromised and could be spreading viruses.

Since email is a critical communication device for my business, I had this awful feeling in the pit of my stomach. What happened to my ISP’s mail servers???

The good news is that the problem was not my ISP’s outgoing mail servers, but rather the servers of the ISP service the hotels had contracted. (The rejection messages had the ISPs’ IP addresses in it, so I could trace the problem.) My concern went beyond the messages for which I got a rejection notice. How many other messages got rejected but no notice was sent to me? I don’t feel it’s an overstatement to say that the hotels’ internet access service was defective. (Isn’t this equivalent to a hotel room TV that doesn’t work or a clogged sink drain?)

The story doesn’t stop there. Since this was a difficult problem to describe in any specificity to those who don’t understand mail servers (which I really don’t!), I chose to raise the issue in writing to the hotel. On the first day in this Ritz hotel, I used the Contact Us form on their website to make the issue known, indicating I was a current guest with my name and room number. The message was supposed to be directed to the specific hotel with a promise of a response within 24 hours according to the web site.  Since I knew something about this hotel’s elaborate service recovery program — I use a business school teaching case on the hotel in my MBA classes — I was interested to see what would happen.

What happened? Nothing.

Later that month in the second hotel, a top-line Marriott in Plano Texas, I used the comment card in the hotel room to write down the issue, again with my name and room number. The card promises it will be reviewed that day by the manager or a key staff member. I dropped it at the front desk the first morning out of three I was there.

What happened? Again, nothing. Absolutely nothing.

(In this latter trip, I conversationally mentioned the problem to my client for whom I was conducting one of my Survey Design Workshops. The folks there told me to expect exactly the response that I got. The hotel had a reputation with that local business — and others — for not being responsive.  In fact, they usually steer visitors to another nearby hotel.

After these experiences most customers would have just defected to another hotel chain for future stays, but I am not the typical customer. I do not take “nothing” as a response. I did pay for the service after all. I also admit readily that I am tenacious in part to see how companies respond. I have a researcher’s mindset. Also, I preach the value of customer feedback, and it would be hypocritical of me not to practice what I preach. So, I pushed onward with my feedback!

The Ritz Carlton had a survey comment card. I typed up a half page description of my experiences and included it with my survey. The survey even had questions about whether I had experienced a problem and its resolution. I also sent this letter to the Ritz COO whose name was on the comment card. That got a response. I got a phone message from the hotel asking me to call back so they “could get my email back up and running.” Huh?  The barn door had closed weeks earlier. The person I did speak with offered me an upgrade the next time I am at that hotel, but the likelihood I’ll be in that area again is small. So the compensation offer is essentially meaningless.

I wasn’t sure to whom to write at the headquarters of Plano Marriott. (While the two hotel brands have common ownership, they have separate headquarters.) But by the happenstance of frequent travel, a few years back I sat next to a fairly senior person with this company. We had a delightful conversation — one of those rare flights that was actually too short — and stayed in touch. I wrote her asking to whom I should direct my comments. She took ownership for the problem and put me in touch with a senior person who has responsibility for the information technology (IT) at the hotels.

He and I had a good chat, and he quickly uncovered the root cause of the problems. In both cases the hotels were using ISP providers that were not on the approved corporate list. They had negotiated with these vendors on their own. This IT director thanked me for giving him the ammunition to make his case about the need for the hotels to adhere to standards.

While I like Marriotts, my confidence has been shaken. And previously I had had very positive service recovery experiences with the chain. I even wrote about that in my Customer Survey Guidebook. But in that case, it was a one-to-one interaction, and the employee offered compensation on the spot. Marriott’s company’s culture supports and promotes such empowerment. In the Ritz Carlton situation, the information system that supports complaint solicitation had apparently failed. In Plano Marriott, the company’s culture of responding to and addressing customer issues is apparently not well embedded at the top of that hotel’s hierarchy.

Most of us have stories like this, but stories have little value unless we learn from them.  What are the Lessons Learned from this anecdote?

  • Charging for defective products. Most obviously, if a company is going to charge for a premium service, it should not be defective.
  • Customer complaint solicitation systems. Having systems to solicit failure situations is critical. Both hotels had these solicitation mechanisms.
  • Act on the solicited information. Most critical is to be sure that solicited feedback from a customer complaint should not be ignored! Is there any better way to turn a customer into a lost customer than to ask for feedback, promise a response, and then ignore it?
  • Act promptly. After the fact offers to fix a problem are next to meaningless.
  • Compensate appropriately. If you are going to attempt service recovery by offering some form of compensation, it needs to be something that is truly of use to the customer. If you devise compensation schemes based on minimizing the direct cost of the compensation, you are bound to offer little of value to the customer. (I discussed Ralston’s Purina’s compensation matrix in another article.)
  • True programs that build customer loyalty. Customer loyalty is not secured with reward programs that provide rebates for frequent use. Customer loyalty is secured by 1) delivering true value in quality products and services, 2) cultivating customer relationships that demonstrate concern and empathy, then 3) providing rewards of value.

Tell me about your experiences with the customer complaint, service recovery, and rewards programs — or tell me how your company handles these customer feedback and loyalty processes.

Addendum. A reader asked if I was credited for the cost of the internet service. No, I was not. This surprised me. I did not ask, and it was not offered. All in the name of research…

A Sporting Service Recovery

Customer retention through increased customer loyalty is key to increased profitability since acquiring new customers is more expensive than keeping current ones. The obvious question is: how can this loyalty be attained. Customer loyalty is taxed most when a customer has a complaint. However, a problem is also an opportunity. Research (see references below) has shown that customers who have had a problem resolved effectively through a company’s service recovery actions are in fact more loyal than those who have not had a problem. So, a customer complaint is a bad news/good news situation. However, another caveat: poor handling of a customer issue will just further exacerbate customer dissatisfaction.

Service recovery is more than complaint handling. It is recovering a customer’s positive feelings about a company after a bad experience and taking action to resolve the root cause of the problem. Complaint handling connotes just addressing the negative. Service recovery means turning the issue into a positive — both for the customer and for the company through the learning opportunity.

I like to explore companies’ service recovery practices in my own economic transactions, and I’m always asking about others’ experiences. Awhile ago I received an inquiry about service recovery practices from Chris Gibbs, the Director of Client Services for the Toronto Maple Leafs Sports and Entertainment. “Service recovery in a sports franchise?” was the thought that hit me. My background — aside from my university teaching — is after-sales support services for technical products, and that industry has been my focus for customer satisfaction and loyalty work. However, web searches and keyword advertising has led to a broadened focus for my Survey Design Workshops, since the ads have garnered inquiries across industries and across organizational functions.

So, this opportunity to examine service recovery practices in another industry — particularly the sports industry —  piqued my interest. What service recovery lessons could a sports franchise provide? Intrigued, I took the opportunity presented by a trip to Toronto to visit with Chris. Earlier this year, I also the chance to hear Pete Winemiller, VP of Service Development for the Seattle SuperSonics and Seattle Storm speak at the Customer Care Institute’s conference. The two organizations share approaches, but with some difference in application.

Toronto Maple Leafs Sports and Entertainment presents both hockey — the Maple Leafs — and basketball — the Raptors — as well as concerts and other events that use the Air Canada Centre, which it owns and operates. Gibbs’ focus is on the fan experience. His goal is to make the game or event an enjoyable experience (even if the home team loses).   The stadium should not be a distraction, but should be a positive part of the experience. They must meet the fans’ “basic expectations” — a clean building, fast food service, and friendly staff — but hopefully move beyond that to create “delighted” customers who will “spread the good word about our building and sports teams.” Equally importantly, they want to avoid “fan outrage” that may result when the fan feels he has been treated unfairly or have his personal security violated.

Similarly, the SuperSonics CEO Howard Schultz says, “We want to the most fan-centric organization in professional sports.” Not first class or world class, but “world famous” according to Winemiller  Schultz stresses to his staff that they are not in the basketball business, but in the people business. “Companies don’t ‘make’ money; they get it from their customers.” Winemiller’s team focuses on the “driveway to driveway experience” and to give fans “magic moments [not] tragic moments.”

Service Recovery in a Sports Franchise

But how does service recovery come into play with a sports team? Fans can have problems, anything from a spilled drink to a noisy obnoxious neighbor, a bad view or a more involved problem. Gibbs has three rules for handling recover situations: “recover quickly, recover effectively, and improve the situation.” To accomplish this, he has three levels of handling customer issues at the Air Canada Centre.

  1. Front line employees. Employees, the ushers, are empowered to handle a problem in their area. In essence, they own customer satisfaction in their section of the stadium. You might think that if a fan spills a drink or a child drops her hot dog, tough luck. Make them buy another. More business! (That was my expectation based on childhood memories at Fenway Park.) Instead, the ushers will get a replacement food item for the patron and get the mess cleaned up. In Gibb’s mind, this is an inexpensive opportunity to buy considerable fan goodwill and create “fan delight.” An usher may also arrange for a father and son who have tickets in the nose-bleed sections to sit in the lower boxes during practice. It’s these “little things that make the difference.”When dealing with the irate fan, Gibbs wants his employees to be skillful in defusing the issue by a) explaining the rationale behind any policies, not just hiding behind the blanket statement, b) by being flexible in implementing policies where logical, such as allowing a parent to bring food and juice for an infant, c) showing concern and empathy.
  2. Customer Service. Some problems require the action of the Centre’s customer service department, for example, if someone has a bad sight line at a concert at the Centre or that rather effusive (and possibly abusive) neighbor. Customer Service will relocate the person as best as possible, sometimes using the wheelchair locations that create some seating buffer. Once, a customer accidentally ripped his pants, splitting a seam. They got the fan into a back room and mended the pants. (I’m sure there was a TV in the waiting room so no action was missed.)
  3. Senior Staff. Some problems require decisions at Gibbs’ level. For example, at a Julio Iglesias concert, they received a huge number of complaints from one section due to the sound quality. The whole section was granted complimentary tickets for the next Iglesias concert in Toronto. Then there were the three guys from Israel who traveled all the way to Toronto to see the Raptors, but missed the game because they miscalculated the time zone change. Gibbs’ group played travel agent for the fans, changing their airplane tickets, getting them a cheap hotel, and giving them tickets to the next Raptors home game.For the SuperSonics, there is a similar emphasis on the front line for problem resolution. Since “70% of customers will provide repeat business if a problem is resolved eventually, but 95% will do business again if the problem is resolved on the spot,” the employees “have the green light to make your guest experience gold… The front line is the bottom-line all the time.”In fact, the SuperSonics don’t refer to the fans as customers, but rather as “guests” because of the connotations that word brings to how they should be treated. Winemiller pointed out that the second definition of “customer” in the American Heritage dictionary is “An individual with whom one must deal: a tough customer.” In fact, the SuperSonics don’t have a Customer Service department; rather, they have a Guest Care department.

This all reminds me of an article written many years ago by Tom Petzinger for his The Front Lines column in the Wall Street Journal, The Beer Man at Camden Yards. This beer vendor was a cut above all others. (At Camden Yards beer is served in the stands by vendors.) He had devised equipment that allowed him to pour beer twice as a fast. He knew all the season ticket holders in his sections and would greet people who came on borrowed tickets. What particularly astonished Tom was that he even chatted with the fans who didn’t drink beer. Everyone was his customer since all the fans contributed to each others’ enjoyment of the game. Amazingly, he didn’t collect money when he served. Instead, he’s come back in the late innings after beer serving had ended and collected. He trusted his patrons — and they were probably looser with tips at that point. Talk about an empowered employee taking ownership of customer satisfaction!

The Critical Role of Employees

Following the lessons of the Service Profit Chain, Gibbs quite openly states that the key to his success lies in his people. His goal is to get employees to own the fan experience. Tactically, his goal is to grow the number of employees who think this way and to practice the 3 Fs: Find, Fix, and Follow-up. But employee behaviors and practices don’t turn on a dime. Old ways die hard, especially when in a union environment.

maple-leafs-employee-cardGibbs has approached this challenge by winning over employees one at a time by showing the impact that good practices can have. Employees have a website where their work schedule is posted. This provides a mechanism for putting the positive points before the employees’ eyes on a regular basis. They have plaques on the wall with thank you letters from fans. Chris focuses on so-called “teachable points of view” (TOVs). TOVs are particularly difficult to instill in part-time employees who don’t have a long-term bond to the organization. Teaching through example is the approach that has worked best.

Gibbs also employ “mystery shoppers” who report on their experiences as a customer. To keep the cost of this research reasonable, they recruit customers and have employees to do the reporting. Mystery shoppers use a 70-question feedback form with coverage in 10 critical measurement areas. Interestingly, they don’t use the results as a club against bad employees. Instead, they publicly reward those employees who got a 100% rating, and privately communicate with those employees who didn’t receive the full score. This keeps the cultural message positive. They want to “catch people doing things right, not just doing things wrong.” According to Gibbs, “Measure what you need. Reward what you want repeated.” They also use this and other feedback “to learn from our failures or successes.”

For the SuperSonics, their challenges are perhaps greater since almost all of the 500-person staff at Key Arena works for the Arena and not for the SuperSonics, which rents the Arena. Their goal is to change employees’ “attitude of indifference… [to an] attitude of invitation” since “business goes where it’s invited but stays where it’s appreciated.”  They have “Think Big” ideas that prompt “Act Small” actions for the employees. RAVE is their motto which is “Respect And Value Everyone.” Plus they want their employees to CLICK with their guests.

supersonics-click-cardCommunicate courteously.
Listen to learn — learn from every question a guest asks.
Initiate immediately — deliver fast, waits just make the situation worse.
Create connections — connect with your guests.
Know your stuff — product knowledge, e.g., cost of concessions and ATM locations

The goal is to become CLICK certified: Winemiller also cited a UCLA study on how we communicate. The actual words only represented 7% of the communicated message. The tone of voice and nonverbal expression delivered most of the message at 38% and 55%, respectively.

His point is that people do what they’re shown to do, not what they’re told, and they work on communicating a totally positive message. Winemiller tells his employees, “It’s not doing one thing 100% better. It’s doing 100 things 1% better.” He asks everyone on this staff what 1 idea would they commit to improving 1% for the next year and to write it on a card with the CLICK logo worn hung from a lanyard. He wears one himself.

Managing the Customer’s Role in the Service Experience

In the classes I teach on service management, we stress that to deliver quality service, a service provider must manage all the different sources of variability, such as the variable arrival pattern of customers, the variable length of service delivery, and the variability that uncertain and unpredictable customers bring to the operation. These are the challenges that set service managers apart from their manufacturing peers.

Perhaps the most difficult variability to manage is the customer-to-customer interaction. Ever been at the movies when someone talks throughout the movie — on a cell phone! — or on a plane where the person in the row in back of you constantly kicks your seat back? Think of the fan-to-fan interactions possible at a sporting event. Fan relocation is common, and the Gibbs’ group at the Air Canada Centre has gotten good at handling this. Why? They’ve learned from their history. Plus, there’s repetition. The same fans — season ticket holders — return again and again.

The real challenge lies with concerts held at the Centre. Each concert is unique to some extent. Sound systems are arranged differently, and you don’t have the same fans seated next to each other repeatedly. So, even with lots of experience, unpredictable problems with seating will demand resolution on an individual basis. They will relocate fans with obstructed view seats on the spot where possible.

The customer’s role in the service experience poses an interesting question for service managers who must handle service recovery. Is the customer always right? Gibbs feels that for tangible products, the customer is always right assuming they did their due diligence to learn what they bought. But with services, the customer’s role in the service experience has to be added to the calculus. The customer is not always right. So they have a debate about when the customer is owed an apology and when he is not.

Service Recovery Outcomes

What’s the result of their service recovery practices? The Maple Leafs have a 97% season ticket renewal rate. The Maple Leafs are a Toronto — a Canadian – institution, so the fan loyalty would be high. But loyalty can change quickly. In my home town, Boston, the Bruins were perennial sell outs even when the Celtics had championship teams. Lately, though, attendance has fallen precipitously — and with the strike resolved who knows were attendance will go. A better team would certainly have helped, but would better service recovery practices also have helped? In Toronto the Maple Leafs have the Blue Jays’ experience from which to learn. In the early 1990s, the Blue Jays sold out regularly, but when the team on the field weakened, so did attendance. Did the Blue Jays take their fans for granted? Maybe that’s part of why they recently bought their ball park to better control the fan experience.

The Maple Leafs want to be sure their fans don’t feel taken for granted. Each year tickets for seasons ticket holders are delivered in some handsome gift set, e.g., in a beautiful wooden box with other Maple Leaf mementos to demonstrate an appreciation for the fans.

Lessons from the Sports World

What lessons can be drawn from these examples of service recovery in a sports environment?

  • Positive customer satisfaction is more than the lack of customer dissatisfaction.
  • Meeting the basic expectations does not bond customers to an enterprise.
  • Service recovery promotes a proactive attitude toward improving customer satisfaction.
  • The key tenets of service recovery: Listen, Resolve, Compensate, and Learn.
  • Empowered employees — who want to use their empowerment — are key to a service recovery program.
  • The culture must be ready for service recovery since employees must own it and drive it.
  • Leadership – and leading by example — is critical to establishing the proper culture.

Service recovery, while typically funded from an operational budget, is really a marketing program. This type of program can deliver a very high ROI through its effects on customer retention.

Articles on Service Recovery

Here are useful articles and links on service recovery:

  • “The Profitable Art of Service Recovery,” Christopher W.L. Hart, James L. Heskett, W. Earl Sasser, Jr., Harvard Business Review, 1990, Reprint #90407.  (also available from Amazon)
  • “Recovering and Learning from Service Behavior,” Stephen S. Tax & Stephen W. Brown, MIT Sloan Management Review, Fall 1998, pp 75-88, Reprint 4016.
  • “Putting the Service Chain to Work,” James Heskett & Thomas O. Jones, Harvard Business Review, March/April 1994, vol 72.
  • The Service Profit Chain, James L. Heskett, W. Earl Sasser, Leonard A. Schlesinger, Free Press, 1997.
  • The Value Profit Chain, James L. Heskett, W. Earl Sasser, Leonard A. Schlesinger, Free Press, 2003.
  • “Understanding Customer Delight and Outrage,” Benjamin Schneider, David E. Bowen, MIT Sloan Management Review, Fall 1999, pp 75-88.
  • Knock Your Socks Off Service Recovery, Ron Zemke, Chip R. Bell, AMA
  • Delivering Knock Your Socks Off Service, Kristin Anderson, Ron Zemke, AMA, 1998.

Also, a couple of vendors have software applications that help manage the complaint handling process to effect positive service recovery.