Gift Giving Guy

As givers of gifts, sometimes we encounter problems with retailers. Perhaps the retailer sent the gift too late, sold damaged goods, offered a sub par experience, shipped to the wrong destination or even delivered the wrong gift altogether. In my MBA service management course this spring, we called these service failures. Our textbook authors, James and Mona Fitzsimmons, shared some statistics on word of mouth and service failures.

• The average business only hears from 4% of their customers who are dissatisfied with their products or services. Of the 96% who do not bother to complain, 25% of them have serious problems.
• The 4% complainers are more likely to stay with the supplier than are the 96% non-complainers.
• About 60% of the complainers would stay as customers if their problem was resolved and 95% would stay if the problem was resolved quickly.
• A dissatisfied customer will tell between 10 and 20 other people about their problem.
• A customer who has had a problem resolved by a company will tell about 5 people about their situation.

From these statistics, the authors conclude “that a quick resolution to service failure is an important way to create loyal customers.” In other words, businesses need to focus on service recovery: empower front-line employees to make wrong situations right. My business professor reached a more proactive conclusion. Service firms should train people and invest in systems to prevent the service failures in the first place.

I agree with my professor. Once a customer receives poor service, retailers need to expedite (i.e., spend more time and money) to win that customer back. Service recovery should be a secondary strategy. Yes, online shoe seller Zappos.com made my gift order right last Christmas. But I would have been more satisfied if Zappos.com shipped my wife’s Uggs slippers undamaged when she opened them on Christmas Day.