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The Power of Service Recovery

Everyone screws up. The problem is what you do to keep the customer from defecting. Often “I am sorry” will work. If you have a monopoly “I am sorry” is fine. Most of us have competition and the cost of losing a customer is huge. Very few people know the cost of a defection so if you have a bank, retail store, gym, hair salon, or thousands of other businesses what is the real cost of losing a customer?

In my book, Achieving Excellence Through Customer Service I talk about the defection strategy. In my book Loyal for Life and Service Recovery Training Program, Loyal for Life I teach you how to master service recovery.  Firms like Federal Express do not know how to spell the words Service Recovery. They are in essence a monopoly. I get a 60% discount off their international rates so I am stuck with them. This week I have been in Hilton Head Island, South Carolina. My wife Pat and I got married here 45 years ago so we came back. In many places customer service is great. At several places it is awful and we would never go back. I just went to Trip Advisor and made my comments. These comments and my rating will be there for years. The problem is the employee doesn’t care and management believes that there are millions of new potential customers. It appears there are over 50 different outlets you can advertise within just Hilton Head Island.

Most employees and owners figure a customer will never come back. They are wrong. Superior customer service creates word of advertising. It is free and 100 times less expensive than paid advertising and capital renovation. We went back to Holly Tequila twice. Great food. Good service. If we spend $35 on a meal how do you figure out the cost of defections? We don’t by appetizers, drinks or desserts) At Outback Steak we have been there 35 times according to their software. Over the last few years, this is $1,225  If I keep going there for another 10 years and have an average meal price of $40 that is $4,000. Outback Steak is very good at Service Recovery. Their customer service is excellent. A lifetime value of my wife is over $5,225.

If I am unhappy with the meal or service it’s not $40 walking out the door forever, it is $5,225. That is why Service Recovery is so important.

My monthly membership fee at Lifetime Fitness is about $960 a year. I have no love for them because their customer service is weak. They are the only place close to my home that has indoor tennis courts and my best friend likes to play there. They have a monopoly. They have never practiced service recovery. If he stopped playing tennis there I would immediately drop my membership. I just played tennis today there and the nets have huge holes in them and the water fountain for over 5 years has warm water. They never fixed it.

When you make a mistake or screw up you have to solve the problem in 60 seconds if you want to keep the customer. Keep in mind most employees don’t care and know the owner is rich. Most owners have no service recovery system in place. Almost all employees fall back on rules, policies, and procedures. The HELL with the customer.

How do you save a customer? More importantly, how do you flip an upset customer so in 60 seconds they believe they are dealing with the greatest company on earth. To make this work every employee must be empowered and master this skill.

  1. Act Quickly. All this has to happen in 60 seconds or less. NO time to move this up the chain of command. What the employee does is magic.
  2. Take Responsibility. It’s OK to say we screed up, it’s my fault or we messed up. The chances of customers hearing these words will be close to a miracle but they work magic. Don’t lie or pass the problem off to someone else or try to move it up the chain of command.  All this has to happen in 60 seconds or less for the magic to work.
  3. Be Empowered. Make a decision in favor of the customer on the spot. When I ask an employee if they can make an empowered decision they often say “what do your mean?” or “would I be fired?”
  4. Compensate. Every organization has products and services of high value and low cost. Give the customer something of value where they say Wow. Cool. Great. Thanks. Being too cheap does not work. The greatest fear of management is an employee will give away too much. Think what would happen if thousands of your customers were over happy. You only wish. If the restaurant can’t seat you at 7 PM for your party of 4 for another 30-40 minutes. Invite them into the bar area to have drinks on the house until they can be seated.  Your real cost for 2 drinks per person is $8. What do you think they are saying and doing every time they order a drink. Another 100-1000 people will hear about this because of Facebook, Twitter, Instagram etc. All for $8.

My wife, Pat said she has never had a hair salon practice service recovery. In the Twin Cities, there are probably 500 places that cut women’s hair. She spends $86 once a month. She had been going to Rocco for 20 years. That is $1032 a year or $20,640.  They cut her hair too short this last time. She never told anyone. She’s not going back. I am in an airport lounge writing this newsletter and was shocked to hear what she told me. I said would they ever give you a free haircut. She said, never. They just lost $20,640.

The more generous the service recovery the more of an impact. The cheaper you are the smaller the impact. Your goal should be several;

  1. Get the customer to come back
  2. Feel like you really care.
  3. Tell their friends.

If the service was so bad many will just never return regardless of the offer. You are hoping this bad customer experience was a one-off occurrence and rarely happens. You are buying yourself a second chance to impress the customer.

In the US, less than 2 percent of companies practice Service Recovery. At least 80% of employees lie when there is a problem hoping you will just disappear. I suggest each organization come up with a list of at least 10 products and services your employees can give away free and on the spot when they or someone else makes a mistake.