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This is where we will share insight and observations from our experience with clients and colleagues. We welcome your comments and input.

Cost of Service Recovery

Perhaps the title here should be the investment in quality yields big results. We spend a lot of dollars (or equivalents) in business trying to make a customer happy in order to retain their business AFTER a service failure, it makes sense to focus on reducing the failure rate as a top priority. If the overall experience of a customer is poor as a result of a service error then studies have show where we may have to spend at least 10x or more to recover from a problem than the investment would have been to prevent it from happening in the first place

A recent personal example of this happened recently when my wife took her car in for routine service. There is no need to name names but the luxury brand is known for its expensive services. On top of that the dealer advisors push to have additional maintenance services performed that may or may not be needed. It is not a scam as the services are legitimate and of course more profitable for the dealer. If you are not mechanically inclined or don’t have some expertise with automobiles, the offer seems ominous if you do not accept the extra services. Consequently the proposed bill was 3x what she expected going in based on past experience and estimates for the same service type provided before. She was also very clear beforehand that she was going to wait for the service to be completed but she had tight timeline and the dealer would have to keep to the promised timeframe. In the end they were late by a small amount, the ending costs were more than anticipated due to the added services (which were not really required). All of this did not bode well for a satisfied customer. Since we have come to expect less than stellar experiences with dealers, we complain a little then move on.

The kicker was that they insisted on replacing the windshield wipers that had been functioning flawlessly and they had the nerve to charge $41 in labor to replace them. So, the car is late in getting delivered, the service overall was more expensive than anticipated and shortly after she leaves the dealership, late for an appointment, rain comes and the windshield wiper is not doing its job as well as the old one with a huge streak right in front of the drivers view. This was the straw that broke the Camel’s back. Something that she hadn’t really wanted changed in the first place was malfunctioning. Compared to all that was serviced on the car this one item was just a nit had everything else been a better experience. This is not a shoddy dealer and their service staff is well trained on how to treat customers of this luxury brand so in spite of everything else the overall experience might be rated as neutral. But now there was genuine anger, loss of trust with the service provider and additional inconvenience to get it resolved. It was now an emotional response and not of logic and reason.
The root cause of the wiper problem is that it was not pushed on far enough at installation and no one checked the operation of it afterward. The dealer offered restitution in terms refunding the labor for the original wiper install ($41) plus cost of bringing the vehicle back. However the whole loss of confidence and trust with the provider meant this was a bigger issue and every line of the invoice was reviewed. In the end the dealer did the right thing by making concessions that would somewhat appease the customer. However, those concessions cost the dealership about $700.00 in bottom line profit, not to mention time lost for management and other indirect costs. Certainly they lost a promoter. A two minute process done incorrectly and not quality checked cost the dealer almost 30X the cost of doing it right. The cost of service recovery here was huge.

The storyline behind this is long and boring and many of you will have similar stories. The point here is that the little things count in customer experience and retention. The cost of service recovery should be a key measure, especially in B to C. Understand the root causes and work towards reducing the cost of the service recovery costs by improving quality and compliance. A small investment in checking and improving the service processes will yield a very high financial ROI. When you consider the cost of keeping customers and impact to the brand the ROI is even greater. Invest in the things that cause service failures and spend less time sending people to charm school (#Delta Airlines) or how to apologize more often. Buying a customer’s loyalty is far more expensive than doing the right things to retain customers. You will profit in the end.

That is my opinion, what is yours?

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