Tag Archives: Customer

What You Need to Know about the Impact of Service Crises

Service crises and their impact on companies

Extreme and massive service failures. They are probably the worst nightmare for any service provider. Such crises have a profound impact on customers as the service they seek becomes simply unavailable. The scope of the problems – thousands, to even hundreds of thousands, of customers being hit at the same time – assures wide-scale media attention, damaging the reputation of the company even more. Vivid examples of such failures include JetBlue’s Valentine’s Day crisis in 2007, when over 130,000 customers got stranded; or the BlackBerry service failures in 2011 and 2012, when Blackberry owners around the globe could not access the Internet or their emails for several days in a row.

Whereas a traditional product-harm crisis still offers the possibility to trace the batches of defective goods and engage in recall actions, a mass service crisis does not have this option. All users are experiencing service failure at the same time. This drop in objective service performance (OSP) has an immediate and strong negative impact on the perceived service quality (PSQ). However, it may take much more time for companies to restore their customers’ satisfaction.

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Losses loom larger and last longer than gains

We studied the impact of mass service crises on the perceived service quality for a major European public transport provider. During the observation period, the company experienced several service crises caused by extreme winter weather, which was unprecedented in the recent past.

Consistent with the argument of the Nobel Prize winners Daniel Kahneman and Amos Tversky, we find that negative experiences – drops in service performance – have a much stronger negative impact on perceived service quality compared to improvements in service performance. However, our results also show that the detrimental impact of such crises goes beyond a stronger immediate negative impact. What is even worse for companies is the fact that this negative impact also lasts longer. Losses not only loom larger than gains, but they also linger. Any improvements in objective service performance will only have a short-lived effect on perceived service performance, whereas deteriorations in objective service performance will have a lasting negative effect on perceived service performance.

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The role of history

The ultimate impact of a mass service crisis may depend on the history of a company’s service performance. Customers can be more forgiving if the company has a good track record. On the other hand, an unexpected crisis may be of such an extreme disconfirmation of their (high) expectations that it can result in extreme anger. On the other hand, when the company has a history of bad service, customers may already have become cynical. A new crisis would not add any new information: the company is simply living up to the (low) expectations. But it may also become the final drop for these customers, infuriating them even more.

Our results show that, in case of a “business-as-usual” scenario with a relatively stable service performance, the following picture will emerge: improvements will have short-lived positive effects, and deteriorations will have lasting negative effects. In case of “sustained gains”, an upward spiral of ever better service, a new improvement will result in lasting positive effects (customer delight: the customer gets an even better performance than expected), but a sudden deterioration will have a strong lasting negative effect (extreme negative disconfirmation). When the company is already in a downward spiral (“sustained losses”), an additional deterioration will not have much effect anymore; the damage has already been done. A sudden improvement, on the other hand, will not add much either.

So, what to do?

Even though service companies would love to avoid such mass service crises, they often have little real power to do so, no matter how well prepared the companies are. Restoring the customers’ appreciation of the service quality to the pre-crisis level can only be attained by a continued service performance at a higher than pre-crisis level. A crisis will raise the bar for the future, and improving once is not enough. The customer needs to see that the company succeeds consistently in providing a better service. This is all the more important for companies with a good track record who suddenly face a crisis. Such crisis is an extreme deviation of what customers are used to, and has a strong detrimental effect. Getting back to the old pattern of good and significantly better service is crucial. A silver lining is that when one is already in a downward spiral, an additional negative experience will not further decrease the customers’ judgements in the long term.

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In sum, companies should focus on a stable (and good) service performance level. Such performance level has the best outcomes for customers’ service assessment, and takes much less effort compared to constant adjustments needed in response to peaks and troughs in service performance. A good and stable performance, in turn, is a strong argument for companies in their communication to customers, as it may engender favorable perceptions of the service quality.

This post is based on the article “Losses Loom Longer Than Gains. Modeling the Impact of Service Crises on Perceived Service Quality over Time” which is co-authored by Maarten Gijsenberg (University of Groningen, The Netherlands), Harald van Heerde (Massey University, New Zealand) and Peter Verhoef (University of Groningen, The Netherlands). It is published in the Journal of Marketing Research (Volume 52, Issue 5, October 2015; ).

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MJ Gijsenberg PictureMaarten J. Gijsenberg is Associate Professor of Marketing at the University of Groningen, the Netherlands. He holds an MSc in business engineering, and a PhD in marketing (both from the University of Leuven, Belgium).

His research focusses on the econometric modelling of marketing decisions (timing and size of investments, targeting of actions) and their effectiveness, with special attention to the over-time dynamics of the latter (due to e.g. the impact of both macro-economic and firm-specific crises on consumers’ behavior), and main focus on advertising. His work has been published in the Journal of Marketing Research and the International Journal of Research in Marketing.

He was second runner-up of the 2010 EMAC McKinsey Marketing Dissertation Award, and his research has also been awarded with a Marie Curie Fellowship of the European Commission. Recently, his paper on advertising effectiveness around major sports events was selected by the Marketing Science Institute as one of the “2014 Must-Read Articles for Marketers”.

Unraveling some of the Mysteries of Factors Driving Innovation Success

mouse trapBy Douglas Olsen

Innovation is often cloaked in some degree of mystery – a black box where “change happens” and the world is transformed. Success is often fleeting, and, when failure does occur, there is usually a multitude of views as to what went wrong, with the only commonality being “it was the other guy’s fault.”

Why is it that some inherently good ideas fail and some rather questionable ones seem to stay around forever?

Recently, Raghu Santanam posted in a Center for Services Leadership blog that innovation must take into consideration issues of consumer capability and consumer involvement. This resonated with me. Both of these issues speak to the need to have a customer-centric approach – trying to understand the situation from the perspective of the individual/organization undergoing the change. This does not negate the importance of the views of internal stakeholders, but it underscores the importance of willful and deliberate customer adoption of a new offering. I would like to build a little more on this theme.

I published a book a short while ago based on extensive consideration of existing research as well as examinations of successful and unsuccessful change initiatives. In the book, I laid out a number of fundamental elements that must be present in any successful change context. Let me cover three of the more critical factors here.

Continue reading

Restoring Customer’s Sense of Control through Service Co-Creation

by Adriana Samper

In today’s tumultuous global climate, people inevitably face forces or situations that test the limits of their control.  Natural disasters, political and economic turmoil can all threaten feelings of control over personal and professional outcomes.  Hurricane Sandy or the recent tornadoes in Oklahoma show how people can be strikingly affected and feel a profound loss of control over their lives. Even if not suffering from tragic losses of stability, customers often seek help from service providers for an issue or situation when feeling that things are moving out of their control.  A freelance journalist may seek tax advice as her income begins to grow; a start-up biotech company may need larger-scale technology support as it forms new alliances.

In these types of contexts, how can you, as a service provider, best satisfy your customers?  After meeting and identifying key issues, is it best to inform the client that you will manage the issue and do all of the hard work, so that the client can relax and entrust the problem to you?  Or, is it better to seek the client’s input; perhaps even ask to tackle some of the more difficult tasks with you? Along with a colleague, Keisha Cutright, at the Wharton School, we examined this question at a broad level, asking when people prefer products or services that position themselves as “heroes” (products that will do the hard work for you and deliver impressive outcomes) or as “helpers” (products that will aid you in achieving the same impressive outcomes, but require you to invest hard work). Continue reading

Does Intangibility Make Service Innovation More Difficult?

Innovationby Nancy Stephens

Intangibility is one of the apparent ways in which services differ from products; unlike products, services cannot be seen or touched.  It occurred to me that as a consequence, people probably don’t sit around looking at services and thinking of ways to improve them the way they can do it with products.

I once worked on a project that involved researching U.S. patents and I was surprised to see how many patents are granted to imaginative people who have looked at a tangible object and decided that it could be better.  For example, Floyd Haws had difficulty handling the garden hose when he watered his California lawn, so he invented a “hose outlet support bracket” and was granted a patent on it in 2006.  Amy Harris earned a patent on a “removable crib mattress with detachable top pad” in 2000 to make it easier to put her baby to bed.  (Although such individuals have won patents, they have not necessarily won commercial success with their inventions.)

Is there a services equivalent to the productive musings of Floyd Haws and Amy Harris?  Do people sit around thinking about service processes and how they could be improved?  I would argue no, they do not and that is because the services are intangible.  It is so much easier to think about things that we can see right in front of us.  Yet, enabling ourselves to visualize services is possible. Continue reading