Wendy Gubler and Dr. Kristie Seawright, Business Management

Service recovery is the process of turning disappointed customers into satisfied, loyal customers (Bell and Ridge, 1992). It is an integral part of service delivery design for service industries, where some failure is inevitable.

Businesses are aware that service failures cost businesses years of lost revenues, and that effective service recovery can result in reduced costs and increased long-term profitability. However, they lack empirical data about how various service recovery efforts impact customer satisfaction and loyalty.

Objective

The purpose of this research was to learn about how service recovery impacts customer satisfaction and loyalty in China and Russia. Service industries in the two countries are rapidly evolving from socialized industries that previously largely ignored customer service to privatized industries that rely on customer satisfaction for complete survival. This study will assist in design of the service recovery portion of the service delivery operations systems for companies in China and Russia and for multinational companies located in these countries. This led me to the research question:

In China and Russia, the type of service recovery effort is expected to significantly affect customer satisfaction and loyalty.

Methodology

This research was conducted through consumer surveys in each of the two countries. Subjects read written scenarios of retail service failures varying service efforts. Their satisfaction and loyalty levels were measured following the failure scenario and again following the recovery scenario.

Professional colleagues in Saint Petersburg, Russia and Tianjin, China assisted in data collection. The instrument consisted of culturally adapted written scenarios measuring customer loyalty and satisfaction following varying recovery efforts. Native speakers were hired to translate and back-translate the surveys and assure cultural appropriateness of the scenarios.

Each country’s population sample consisted of four groups with 20-30 consumers per group. The analysis examined consumer response to four recovery effort levels:
1. No effort, belligerence
2. No effort
3. Immediate effort
4. Immediate effort with 15% discount

A multivariate analysis of variance (MANOVA) was conducted to determine if post-recovery satisfaction and loyalty differ among recovery efforts.

Results

When it examines China and Russia together as a population, the MANOVA shows a significant difference in the degree of loyalty and satisfaction levels according to the type of recovery effort made.

Recovery efforts are important, even in countries with lower consumer expectations than traditional market economies. Service operations in these countries can differentiate themselves with an effective service recovery strategy.

Further research is needed to examine the difference between countries in loyalty and satisfaction levels among varying recovery effort levels.

References

• Bell, Chip R. and Ridge, Kathy. May 1992. Service Recovery for Trainers. Training and Development. Vol. 46, 58-9.
• Crosby, P.B. 1979. Quality is Free: The Art of Making Quality Certain, McGraw-Hill, New York.
• Finkelman, D. and T. Goland. 1990. The Case of the Complaining Customer. Harvard Business Review. May/June 1990, 9.
• Hart, Cristopher W.L.; Heskett, James L.; and Sasser, W. Earl Jr. July-August 1990. The Profitable Art of Service Recovery. Harvard Business Review. Vol. 68, 148-156.
• Rondeau, K.V., 1994. Getting a Second Chance to Make a First Impression; Service Recover Programs for Laboratories. Medical Laboratory Observer. Vol. 26, No. 1, 22- 25.
• Webster, Cynthia and Sundaram, D.S. February 1998. Service Consumption Criticality in Failure Recovery. Journal of Business Research. Vol. 41, No. 2, 153-159.