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Getting customers is expensive, and keeping customers is no cakewalk. Photo by Clem Onojeghuo on Unsplash
Everyone makes mistakes. When you screw up and say, “I’m sorry. That’s our mistake,” it’s good customer service, but not service recovery. Most organizations never admit mistakes, and fewer than 1% practice service recovery.
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Keeping customers is critical to your growth. Gaining a new customer is expensive. When you lose one, it’s super-expensive. Not many employees know the lifetime value of a customer, so if one has a problem with a $25 purchase, they will shrug and say, “Big deal. It’s only $25.” However, the lifetime value of that customer could be $1,200, $3,500, or even $11,000. For example, the average Ritz-Carlton customer will spend $250,000 with the Ritz over their lifetime.
To employees, it’s insignificant if the customer never comes back. But the cost to your company is huge. In my book Achieving Excellence Through Customer Service (Bestsellers Publishing, 10th edition, 2014), I show you how to measure the lifetime value of a customer. I wouldn’t be surprised if the lifetime value of your customers is easily more than $12,000.
Employees often feel that the customer is their enemy, especially when something gets screwed up. The customer gets excited and often raises their voice or even uses bad language. Is your employee trained to flip that situation around in 60 seconds or less so they keep the customer? Too often the employee doesn’t want to lose face and admit the problem or take responsibility. If every time something goes wrong an employee remembers the lifetime value of the customer, they’re more likely to practice service recovery and keep the customer.
Four steps to service recovery
For service recovery to work magic, the employee involved needs to implement it. It has to happen on the front line. Here are the four steps:
1. Act quickly. All this has to happen in 60 seconds or less.
2. Take responsibility. Don’t pass it up the chain of command. Just say, “We screwed up. I’m sorry.” (In reality, I can count on one hand the number of times an employee has ever done this.) In the United States, I suspect at least 80% of employees lie. They ’ll say anything just to get you off their back.
3. Be empowered. You have to make a decision in favor of the customer in seconds.
4. Compensate. Every organization has products and services of high value and low cost that your employees can give away when a mistake is made. This is your chance to overwhelm the customer so they say, “OMG! So cool. Wow. Thanks!” If you’re too cheap with the compensation, it has no value. You want to impress the customer within 60 seconds so, instead of them saying, “I’ll never use your firm again,” they post on social media about what just happened and how awesome you are. Identify five to 10 things to use as compensation that meet the wow criteria.
A few examples
At a restaurant: I’m sorry your meal was late. It’s our fault. Can I give each of you a free dessert of your choice? Value may be $6 and real cost $1.
At a software firm: I’m sorry the software isn’t working right. Let me upgrade you to our new software package. You’re our most valuable customer. Your real cost is nothing.
At a hotel: We must have really screwed up your reservation. I’m going to upgrade you to a suite for your inconvenience. Your real cost is nothing.
At a retail store: I’m sorry the new chainsaw isn’t working right. Let me fix it and expand your warranty by another year. Your real cost is nothing.
If you want to set a limit, go ahead. The Ritz-Carlton empowers its employees to spend up to $2,000 to solve customer problems without asking for a manager. What’s your limit?
If you’re interested in training your staff on service recovery, Service Quality Institute has a program called Loyal For Life that’s implemented within one session of 2–3 hours (3–4 hours in developing countries). It includes a user-friendly leader guide with video so your staff can easily facilitate the program. Each participant receives a participant book, certificate of completion, and service recovery technique card.
For more on the subject, I also have a book called Loyal For Life (Bestsellers Publishing, 2013), and each month I publish a new media release.
Published May 14, 2024, on the Service Quality Institute blog.
Comments
Watched managers at a…
Watched managers at a McDonalds I worked at in college do this regularly - giving away ice-cream cones and gift certificates for free food on a future visit. However, stopped at a McDonalds while traveling a few years ago and witnessed a mother with 4 small children try to get her order corrected and the manager insult her and her children rather than correct it or give her free ice-cream or certificates. I thought at the time: this mother will never bring her children to this McDonalds or perhaps any in the future (and her kids might not take theirs in future years). The store probably throws away more food in one shift than it would have cost to help this mother.
Large operation, one couple
My favorite example of excellent customer service, and customer recovery, involves a major Las Vegas casino. My wife and I had left our mobility scooters with the valet parking while we made an excursion. Upon return, one scooter was missing! The attendant immediately Informed us that his supervisor was already in contact with both security and the bell desk to procure a replacement. Within 2 minutes that supervisor arrived, apologized, and informed us that, while no scooters were available from the bell desk, they had already placed a rush order for a third-party rental. He also indicated that the operations manager would be there shortly. Within 5 minutes, that gentleman arrived, also apologized (for the incident AND taking so long to get there) and informed us that the rental unit had been expedited and would be there shortly. Even though I indicated that would not be necessary, he indicated he would remain until the matter was resolved. Speaking with him, in the interim, I discovered that he was, in fact, THE operations manager, responsible for hotel, casino, and all services. The scooter arrived as promised, and the venue comped us both scooters for the entire stay. I have no way of knowing if the fact that we had no issues obtaining difficult tickets, or difficult restaurant seatings, was just pure luck, or the management was assuring our continued patronage.
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