Monthly Archives: November 2015

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”.

2015 Compete Through Service Symposium: Recap in Pictures

Thank you everyone who attended Compete Through Service Symposium this year!  You made it another great event!

Mark your calendars for the next year’s Symposium, which will take place on October 26-28th, 2016. We look forward to seeing you there!

Leading a Culture of Service

By: Christine McHugh

My experience in customer service started in middle school, working for my grandparents at their retail gift shop.  Subsequently, a stint as a restaurant hostess and then a receptionist at a hair salon led me to managing a chain of espresso carts in Seattle where I enjoyed making coffee and talking with customers.

When I began to look for another job that provided health insurance, Starbucks was suggested given their reputation as an employer and my background in coffee.  I was hired as a barista 26 years ago when we had just 36 stores.

As a new Starbucks partner (employee), I went through extensive training on product quality, preparation and, of course, customer service.  When I was promoted into management, I received additional training on what it meant to be a customer service leader.  We had mantras like “if you’re not helping a customer, help someone who is”.

Fast forward to present day – I‘m now responsible for customer service at one of the most admired companies in the world.  And while we are often noted for great service, we do not consistently make decisions that protect and enhance the connections our baristas make with customers.

I’ve come to realize that creating a culture of service and leading a culture of service requires a constant focus, organizationally and behaviorally. Organizationally, every decision needs to be scrutinized as to whether or not it elevates the customer experience.  This requires a tremendous amount of cross-functional effort and influencing but also prioritization to focus on what matters most.

Behaviorally, employees must have clear expectations about what service looks like, accountability to those expectations, and celebration when those expectations are achieved.  For an organization and/or leader to really instill a culture of service, four practices need to be in place:

  1. Hiring for a service mentality
  2. Training and setting expectations for service
  3. Creating an environment of service
  4. Growing your business by looking at ways to analyze and improve your service

These four things are not rocket science and they are probably on the priority lists of many organizations but instilling them in the culture is the real challenge.

Hiring for Service

Do you only hire people who can connect in a genuine way?  How do you assess that?  Do they look at things from the customer’s perspective? This should be the first filter in assessing talent, not experience, not availability, not references.  If you don’t feel that a prospective employee can connect with customers, has a desire to understand customers or has a true genuine desire to serve others, then don’t hire them.

Training and Setting Expectations

Does your training plan focus specifically on customer service?  This is so critical because initial training signals what’s important and what’s expected.  Ongoing training investments reinforce concepts and develop new skills.  As a leader, you also need to show that you care about customers by demonstrating how to connect with them and telling your customer stories often.  By modeling service, you are showing what’s expected.

Creating the Environment

People want to work in a fun supportive environment, with each other and with customers. How do you recognize and celebrate customer service behaviors?  Do your customers get involved in recognizing and celebrating your employees for great service? Conversely, when service does not meet expectations, is swift coaching and action taken?

Analyzing and Improving

You probably have a lot of data available to measure the customer experience such as surveys, sales reports and research. This is valuable information but should not be taken on its own.  Analyzing and improving service also requires talking with customers and observing interactions between employees and customers.   Being solely reliant on data and metrics is a limiting perspective of the customer’s experience.

Leading a culture of service means alignment across the organization that customers and their experiences are the imperative.  Having the supporting systems, tools and expectations reinforce that alignment helps everyone understand what matters most –customers.

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Headshot_ChristineMcHughChristine McHugh is currently vice president, Customer Service and Operations Services.  Christine oversees the company customer service strategy including the programs and philosophies for our retail stores.  Her team is also responsible for operational planning and implementation of all other company programs and initiatives that are deployed to our to our retail stores in the U.S. and Canada.  Prior to her current role, she was on an 18-month assignment reporting to a member of the senior leadership team to develop and deploy the Starbucks 2014 Global Leadership Conference for 2,000 district managers from around the world.  Previously, she was the vice president, Global Business Optimization, where she was responsible for the company labor investment strategy, work and process improvement using Lean principles and functional store design and engineering.  Christine joined Starbucks in 1989 as a barista and has held a variety of roles during her tenure in the organization including operations, licensed business development, foodservice sales, office coffee, human resources and learning and development.   

Christine is a graduate of Antioch University where she majored in Leadership and Organizational Studies. 

Join the Center for Services Leadership at Compete Through Services Symposium on November 5th, 2015, to hear Christine McHugh, Starbucks speak on Customers at our Core – Leading a Culture of Service.