Service Failure And Recovery Essay

2951 words - 12 pages

Chapter 1 IntroductionIn this chapter, background information about the research problem was presented firstly. Then the purpose of this dissertation and research questions was introduced, after which the structure of this thesis was described.Background of the ProblemThe deepening of globalization has forced companies to develop and maintain their competitive advantages to remain their customers' loyalty. The increased competitiveness in the markets highlights the importance of building a long -term relationship with customers (Javalgi and Moberg, 1997). It is quite common in service market that employees of service companies communicate and interact with customs face to face, which provides the opportunity to companies to foster longer "customer tenure" (Ang and Buttle, 2006). In return, the purchased volumes of customer and the referrals of customers would benefit from the longer "customer tenure".The service industry is highly competitive and hence the provision of differentiated service quality (Ndubisi, 2007). The importance of managing customer retention and loyalty has become more and more apparent (Zineldin, 2006). Andersn and Fornell and Lehmann (1994) suggested that the need of customer retention results from the fact that it is more costly to attract a new customer than to maintain a current customer. Moreover, it is 5 times costly to attract a new customer than to retain an existing customer. Moreover, the existing customers have already knew the service process and need less help, compared with new customers.Thus, with an effort to build a long- term relationship, it is very crucial for service companies to satisfy customers and take the lifetime value of customers into consideration. According to Zineldin 2006), the lifetime value of customers includes the purchase /repeated purchase in the future, the referrals and the avoiding of negative reviews from customers. However, the elimination of service failure is unrealistic target for service companies although they show extraordinary service. Moreover, the characteristics of service industry: intangibility (Collie, Sparks and Bradley, 2000), production and consumption at the same time (Pauwels and et al., 1986) and the high degree of human resource participation (Boshoff, 1997), contributed to the difficult to reach the elimination of service failure.However, even though the service failures could not be eliminated but the services defections, especially caused by the bad customer service could be controlled by the companies. The marketing strategies which concentrate on the customer retention probably help the companies to prevent and recover from the service failures as well as improve the overall performance of the service, thus contributing to the formulation of long term relationship with customers. The early study of Reichheld and Sasser (1990) found that the decrease in the defection rate of 5% would stimulate the increase in the profits of services firms at 85%. Thus, the...

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