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University of Washington EMBA Program North America 5. “The Case of the Complaining Customer” Instructor: Char Popp. The Case of the Complaining Customer. Background Decision Maker: Presto Cleaner President J.W. Sewickley Recently received information on a “service failure”

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university of washington emba program north america 5
University of Washington EMBA ProgramNorth America 5

“The Case of the Complaining Customer”

Instructor: Char Popp

the case of the complaining customer
The Case of the Complaining Customer
  • Background
    • Decision Maker: Presto Cleaner President J.W. Sewickley
      • Recently received information on a “service failure”
    • Customer: George Shelton
      • Angry!!!
        • Not very fond of new order system’s performance from the start ($3 for each bag, longer wait, service provider unfamiliarity with the new system)
        • Presto lost (and later found) shirts he submitted for cleaning
        • Feels like he got “the run around”/no empathy from Paul Hoffner & Presto Management or the current complaint resolution system
        • After 9 day wait he bought 4 new shirts
        • Eventually another customer—having inadvertently picked up the wrong order—returned his 4 shirts
        • Still has not heard from Presto as of October 8 (originally tried to pick up his 4 shirts on August 10)
the case of the complaining customer3
The Case of the Complaining Customer
  • Background (cont.)
    • Presto Manager: Paul Hoffner
      • Feels like he made a good faith effort
      • Considers circumstances to be highly mitigating factors
      • Customer has outright lied about some key facts
      • Willing to play the fall guy
the case of the complaining customer4
The Case of the Complaining Customer
  • Mr. Sewickley has 2 decisions to make:
    • Fix the problem?
      • Customer
    • Assess and fix the system?
      • Employee
      • Operations System
      • Corporate Culture
case of the complaining customer
Case of the Complaining Customer
  • Fixing the Problem: To Keep or Not To Keep Customer?
    • Costs vs. benefits to Presto
      • Value of Customer
      • Compensation needed/given to keep customer (if any)
case of the complaining customer building a defection tree
Case of the Complaining CustomerBuilding a Defection Tree

SERVICE ENCOUNTER

P1

Satisfied

Dissatisfied

a

c

b

Do not

Complain

Complain to

Employee

Complain to

Management

P2

P3

P4

Unhappy,

Leave

Unresolved,

Leave

Unresolved,

Leave

Stay, but

Unhappy

Resolved,

Stay

Resolved,

Stay

% Customers Lost =(P1)(a)(P2) + (P1)(b)(P3) +( P1)(c)(P4) + negative word of mouth

case of the complaining customer building a defection tree11
Case of the Complaining CustomerBuilding a Defection Tree

SERVICE ENCOUNTER

.90

P1=.10

Satisfied

Dissatisfied

.60

.05

.35

Do not

Complain

Complain to

Employee

Complain to

Management

P2=.50

P3=.50

P4=.30

.50

.70

. 50

Unhappy,

Leave

Unresolved,

Leave

Unresolved,

Leave

Resolved,

Stay

Resolved,

Stay

Stay, but

Unhappy

% Customers Lost = .03 + .0175 + .0015 = 4.9%, excluding negative word of mouth

% Lost observed by Management = 0.15% = 3% of Total Lost

For every customer Management loses, there are 33 more out there (x 1.5 negative w.o.m)!!!

key learnings
Key Learnings
  • A substantial portion of the customer’s “true” value to the organization can stem from referrals, network effects, and reduced service costs that are not part of “basic” LTV calculations
  • Informed decision makers tradeoff the costs and benefits of service recovery, and they learn from mistakes
    • Customers who complain are typically desperate to do business with your organization
  • Customers will typically hold your organization responsible for their entire experience (whether you think you’re responsible or not)
    • Coordinate points of contact to send a consistent message
key learnings13
Key Learnings
  • Its usually best to keep customers informed, even when the news is bad
    • Emotion plays a huge role in customer assessments of service quality. Keeping customers in the dark risks making things worse.
  • In addition to assessing whether or not to fix the problem, good marketing managers will check to see whether or not the system needs fixing as well