208 CHAPTER11 DESIGNING ANDMANAGINGSERVICES
drinking water 8 days a year. Companies can be distinguished between those offering
“merely good” service and those offering “breakthrough” service aiming at 100 per-
cent defect-free service.^22Monitoring Systems
Top firms regularly audit service performance, both their own and their competitors’.
They use a number of measurement devices: comparison shopping, ghost shopping,
customer surveys, suggestion and complaint forms, service-audit teams, and letters to the
president. General Electric sends out 700,000 response cards a year asking households
to rate its service people’s performance; Citibank checks continuously on measures of
ART (accuracy, responsiveness, and timeliness). RedEnvelope Gifts Online, an on-line
retailer specializing in upscale gifts, analyzes how many of its orders were correctly filled,
how many were shipped on time, and how many orders were returned by customers.^23
When designing customer feedback mechanisms, service marketers need to ask
the right questions, as United Parcel Service (UPS) discovered. UPS always assumed
that on-time delivery was its customers’ paramount concern, and based its definition
of quality on the results of time-and-motion studies. To get packages to customers
faster, UPS would factor in such details as how long it took elevators to open and how
long it took people to answer their doorbells. Accordingly, UPS’s surveys included
questions about whether customers were pleased with delivery time and whether they
thought the company could be any speedier. Yet, when the company began asking
broader questions about service improvements, it discovered that what customers
wanted most was more face-to-face contact with drivers. If drivers were less hurried and
would answer questions, customers might get practical advice on shipping. UPS has
now taken service a step further, allowing customers to track their UPS shipments and
deliveries through its Web site (www.ups.com), where customers can also order ship-
ping supplies and request parcel pick-up.^24Satisfying Customer Complaints
Studies of customer dissatisfaction show that although customers are dissatisfied with
their purchases about 25 percent of the time, only about 5 percent complain. The
other 95 percent either feel that complaining is not worth the effort, or that they don’t
know how or to whom to complain. Of the 5 percent who complain, only about half
report a satisfactory problem resolution. Yet the need to resolve a customer problem
in a satisfactory manner is critical. On average, a satisfied customer tells three people
about a good product experience, but the average dissatisfied customer gripes to 11
people. If each of them tells still other people, the number of people exposed to bad
word of mouth may grow exponentially.
Toys ‘R’ Us found this out recently when it failed to deliver toys ordered through
its Web site (www.toysrus.com) in time for Christmas. Even though the retailer offered
$100 gift certificates to make up for the inconvenience, so many customers were out-
raged by the delivery problems that the situation made national news and led to a
class-action lawsuit.^25
Nonetheless, customers whose complaints are satisfactorily resolved often
become more company-loyal than customers who were never dissatisfied. About 34
percent of customers who register major complaints will buy again from the company
if their complaint is resolved, and this number rises to 52 percent for minor com-
plaints. If the complaint is resolved quickly, between 52 percent (major complaints)
and 95 percent (minor complaints) will buy again from the company.^26
Tax and Brown have found that companies that encourage disappointed cus-
tomers to complain—and also empower employees to remedy the situation on the
spot—achieve higher revenues and greater profits than companies that do not have a