The expansion of the Insurance industry in Malawi has resulted in an increased variety in customer demand as well as provided service. Consequences of these developments are less predictable customer wants and needs, increased requirements to fulfil such needs on behalf of the industry as well as a greater demand on employees to interpret such. As a result, customer service and service quality have become major sources of competitive strengths.
As Clients everyday purchase insurance, it is inevitable that sometimes insurance products do not live up to costumersï¿½ expectations. On the other hand, many researches agree that recovery after a service failure can make customers more satisfied and loyal than if the service failure had not occurred at all. Customer complaints occur all the time even though many companies wish they could lower the number of complaints.
The purpose of this thesis, therefore, was to provide a better understanding on how to turn a dissatisfied customer into a satisfied one by having a system of recording Customer Complaints. In order to reach this purpose, research questions that focus on how the handling of a service recovery can be described, as well as the benefits of doing so have been stated. These research questions provided a path to reviewing the relevant literature which results in a conceptual framework. This framework was then used to guide the data collection.
Get your grade
or your money back
using our Essay Writing Service!
Data was collected via a qualitative, case study approach using interviews of six recent customers of insurance policies, enabling us to collect data on a service recovery from a customerï¿½s perspective. The study found that the service failure itself is not what companies should focus on. Instead, it is the effort a company is willing to make to recover from a service failure that matters for most customers. Our findings show a connection between how the employee handles the service recovery and customer satisfaction. We also found benefits connected to handling customer complaints, such as word-of-mouth and customer retention. These benefits can be achieved by companies that welcome customer complaints and respond to their needs.
We would like to express our gratitude to ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ Old mutual Life Assurance Company, for providing us the opportunity to conduct this study in the intriguing and challenging setting of Malawiï¿½s largest insurance Company. It is our sincere hope and firm belief that this study can be of use in future managerial strategy developments.
A special thank you to our thesis supervisor, ........................................, for supporting our ideas and guiding our work. Your comments and help have been most appreciated.
We would like to thank our interviewees and the front desk staff at Old Mutual, who has been our inspiration and motivation in writing this thesis. We recognise your amazing effort and everyday challenge in handling Complaining Customers and would therefore like to dedicate our work to you. Finally, we would like to thank our families and friends for putting up with us when the thesis has hindered us from spending quality time with them.
Table of Contents
List of Tables
List of Figures
CHAPTER 1 Introduction
In this chapter we will present a background followed by a problem discussion on the different aspects of complaint handling connected to service failure. The outcomes of complaint handling will also be depicted. Finally, an overall research purpose will be presented followed by the research questions.
The increased competitiveness in the business environment has made customers more demanding and the need for focus on relationship marketing is more subtle than ever. To confront these new challenges, companies must develop long-term relationship with their customers. In the case of service markets it is common with face-to-face interaction between the employee and the customer, which gives companies the opportunity to tie social bonds and promote longer customer tenure (Ang and Buttle, 2006). This in turn leads to higher volumes purchased and evidently an increase in customer referrals.
In the highly competitive marketplace it has become more important to differentiate through providing superior service quality (Ndubisi, 2007). It is no longer the belief that customer satisfaction will make customers stay; managers must adopt proactive strategies in order to build and uphold a competitive edge.
Always on Time
Marked to Standard
It is of great importance for companies to be able to manage customer loyalty and retention
(Zineldin, 2006). Companies should also consider the lifetime value of a customer and not only the profit that can be made by an individual transaction. The lifetime value consists of future purchases, referrals and also avoiding negative word-of-mouth.
Michelson (2006) states that even if the compensation is a loss to the company, solving the problem will pay valuable rewards in the future in the form of saved sales. One important reason why existing customers are important is that the cost of obtaining new customers exceeds the costs of retaining existing customers (Zineldin, 2006). According to Zineldin
(2006), another good reason is the fact that having long-term loyal customers reduces the cost of serving these customers because they are aware of how the company conduct business and need less help. For all of the reasons above, companies should try to obtain a balance between the efforts made on pleasing existing customers and the investments made in attracting new ones instead of having new customers as their main objective.
Long-standing and happy customers are more loyal (e.g. more likely to provide recommendations and positive word of mouth).
In order to understand relationship marketing Ndubisi (2007) has depicted the four foundations of a buyer-seller relationship; trust, commitment, communication and conflict handling. First, the level of trust is connected to the extent to which the parties have fulfilled their obligations to one another. Second, commitment reveals how much a party desires to maintain a relationship. Third, the interactive dialogue should be timely and trustworthy in order to have effective communication. Fourth, good conflict handling is to avoid conflicts and find solutions if they occur which means that conflict handling should be viewed as proactive and reactive. According to Zineldin (2006), companies should welcome complaints because they should be viewed as a second chance to keep a dissatisfied customer loyal. In fact, up to 95 percent of complainers return if the complain is handled correctly and is satisfying for the customer. If the customer is unsatisfied but does not complain he/she will likely leave the company and spread a bad word-of-mouth which can hurt the companyï¿½s image.
Customer complaints are considered to be a waste of time and money by many companies.
In some cases, the employees give the customer the impression that they do not have the right to complain. Most of the companies today are still considering complaints as something negative. Michelson (2006), claim that approximately 96 percent of the dissatisfied customers do not complain and up to 63 percent of these silent customers do not purchase from the company again. Researches have shown that a dissatisfied customer tells an average of ten people about the negative experience (Zineldin, 2006).
70 percent of the complaining customers will make repeated purchases if they are satisfied with the handling and outcome of the complaint. Customers who do not complain can lead lost market shares and financial losses. This indicates that complaints should be considered as a positive source of information and managers should take into account that the general customer will tell approximately five people about the problem and how it was solved if the customer is satisfied.
1..2.. Problem discussion
When experiencing unsatisfactory problem solutions a customer can respond by switching to a competitor (exit), complaining (voice), or staying with the company and remain quiet (Levesque and McDougall, 2000). Customers may also spread the word of a negative encounter, which affect companiesï¿½ profitability and hurt reputations (ibid). Since a service recovery has such impact on a company it is of great importance to determine what recovery strategy a company should implement (ibid). When severe service failure occurs, the customer retention rates are jeopardized (ibid). The recovery after a service failure is therefore critical in the continuation of the relationship (ibid).
Bell and Luddington (2006) have the opinion that customer complaining behavior has major value for businesses in todayï¿½s competitive marketplace. The main concern is that only five percent of all complaints are brought to the companiesï¿½ knowledge, which has resulted in organizations encouraging complaints to have an opportunity for service recovery and improvements. It is however a predicament that the responsibility of the service recovery is transferred to the company employees which gives management less control. (Bell and Luddington, 2006) Hellier, Geursen, Carr and Rickard (2003) claim that repurchase intention, loyalty focused on sales, is affected by numerous factors: factors like brand preference and perceived value.
This Essay is
a Student's Work
This essay has been submitted by a student. This is not an example of the work written by our professional essay writers.Examples of our work
Brand preference refers to a customer favoring a companyï¿½s service compared to others and perceived value is based on a judgment of benefits and costs or sacrifices (Hellier et al., 2003). Further, Hellier et al. claim that organizational strategies should focus on delivering superior value and fairness of the service provided by the company in order to preserve customer relationships. Customers treated fairly leads to customer satisfaction is a statement by Wirtz and Mattila (2004). The importance of speed of recovery and instant apology is a necessity in a service failure (Wirtz & Mattila, 2004). This results in customersï¿½ procedural and interactional fairness perceptions (ibid). Compensation to the customer must only be
offered if an on-the-spot recovery is impossible (ibid). Immediate compensation with apology after service failure will give the customer the impression that the company had control over the service failure(ibid). The compensation can be interpreted as an admission of guilt (ibid).
Treating customers fairly will encourage present loyal customers to retain brand preference (Hellier et al., 2003). Wong and Sohal (2003) provide results that point toward a greater importance of person-to-person loyalty than of person-to-firm (ibid). This implies that the probability of customer loyalty increases with the quality of service provided by company personnel (ibid). Wong and Sohal (2003) further argue that the reason for higher level of loyalty on the person-to-person level is determined by trust and commitment.
When service failure occurs, the sense of belonging and involvement with a company affects customersï¿½ emotions (Mattila, 2004). Mattila describes two types of post-failure attitudes and the company distinguishes the high levels of affective customers from the low levels. High levels of affective customers are particularly and emotionally involved with the organization. These customers are more likely to feel betrayed after failure and the consequence is negative commitment (ibid). According to Venetis and Ghauri (2004), commitment is the likelihood of the relationship continuing in the future. Service failures generally result in some degree of blame and anger and service managers therefore need to reverse these emotions with the customer in order to circumvent the risk of relationship termination and negative word-ofmouth (Forrester and Maute, 2001). According to Levesque and McDougall (2000), increased customer loyalty determines a companyï¿½s long-term profitability. Further, dissatisfaction reduces customer loyalty and dissatisfying experiences are undesired service solutions (ibid).
In order to avoid negative word-of-mouth managers should consider relationship-building efforts as a supplement to service recovery program; the longer the relationship the more likely a customer is to continue a relationship after a single service failure (ibid).
Tax, Brown and Chandrashekaran (1998) consider the connection between commitment and complaint handling obvious and it is clear that these factors have impact on customer loyalty. They discuss that complaint handling is particularly important in service business when maintaining and developing the relationships (ibid). The complaint management should approach complaints with fairness and motivate employees to handle dissatisfied customers with care and provide them with suitable compensation (ibid). The outcomes of a complaint handling are represented by corrections of charges, refunds, repairs, credit, replacements, and apologies (ibid). Levesque and McDougall (2000) state that actions of recovery after a service failure has three different approaches; apologize (admitting the problem), assistance (solving the problem), and compensation (offering compensation for a loss related to the problem) and these actions can take place alone or be in combination (Levesque and McDougall, 2000).
CHAPTER 2 Review
CHAPTER 3 Methodology
CHAPTER 4 Data
CHAPTER 5 Data Analysis
CHAPTER 6 Findings and Conclusions
CHAPTER 7 Reference