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The Impact Of Service Recovery On Service Quality Management Essay

4835 words (19 pages) Essay in Management

5/12/16 Management Reference this

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This study explores the impact of service recovery on service quality through the Malaysian perspective. It also hoped to serve as a reference to upcoming researchers and not only that, this study will indeed benefit the service industry on how they can provide and serve customers better through a systematic complaint handling or recovery system. The study also proposes a model of systematic complaint management which applied to academic library as a tool of service recovery. On the other hand, organizations themselves can also reap the benefits as complaints are often related to customer satisfaction and loyalty, where if the company took serious notice of one’s complaint and rectified it, that particular customer would actually come back to using their services albeit the mistake occurred earlier. If a company chooses to ignore their customers’ complaints, they would most probably have to suffer the cost of losing another customer as well as the cost of getting a new customer, which sometimes can be very costly. The variables included in this research are empowerment, culture and psychology, management system, compensation and speed of recovery as the independent variables and service quality as the dependent variable. Through this study, business organization, government and society can gain valuable information on the link between service recovery and service quality. As such, the main purpose of this study is to investigate the critical success factors of service recovery towards service quality at the National University of Malaysia (UKM) library. A questionnaire was designed and used as the data gathering instrument based on past research. A total of 315 samples were successfully gathered from 377 questionnaires distributed among the regular users of Tun Seri Lanang Library (UKM). Based on the generated results, it’s proven that there is a positive significant relationship between service recovery and service quality (r = 0.632**, p = 0.000) at the 1 per cent significance level.

Keywords: Service recovery; Complaint management; Service quality; Library

INTRODUCTION

In today’s increasingly competitive and complex environment, the voice of a consumer is becoming more powerful than before as they are more wholly educated on their bill of rights (Tan and Ong, 2009). Hence, if they ever felt unsatisfied, they should take action to get the service they deserve. Good service is as much the responsibility of customers as it is of businesses because complaints by customers often notify a business its deficiencies and indirectly educates managers that proper service leave satisfied customers who will then reflect a strong positive impact upon its bottom line (Tan and Ong, 2009). Although customers these days know that they are encouraged to complain, the real bare fact is that people do not complain when facing service failures.

According to Tschohl (1995), it is said that only one out of 26 customers who are dissatisfied actually complain and only a fraction of the complainers pursue a solution to their problem beyond the seller, the manufacturer, or to government agencies and consumer groups apart from a survey found that consumers with service problems found that more than 70 percent of consumers fully justified in complaining don’t do so. Although customer satisfaction is a major goal to most organizations and trying to consistently please the customers, not all of the services provided are satisfactory from the consumer’s perspective. According to Boshoff (1997), “Mistakes are an inevitable feature of all human endeavour and hence also of service delivery”. Service breakdowns and failures sometimes occur. In these events, customer expectations will be frustrated, which may lead to complaints from unhappy customers. However, not all dissatisfied customers actually complain. When a main service provider fails them, people are far more likely to tell their family, friends and colleagues about their problem than make a complaint. This confirms the belief that complaints only reveal a small part of the damage caused by poor service, and the power of word of mouth recommendation.

According to Mumford (2007), “Very few dissatisfied customers complain, making this a meaningless measure of customer satisfaction.” Hence, most companies often think that their customers are satisfied because they rarely receive any complaints. Mumford also said that “The key to the success of your business is held by your customers. Only by understanding them better will you be able to unlock your business’s future potential.” Often, companies take complaint lightly and focus more on providing a perfect service to the customers. The concept of providing a flawless service to the customers with no interaction from both parties is considered failed. Without customer feedback, it would be impossible for a company to know whether they needed a change or not and it is rather safe to blame the customers themselves on this since it is their fault for not raising their voices when confronted with exceptionally poor service or quality. Therefore, complaints are no longer use as a source of blame but it works as a unique indicator or strategy to build a deeper connection with customers. Complaints are actually opportunities to rectify customers’ problems because most executives will appreciate the so-called ‘service’ when customers bring up a problem to the attention of the management. Researchers has found out that customer who faced service flaw and being dealt with quickly and properly are more satisfied than customers who have felt flawless service all the time (Mattila and Cranage, 2005). Customer satisfaction plays a crucial role as it determines the quality in the service setting. In return, it will provide a competitive edge to any organization which is competing against its competitors (Tan and Saludin, 2009). Complaint management also brings a learning opportunity or experience to organization on services that should be improve and also provide a better service. Therefore, it is important to detect customer dissatisfaction through a systematic complaint handling or recovery system.

Hence, the general objective of this study is to identify the impact of service recovery on service quality. This study aims to analyze whether service will be affected or not based on the way the organization implement their complain handling or recovery system.

LITERATURE REVIEW

Service failure is defined as service performances that fall below customer expectations (Hoffman and Bateson, 1997). Maxham (2001) defined service failures as “Any service related mishaps (real or perceived) that transpire during a customer’s experience with a firm”. Consequently, the manner in which firms respond to service failures is increasingly seen as a factor that may separate the more successful firms from the others. This response, termed service recovery, is defined as the process by which the firm attempts to rectify a service failure. Some researchers believed that service failure that is not immediately handled by a service provider could generate customer turnover which can be costly, especially given that it costs more to win new customers than it does to retain current ones and could lead to customer defection (Kotler, 2000; Liu, Sudharshan, and Hamer, 2000). That is why recoveries are critical because customers perceiving poor recovery efforts may dissolve the buyer-seller relationship and purchase elsewhere. Service quality has become a key strategic variable in organizational efforts to satisfy and retain customers or to attract new customers (Lewis and Clacher, 2001). As a consequence, service failure and recovery encounters have been recognised as critical moments of truth for organisations in their efforts to satisfy and keep customers.

Service failure could be due to unique characteristics of services and psychographic factor of individuals getting involved in service delivery (Lewis and Spyrakopoulos, 2001). Bitner, Booms, and Tetreault (1990) concluded that employee responses toward service failure directly relate to customer satisfaction and dissatisfaction. Other researchers revealed that service failures could also due to customer behaviour in the delivery process of the services (Armistead, Clarke, and Stanley, 1995). Service failures could be grouped into four categories: service delivery system failures, gap between needs and requests, unprompted/ unsolicited employee actions, and problematic customers (Bitner, Booms, and Tetreault, 1990). In a similar way, Lewis and Spyrakopoulos (2001) classified service failures into five categories, namely organization procedures, mistakes, employee behaviour, functional/ technical failures, and actions/ omissions of the organization that are against the sense of fair trade.

However, for many service providers, service failure is inevitable since some aspects of services such as customer attitudes and employee behaviour cannot be totally controlled by management. All service organisations, no matter how quality driven they are, will have some kind of service failures with respect to one or more dimensions of service quality. Although many firms may aspire to offer ‘zero defects’ service, the possibility of service failures cannot be wholly eliminated simply because of the variety of factors such as human errors in service delivery (Fisk, Brown, and Bitner, 1993). According to Michel (2008), service failure isn’t necessarily a disaster for an organization. If the service recovery as in the actions taken in response to that particular failure is handled well, then customer satisfaction, trust, and loyalty can increase at the same time due to the fact that service recovery has a multi-dimensional impact on the company. He also stated that “service recovery is the acid test for customer orientation: if a company does not excel in this, then it is not customer oriented”. Conversely, service recovery brings a learning experience to organization on services that should be improve and also provide a better service quality. Indeed, good service recovery can build commitment and trust between the company and the customer, which increases customer satisfaction and loyalty; moreover, customers are likely to spread positive news about the company, which enhances its image.

Another study done by Eccles and Durand (1998) has shown that customers who have had an experience of service failure being dealt quickly and properly are more loyal to a company than are customers who never felt a service failure before. This argument is further strengthened by research showing that customers who complain are also more likely to repurchase, even when their complaint is not handled as perfectly as they wanted (Eccles and Durand, 1998). According to Kau and Loh (2006), a comparison of customers who did not complain shows that of those who were originally satisfied with the service, their positive values were not promising compare to the customers who take the effort of complaining. In addition, this is a signal to the service providers that complaints from customers and a proper recovery system are a win – win situation rather than getting a dissatisfied customer who choose to remain silent bringing along a negative word – of – mouth (WOM) and dismally low loyalty (Kau and Loh, 2006).

In contrast, service recovery failure – even for a relatively minor incident can increase customer dissatisfaction and frustration. This makes them more likely to say negative things about the company, damaging its image and potentially turning other customers away (Michel, 2008). Companies often measure service failures by the number of customer complaints. However, this severely underestimates the problem as only a small fraction of dissatisfied customers actually make a complaint. Therefore, customers are always encouraged to complain. Complaining gives management an opportunity both to remedy specific problems that are episodic and limited to the individual incident, and to correct systematic problems that affect many individuals throughout the firm’s customer base (Huppertz, 2007).

Generally, consumer complaint issues in Asian countries like Malaysia need to be further explored as it is considered scarce, with many of the research being conducted in America or European countries (Tan and Ong, 2009). In the local context, Malaysians are less forthright in expressing views and opinions and giving negative feedback can be awkward and difficult as indirectness is the more acceptable norm than directness in day-to-day behaviour (Asma, 1996). This actually makes it more difficult for the service provider who may not have a chance to know when and why customers are unhappy (Ndubisi and Tam, 2004b). As the choice of complaint style might differ across cultures, it is expected to find some differences in the Malaysian consumer complaint behaviour, for example, one would expect private complaint to be more strongly associated with defection than public complaint, and defection to be higher among private complainants compared to public complainants (Ndubisi and Tam, 2004b). It is also relevant to believe that Malaysian customer might be more willing to engage in private complaint rather than public complaint because a customer who chooses public complaint will have to confront the service provider directly, which may not be deemed normative (Ndubisi and Tam, 2004a). A study by Tan and Ong (2009) identified 5 main complaint responses executed by Malaysian customers when they are dissatisfied due to service failures occurred in service industry. They are the customers’ decision to complain to the organization when dissatisfied, doing nothing, spreading negative word of mouth to friends and families, quit purchasing the company’s product and their service, and complaining with the help of an external third party. The study also demonstrated that there is a significant relationship between complaining to the company and customer satisfaction. Their research has also successfully proven that Malaysians no longer restrain themselves from voicing out their opinions, and do not view complaining as a type of confrontation anymore.

Service recovery has become a part of most companies’ customer retention strategies as more and more companies recognizes the value in developing and maintaining long – term relationships with their customers. Organization should provide necessary or suitable training to service providers in terms of skills, attitude and positive behavioural reactions toward difficult situations which it will all give the confidence in staff to be empowered (Shahin, 2000). Therefore, by empowering staff and implementing a systematic complaint handling through in – depth analysis on voice of customers and customer complain should be the main priority of all organization or library specifically (Tan and Saludin, 2009). As concluded by Tan and Saludin (2009), effective communication between staff and students by organizing communication workshop frequently in which staff could be exposed and educated with the current skills needed and uptrend issues pertaining to customers’ needs and satisfaction should be the agenda to all institutions. The workshop should emphasize on issues such as courtesy, friendliness, readiness, responsiveness and etc. Evidence suggests that little time spent on training employees in the art of service recovery reports that one – half of company responses to customer complaints actually strengthen the customer’s negative feelings toward the company and its representatives (Hart et al., 1990). By having a standardize complaint handling system, the voice of customers (VOC) can be identified for continuous improvement (Tan and Saludin, 2009).

In this research, the core study is to determine the significant relationship between service recovery and service quality. There are five determinants or indicators identified, which includes: (1) speed of recovery, (2) management system, (3) empowerment, (4) culture and psychology, and (5) tangible compensation. These determinants of service recovery are briefly described in the following sections.

Speed of Recovery

Speed of recovery is typically related to the efficiency of the service provider; a delayed response would imply inefficiency and thus induce consumers to think that the same problem is likely to occur in the future (Folkes, 1984). Consistent with these arguments, Wirtz and Mattila (2004) results indicate that a delayed service recovery prompts the consumer to attribute the cause of the service failure to be more stable and more controllable, while an immediate recovery reduces such attributions. Frontline staff plays a crucial role not in only service delivery during service encounter but also during service recovery. The speedy recovery of service complaints is particularly important to customers (Whitely, 1994). As frontline staffs are normally the first to face dissatisfied customer, the most effective service recoveries are those solved immediately by frontline staff (Zithaml et al., 1993).

Management System

Management system is one of the influencing factors which affects a service recovery performance and thus influence service quality. Overall, most companies will have at least one in ten customers who will not be satisfied with the service they received (Bramson, 1991). Therefore, given that in the best managed companies problems will still occur. An emphasis should be placed on service recovery which is the process of putting right what went wrong. A range of techniques must be used to ensure customers have adequate means by which they can register their view, opinion and suggestion. However, if the latter option is taken and a complaint is registered, there is little organization can do to recover the situation (Eccles and Durand, 1998).

Empowerment

Empowerment is giving the employee the power to act in the interest of serving customers better and so to influence organizational performance and service quality (Bowen and Lawler, 1992). When service failures occur, customers expect a quick and fair response (Desatnick and Detzel, 1993). Customers who have experienced unsatisfactory service do not want to be referred to numerous other people or be told to wait; they just want the problem fixed. Front line staffs are the closest to the customer and they are in the best position to determine what action is required and to provide it (Dewar, 1993). Unfortunately, normally frontline staffs don’t have the power or authorization they need to fulfil a service recovery on the spot (Rust, 1996). This is important if an event of a service failure is about to occur (Bowen and Lawler, 1992).

Culture and Psychology

The relationship between culture and service quality and satisfaction has been investigated by previous studies (Winsted, 1997; Donthu & Yoo, 1998; Mattila, 1999; Furrer et al., 2000). A strong organizational culture exerts tremendous influence on the culture of the firm’s employees. Webster (1995) suggests that those informal forces within firm can sometimes be even more influential than formal written policies and guidelines. As such, organizational culture provides managers with an effective means of conveying expected behaviours to employees. Similarly, the culture which exists within a service firm has a strong influence on the firm’s ability to provide excellent service and to effectively recover from service failures (Parasuraman et al., 1988).

Tangible Compensation

In addition to satisfaction and post – recovery behaviours, researchers explored the role of service recovery dimensions on consumer attributions for service failure. Compensation might be perceived as an admission of guilt, and hence enhance the perception that the service provider had control over the service failure. When the recovery was in the middle of the performance continuum either an immediate recovery but no apology, or a delayed response accompanied by an apology, offering a discount had a positive impact on satisfaction. It thus seems that offering compensation might be perceived as a more “powerful” apology, which then helps to tip the balance towards satisfaction in mixed – bag recovery situations (Wirtz and Mattila, 2004).

Service Quality

Parasuraman et al. (1988) defined service quality as an overall evaluation on the customer’s general expectation of how the industry should perform and the firm’s performance providing services. Thus, service quality is seen from the perception of the customers towards the service providers. On the other hand, service quality is said to be influenced by expectation, process quality and output quality (Chen et al., 2001). The result of their study shows that customers are the main determinants to the standards of service offered by service providers as they have the experienced and feelings to perform a rational judgement. Edvardsson (1998) said that the service quality is a measurement of how well the level of service is delivered to the customers and matches the customer’s expectation.

METHODOLOGY

Based on the literature review, a research framework has been formulated. The research framework is shown in Figure I.

Independent Variables Dependent Variable

FIGURE I. Research Frameworks

The hypotheses are as follow:

Speed of Recovery

H1: There is a significant relationship between speed of recovery and service quality.

Management System

H2: There is a significant relationship between management system and service quality.

Empowerment

H3: There is a significant relationship between empowerment and service quality.

Culture and Psychology

H4: There is a significant relationship between culture and psychology and service quality.

Tangible Compensation

H5: There is a significant relationship between tangible compensation and service quality.

Service Recovery

H6: There is a significant relationship between service recovery and service quality.

The questionnaire was pilot tested with a random selection of 30 regular patrons to determine the usability, consistency, suitability and validity of the questionnaire designed. Amendments are made onto the questionnaire based on the comments and feedbacks given by the respondents. Questionnaires are administered through a face to face method. A total of 315 samples have been gathered from the 377 questionnaires distributed. An excess of questionnaires are distributed to get sufficient information and an equally distributed date for later data analysis purpose. Finally, a six-point Likert scale has been employed in the questionnaires.

ANALYSIS OF SURVEY

Statistical Package for Social Science (SPSS) version 16.0 is used to analyze the data based on the information stated in the questionnaire. The measurement and analysis method that is used shall consist of descriptive analysis, reliability test, correlation analysis and multiple linear regression. All raw data obtained shall be derived into a valid and organized form of data which would consider as the determinant in the entire research.

Descriptive Analysis

In this study, a total of 377 questionnaires have been distributed and due to incomplete and missing data, 315 questionnaires have been selected for data analysis with a response rate of 83.6%. The participants were approximately 61.9% Malay, 27.9% Chinese, 7.3% Indian and others with 2.9%; 77.1% of graduate students, 14.3% post – graduate and outsiders with 8.6% participated in this study. A total of 25 respondents (8%) have said that they have encountered dissatisfaction and experienced of logging a complaint whereas 290 respondents (92%) never. For the question of whether the library took corrective actions or not based on customer complaints they have received, 2 respondents (0.6%) have stated that the library did not do anything when they complain, while 23 respondents (7.4%) did receive the proper corrective action after they have complained. Out of 315 respondents, 286 respondents (90.8%) have stated that by complaining, they can help the company to realize their mistake and would provide a better service in future whereas only 29 respondents (9.2%) disagree and felt otherwise. The summaries of results are shown in Table I.

TABLE I

SUMMARIZATION OF PSYCHOGRAPHIC QUESTIONS

Variable

Frequency

Percentage (%)

Cultural Background

Malay

Chinese

Indian

Others

195

88

23

9

61.9

27.9

7.3

2.9

Status

Graduate

Post – Graduate

Outsiders

243

45

27

77.1

14.3

8.6

Experience of Complaint

Yes

No

25

290

8

92

Actions taken towards the complaints

Yes

No

23

2

7.4

0.6

Is Complaining Influence Service Quality

Yes

No

286

29

90.8

9.2

Reliability Analysis

According to Sekaran (2003), Cronbach’s Alpha reliability coefficient is also known as temporary consistency reliability was being used for the variables measured. The reliability test would determine and prove whether the study and the measurement test applied upon if are reliable, thus approve the validity of the study. With that, it would strengthen the causal effect and the objectives of the study. The number of variables, reliability measures and no of items are summarized in Table II below.

TABLE II

SUMMARIZATION OF RELIABILITY MEASURES

No

Section

Variables

Cronbach alpha

(α)

No of Item

1

Factors Influencing Service Recovery

Speed of Recovery

0.8677

5

2

Management System

0.8613

5

3

Empowerment

0.8655

5

4

Culture and Psychology

0.8520

5

5

Tangible Compensation

0.8100

5

6

Impact of Successful Service Recovery

Service Quality

0.9089

6

The value of alphas (¡) obtained from this research were between 0.8100 ~ 0.9089 with all the constructs above 0.80. All scales exceed Helmstadler (1964) suggested level of 0.50 and Nunnally (1978) suggested Cronbach’s alpha level of 0.70. This indicates that the instruments used in setting up the questionnaire in this research are highly reliable and with high internal consistency.

Hypotheses Testing

TABLE III

H1: THERE IS A SIGNIFICANT RELATIONSHIP BETWEEN SPEED OF RECOVERY AND SERVICE QUALITY

Variable

Mean

Standard Deviation

Pearson Correlation, r

Significant, p

Results

Speed of Recovery

4.9048

0.66434

0.491**

0.000

Supported

** Correlation is significant at the 0.01 level.

The correlation result as shown in Table III is 0.491; this indicates it has a moderate positive relationship. Since the p – value = 0.000 calculated is smaller than alpha 0.01, H1 was therefore supported at 1% significant level. This indicates that the sample provides sufficient evidence that there is a significant relationship between speed of recovery and service quality. According o Weiner (1980) he argues that the speed of recovery is perceived as an efficiency cue, thus affecting the perception of customers towards the firm’s service level. In addition, a fast recovery would be seen by consumers as a platform of a good service provider company (Blodgett et al., 1997). In other words, failure to act relatively quickly and actively will lead to deterioration between initial dissatisfaction and final dissatisfaction which leads to negative quality service aspects (Andreassen, 1977). Therefore, the sooner recovery takes place; it will definitely contribute and influence the level of improvement in customer satisfaction (Boshoff, 1997).

TABLE IV

H2: THERE IS A SIGNIFICANT RELATIONSHIP BETWEEN MANAGEMENT SYSTEM AND SERVICE QUALITY

Variable

Mean

Standard Deviation

Pearson Correlation, r

Significant, p

Results

Management System

4.8660

0.66979

0.591**

0.000

Supported

** Correlation is significant at the 0.01 level.

Table IV shows whether there is any association between management system and service quality. There is a moderate positive relationship between these two variables because Pearson correlation value is 0.591. Since the calculated p – value = 0.000 is smaller than alpha 0.01, H1 was therefore supported at 1% significant level. This indicates that the sample provides sufficient evidence that there is a significant relationship between management system and service quality. Management system is where professional and efficient service recovery process operates which leads to service quality (Eccles and Durand, 1998). According to Jenkins (1992), the end service is determined by the commitment of the management of the service firm. Customer relationship management (CRM) system and if used properly, could enhance a company’s ability to achieve the ultimate goal of retaining customers and so gain a strategic advantage over its competitors (Nguyen, Sherif and Newby, 2007). CRM systems can also help organizations maximize their abilities to interact with their customers. This is not only leads to improved quality but will enhance the rapid response to customers’ needs (Anderson, 2006).

TABLE V

H3: THERE IS A SIGNIFICANT RELATIONSHIP BETWEEN EMPOWERMENT AND SERVICE QUALITY

Variable

Mean

Standard Deviation

Pearson Correlation, r

Significant, p

Results

Empowerment

4.8660

0.66979

0.531**

0.000

Supported

** Correlation is significant at the 0.01 level.

As to rectify the validity of correlation or relationship between empowerment and service quality, a correlation analysis is conducted between the two variables. Based on the outcome of the analysis, it is found that the solid variables have a moderate relationship with each other where it is positively correlated of a value 0.531, as shown in Table V. With that since the p – value = 0.000 on which it is smaller than alpha 0.01, H1 was therefore supported at 1% significant level. This indicates that the sample provides sufficient evidence that there is a significant relationship between empowerment and service quality. According to Bowen and Lowler (1992), empowerment is giving the employee the power to act in the interest of serving customers better and so to influence organizational performance and service quality. In other words, empowerment allows the employee to provide efficient, personal and more connected to customer service and recovery efforts (Bowen and Lowler, 1992). Besides that, frontline staff members become more motivated and work roles become enriched through empowerment (Bamford and Xystouri, 2005). Align to support this study, De Vyre (1994) study has managed to conclude that 70% of customers are satisfied if they are serving by a positive empowerment system which solves a problem quickly and effectively.

TABLE VI

H4: THERE IS A SIGNIFICANT RELATIONSHIP BETWEEN CULTURE AND PSYCHOLOGY AND SERVICE QUALITY

Variable

Mean

Standard Deviation

Pearson Correlation, r

Significant,

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