Is the Service Recovery Paradox true for B2B relationships?

Is the Service Recovery Paradox true for B2B relationships?

The Service Recovery Paradox (SRP)

A couple of years ago, I wrote a blog called The Service Recovery Paradox – Fact or Myth?  Today I’m looking more specifically at whether the Service Recovery Paradox is true for business-to-business (B2B) relationships.

But first, a quick recap on the basics of SRP. 

The Service Recovery Paradox is a concept that was first introduced by service management guru Christopher Hart in the Harvard Business Review way back in 1990. Here’s what he said more than 30 years ago:

“A good recovery following a service failure can turn angry, frustrated customers into loyal ones. It can, in fact, create more goodwill than if things had gone smoothly in the first place.”

Sounds great. But is it true? Or, as some other academics have asked more bluntly, is it a more of a smouldering myth than a justifiable theory?

Like most things in life, the answer is nuanced.

The evidence – and there really is little of it out there as I discussed in that blog – suggests that in most circumstances the Service Recovery Paradox is simply not true.

“A good recovery following a service failure can turn angry, frustrated customers into loyal ones. It can, in fact, create more goodwill than if things had gone smoothly in the first place.”

When a company does a really good job at fixing the service issue, Satisfaction can go back up to – and even beyond – pre-failure levels. But here’s the rub. Even though Satisfaction recovers, Loyalty does not. So, to summarise that earlier blog, the Service Recovery Paradox (SRP) is indeed a smouldering myth, at least in the consumer world.

The basic message in that blog was to get the basics right, rather than trying to recover a bad situation. Do things right, and do them right first time.  Reliable and consistent service delivery is the cornerstone of long-lasting client relationships. And it doesn’t cost anything to ensure consistency of service delivery because Quality is Free.

But what about the B2B world?


Is the Service Recovery Paradox true for B2B relationships?

All the case studies mentioned in that previous research were from the consumer world. Do the same conclusions hold true for B2B companies? Is the Service Recovery Paradox true for B2B relationships? I was curious to find out.

It turns out that there is even less written about B2B service failures than consumer service disasters. That said, three Swiss consultants – Denis Hübner, Stephan Wagner and Stefan Kurpjuweit – did examine B2B service failure and subsequent recovery in the logistics industry. They interviewed senior managers and front line workers in 25 different companies across three continents and came up with some interesting conclusions.


The Service Recovery Paradox in B2B Situations: A Smouldering Myth

In summary, they did find some evidence to support a positive aftermath after a service failure. However, they could only find evidence for the SRP in nine of the 25 cases that they investigated. That means that in nearly two thirds of cases, there was zero evidence of any recovery after a service failure.

And here’s a more interesting finding. In those nine cases, the discussion is around satisfaction. There is no mention of increased loyalty in any of the cases. Yes, in nine cases and under quite specific circumstances, satisfaction did recover to pre-failure levels. But there is no discussion about increased purchases or purchasing intentions. Nothing about deeper relationships or increased levels of trust.

In other words, loyalty appears to be remain compromised even when B2B service providers implement an excellent service recovery.

This suggests that the SRP truly is a “smouldering myth” in both the B2B world as well as the consumer world.

Now let’s look at some of the nuances in their research, because there are some good messages for B2B leaders to take on board.

“Overall, we observed the service recovery paradox (SRP) or service failures resulting in increased customer satisfaction in nine of the 25 cases”


B2B: Critical external failures are easier to recover from

The analysis of those nine cases where satisfaction improved after a successful service recovery led Hübner and his colleagues to a couple of key conclusions:

  • Service failures must exceed a “zone of indifference” before SRP is seen. The reason is simple. It often takes a truly critical service failure to draw sufficient attention – and a corresponding response – from senior management.
  • External failures are easier to recover from than internal failures. Customers are tolerant of events such as events that they perceive as force majeure. For example: a volcano eruption in Iceland or a nation-wide transportation strike. Customers are far less tolerant of perceived internal failures that the service provider should have been able to anticipate and plan for.

The corollary is also true. If the service failure is low-impact and part of an ongoing systemic problem, it’s almost impossible to recover from, because it rarely gets taken seriously by leadership teams.

B2B: An immediate response coupled with longer term action are ‘must haves’

Even when the service failure is seen to be in the “that was massive and nobody could have predicted it” category, a lot of hard work is required to rebuild satisfaction level afterwards. A few points are worth noting:

  • Compensation is of limited value. Much more important than compensating direct losses is the avoidance of expensive downstream consequences: delayed deliveries, lost production, and so on.
  • Apologies are also of limited value. For the same reason, formal apologies provide less value than a significant and fundamental change in behaviour in the aftermath of a service failure.
  • Response speed is critical. In fact, speed of response is possibly the B2B service provider’s only truly effective weapon. If it can be deployed, it can go a long way to defusing the situation.
  • Prevention is better than cure. In the longer term, even speed of response is of little value if the underlying issues are not resolved. The service provider must implement action plans that ensure the failure won’t re-occur. That means carrying out root cause analysis rather than simply treating the symptoms. ‘Action’ may mean significant investments in technology and re-engineering of processes. It is also likely to include “softer” interventions such as empowered operating-level employees, and improved communication.

B2B Bottom Line – Get it Right First Time

When you read Hübner’s article in detail, it’s hard to come to any other conclusion than the only successful way of ensuring loyal customers is to prevent service failures from happening in the first place. That’s the same conclusion as in my earlier blog.

Easier said than done.

That means going back to the old principles of Total Quality Management (TQM) and “getting it right first time”. Remember that it’s easier and cheaper to build quality in at the start than it is to firefight when things go wrong.

Apologies are not sufficient (but they do matter)

A final thought: even when B2B service providers do everything to prevent service failures, they still happen. When they do, act quickly and learn how to say sorry, even if an apology on its own has limited value. 

Contact us if you want to find out what your clients think of your service. And if you’re not sure how to say sorry, our friends in Corporate Visions may be able to help!

You Said, We Listened

Last month, we asked our clients what they thought of us. We do this every year and take our Customer Relationship Quality (CRQ) feedback seriously. We try to follow the advice we give to our own clients: give your customers the opportunity to tell you what they think. Listen to what they say. Then act on their feedback.

As we did last year, we cast the net for our 2022 CRQ assessment quite wide. We didn’t just limit the survey to a handful of key decision makers in current clients. We included many operational and administrative contacts. Their views are equally important. We also asked dormant customers what they thought of us.

Last year, you said…

The main message that you gave us last year – actually for the last two years – was that you needed more than just a survey provider. In practice, that meant providing more assistance AFTER your customers gave their feedback. You needed a partner that could help you deliver meaningful change across your whole organisation. You also wanted us to be more flexible and supportive.

We listened, and here are three of the things we did in response to your feedback.

1. Deliver more than just a survey

We have always strived to be more than just a survey company. Our mission is to help companies become truly customer-centric. Getting customer and employee feedback is part of that process, but there’s much more to it than launching a survey. That’s why we completely redesigned the way we work with clients, based on what you said to us.

Today we spend a lot more time with leadership teams and sales or account teams both BEFORE we think about asking our customer’s clients for their views as well as AFTER they give their feedback. The BEFORE piece is critical and must be done properly. If you don’t invest the time up-front, your CX (or EX) programme will not deliver the results that Management and the Board expect from it. More than likely, it will end in failure. It’s as simple as that.

2. Assist with Customer Relationship Quality ‘Healthchecks’

Last year we conducted CRQ ‘Healthchecks’ for clients in the UK and Ireland. The objective of a ‘Healthcheck’ is to benchmark how good a company’s Customer Experience or Customer Satisfaction programme is. That doesn’t just mean assessing if the right questions are being asked of the right people. It’s a more fundamental look at whether all the right components are in place to deliver genuine and meaningful benefits. We do this under four headings:

1. LEADERSHIP. The most important quadrant. Good Customer Excellence (CX) programmes are ALWAYS led from the top
2. STRATEGY. Good CX programmes link customer, product, operational and organisational strategy explicitly to customer needs
3. EXECUTION. Success requires properly resourced teams that are brilliant at executing the Strategy
4. CULTURE. Finally, Customer Excellence must become integral to the DNA of the organisation: “it’s how we do things around here”

All four quadrants are necessary for a successful CX programme. The ‘Hard Side’ quadrants of Strategy and Execution are all about metrics and processes. ‘Hard Side’ activities lend themselves to key performance indicators (KPIs) and while the activities in these two quadrants are important and easily measurable, the quadrants of Leadership and Culture are actually more critical.

In our experience, Leadership is the most important quadrant while Culture is the most challenging. And yet, here’s the strange thing: in most CX programmes the ‘Soft Side’ is often overlooked and almost always under-resourced.

3. Run Customer Centricity ‘Masterclasses’ for managers and leadership teams

One of the key ‘Soft Side’ challenges is making sure your entire organisation is on board with your CX (or CSat or NPS or Customer Relationship Quality) programme. Over the past 12 months, we have partnered with the world-leading HEC Business School in Paris.

That collaboration has helped us develop and deliver a ‘Masterclass’ to educate leadership teams, managers and partners about the importance and benefits of putting the customer at the heart of everything they do. The ‘Masterclass’ also helps employees understand the crucial role they play in making their companies customer-centric.

Already, these ‘Masterclasses’ have been delivered both virtually (for COVID reasons) and face-to-face to clients in Europe, Asia and the Americas.

How did we score this year?

Having made the investments over the past two years, we were very curious to get your reaction. In short, you were very generous in your responses this year.

This year we achieved a Net Promoter Score of +66 and a Customer Relationship Quality (CRQ) score of 6.1 out of 7.

This is the highest NPS result we have ever achieved to date and the third time we have scored over +50. Our CRQ score is also the highest we have ever achieved and we are honoured to be thought of so highly by you, our valued clients.

Result: new client wins

I honestly believe that it’s because of the trust that our clients place in Deep-Insight that we have been able to announce some great new wins in recent months.

We have a 10+ year relationship with Atos but primarily in the UK & Ireland. Earlier this year, we extended that relationship to Germany and over the next three years we will be partnering with Atos on one of their most important and strategic global accounts.

One of our largest accounts in Australia was the logistics company Toll Group. Last year our key contact at Toll moved to Scotts Refrigerated Logistics and we recently signed a new 3-year contract to help ScottsRL become one of the most customer-centric companies in Australia.

Vreugdenhil Dairy Foods is a Dutch milk powder manufacturer that operates in Barneveld, Scharsterbrug, Gorinchem and Madrid. Its 500 staff process 1.4 billion kilograms of milk each year. Over the next three years, we will be working with the Vreugdenhil leadership team to turn a company that creates great food products into a truly customer-centric organisation.

Agenda for 2022

While we’re really proud of these Customer Relationship Quality (CRQ) and NPS scores, there is more to do.

For starters, we got feedback from 48% of the people we asked to participate. While that’s not bad, we do see some room for improvement. Last year our response rate was 55%. We know that some of our clients achieve rates of 70% or more. We will be working hard to improve on this figure next year.

Second, the main feedback we received this year is that our new consulting services are great BUT not enough. Our clients are looking for Deep-Insight to provide even more support. The two customer quotes below confirm to me that we need to support clients on a year-round basis.

“Would like to see greater insight on how we can really make a difference for our customers. How do we truly address those recurring themes that come up each year? It would be great to get insight on how we can do this better – beyond the data”

“I would question to what degree on a continual basis Deep-Insight provides interaction and insight as a partner to the business. Also, to what extent there are follow-up meetings post results as you as experts help inform our response and strategy.”

 

Third, the feedback process is not finished yet. We need to ‘close the loop’ with all clients and discuss their specific feedback. We will be in touch shortly and will be looking specifically for more insights into any additional support needs they may have.

I need to finish off by thanking Fiona Lynch for planning, organising and running this year’s client assessment. Fiona joined us earlier this year from Atos where she was part of a global service delivery team. It’s great to have her on board.

So, well done Fiona, and thank you to all of our clients. We really do value your feedback.

John O’Connor
CEO, Deep-Insight

Should Customer Experience and NPS Surveys be Anonymous?

CX and NPS feedback – should it be anonymous?

Should Customer Experience and NPS Surveys be Anonymous? The simple answer is NO – anonymity is not required for a B2B CX or NPS programme.

But the answer is not that simple. Let’s start by defining what Confidential and Anonymous mean in the context of surveys. This may sound obvious, but I have been amazed at the number of times I have needed to discuss this:

ANONYMOUS: No person or application can associate the answers you give with any identifiable information about you
CONFIDENTIAL: Any identifiable information about you will be held confidentially, and stored in an appropriately secure manner
OPTIONAL CONFIDENTIALITY: Any identifiable information about you will be held confidentially, and stored in an appropriately secure manner unless you specify that you would like to be identified (in other words, you decide to waive your right to confidentiality)

So for the rest of this blog, I am not longer going to dwell on anonymity. It’s simply not needed.

Confidentiality – now that’s a different matter

In any setting, when a third party asks for your opinion about someone, confidentiality is important to ensure a really open and honest response. In personal relationships this goes without saying but in the B2B world this is also true. It’s especially true if your staff are doing what you need them to be doing – building strong and personal relationships with clients.

Of course, many of your customers will indeed give you an honest response regardless of whether it is confidential or not. But many won’t. Cultural differences will mean this statement is truer in some parts of the world than others. However, regardless of where your customers live, there will always be those who will not respond, or who may not be as open as you would like them to be, unless their responses remain confidential.

Example 1

This example is an actual Deep-Insight client.

Company A ran a Customer Relationship Quality (CRQ) assessment (Survey 1) and told respondents that they had the option for their responses to remain confidential. Six months later Company A ran the survey again, but this time told respondents the option to remain confidential was removed.

The impact on their average Net Promoter Scores (remember NPS is a measure of advocacy on a 0 to 10 scale) was as follows:

Individuals’ responses in Survey 1 Completion Rate (Survey 2) Average NPS (Survey 1) Average NPS (Survey 2)
Chose confidentiality (did not share details) 55% 6.3 7.5
Waived confidentiality (shared details) 70% 7.1 7.2

 

For respondents who had shared their names with their responses in Survey 1, there was no significant impact. When asked to complete Survey 2, 70% did complete and only a small uptick in scores was noted (7.1 to 7.2).

However, where respondents chose to keep their feedback confidential in Survey 1, there was a much bigger impact. For starters, only 55% of these individuals chose to complete Survey 2. For those who completed Survey 2, there was also a significant increase in scores (from 6.3 to 7.5). In fact, ‘Confidential’ respondents went from scoring more poorly than average to scoring more positively than average when forced to share their details with the response.

Example 2

Here’s another client of ours. Having received very high scores for several consecutive surveys, Company B decided to introduce the option of confidentiality to ensure the integrity of what it was measuring. The findings were interesting, especially for newly-included respondents:

  • 26% of respondents opted to remain confidential overall but for newly-included respondents the figure was 38%
  • ‘Confidential’ respondents scored more poorly than those who agreed to share their responses – but not significantly so
  • Newly-included respondents who opted for confidentiality scored significantly more poorly than other respondents

 

“…but my teams are frustrated by these unactionable ‘Confidential’ responses”

In both examples above, the organisations had good business reasons when they chose not to include confidentiality in their CX process:

  • Improved usefulness as an account management tool as ALL feedback is provided to account management teams
  • All raw data can be fully integrated with internal systems, allowing ongoing re-segmentation of responses (this is limited when responses are confidential)

But the argument that your CX or NPS programme should include ‘Optional Confidentiality’ is far stronger. If you don’t include optional confidentiality, your most unhappy customers will either not respond or will not give you a completely honest response.

This puts your entire CX or NPS programme at risk. You will end up making decisions based on inaccurate or incomplete data.

So should NPS Surveys be Anonymous? No. Should they include ‘Optional Confidentiality’? Absolutely!

“Is there any way to convince ‘Confidential’ respondents to share their details but still give an honest response?”

Maybe, but this will take time; people are people after all.

If a customer is at a point in their journey with you that they do not want to share their details, but they are willing to give feedback, that’s OK. Of course, you can explain the benefits of what you can do if they agree to share their details with you (you can address their issues more easily) but don’t push too hard. There is a trust issue here. Pushing won’t help.

You have a much better chance of convincing this customer by including them in your ‘Close the Loop’ process even though you don’t have a response from them. Over time you will gain their trust, both in the CX or NPS programme as well as in your organisation. You’ll eventually win that shared response.