Academic journal article Contemporary Management Research

Service Recovery in the Australian Banking Industry

Academic journal article Contemporary Management Research

Service Recovery in the Australian Banking Industry

Article excerpt

ABSTRACT

Considering the importance of service recovery as a corrective measure for service failures, this paper explores: (a) when Australian customers complain (b) the process they follow to look for solutions to their complaints and (c) how they evaluate banks' service recovery efforts. To address these objectives, 25 in-depth interviews were conducted with Australian retail banking customers. Results show that the main reasons for complaints were incorrect transactions, performance not meeting expectations, and unfair fees. The study also showed that Australian customers perceive two steps of the complaining process are very important to have a control over the complaint: gathering all required information and lodging a complaint in person. In relation to evaluating banks' service recovery efforts, Australian customers felt that banks were not paying much attention to their complaints and that there was a lack of acknowledgement and responsiveness.

Keywords: Service Recovery, Complaining Behavior, Customer Satisfaction

INTRODUCTION

Despite the consensus regarding the importance of offering high quality services, service failure remains problematic for almost every business in the world (Ennew & Shoefer, 2004). The prevalence of service failure in retail service settings and the growth in importance of the service sector in the world's economy both point to the need for a better understanding of the role that service recovery should play in today's marketplace.

The purpose of this study is to investigate the phenomenon of service recovery and how it applies to Australian banks. The study initially addresses the issue of the importance of complaint resolution for banks. Customers share their views and describe why they think banks should make efforts to resolve their complaints.

Following this section, the paper presents a study of the various scenarios that prompt the customers to make complaints to the banks. The reasons are not all of equal magnitude or importance to the customers, and the study provides an in-depth look into these situations. The responses of the customers have been classified into crucial and minor service failures. Most of the failures which prompt customer complaints have been identified as being crucial service failures, whilst only one was classified as a minor service failure.

The steps followed by Australian customers in making complaints were also investigated. These steps were then mapped out. It was found that most customers eventually went to a branch to complain, which suggests that banks may look to trying their best to minimize the effort taken by customers to make complaints.

How customers evaluate the service recovery strategies of the banks was also studied. This predominantly addressed the issues pertaining to fairness, which comprises procedural, interactive, and distributive fairness. The findings could be incorporated by banks into their employee training programs to have more efficient and effective service recovery mechanisms in place.

In relation to the structure of the paper, first a literature review is provided, followed by the methodology. Then the paper discusses the findings of the in-depth interviews, and finally the conclusions are presented.

LITERATURE REVIEW

Service recovery has been defined as actions undertaken by service providers to address service failures and the set of processes that firms employ to attempt to provide a remedy for those failures (Battaglia, Borchardt, Sellitto & Pereira 2012). Johnston and Michel (2008) found that an organization's service recovery procedures led to three distinct outcomes: customer, process, and employee recoveries. Michel, Bowen and Johnston (2009: 253) suggest to integrate customer recovery, process recovery, and employee recovery effectively for a successful service recovery, thus they define service recovery as "...the integrative actions a company takes to re- establish customer satisfaction and loyalty after a service failure (customer recovery), to ensure that failure incidents encourage learning and process improvement (process recovery) and to train and reward employees for this purpose (employee recovery)". …

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