Recover Fully from Service Failures: A Case of Starbucks

When service failures occur, the service provider's reaction can potentially either reinforce a strong customer bond, or change a seemingly minor distraction into a major incident (Hoffman, Kelly and Rotalsky, 1995). Sometimes, this major incident would cost a company dearly as with the case of Starbucks. The original problem was as simple as a defective coffee machine. However, the situation was exacerbated by the poor response of Starbucks and the company received negative publicity across national media. This report intended to demonstrate how companies could recover from their failures by recommending effective service recovery strategies for Starbucks.

Since service failures are inevitable (Hart, Heskett and Sasser, 1999), how customers perceive the organisations' recovery effort plays an essential part in evaluating satisfaction. Many empirical researches have been done to explore customers' responses to complaint (for example, Blodgett, Hill and Tax, 1997). The results increasingly support the proposition that consumers will evaluate satisfaction with complaint handling in terms of perceived justice.

This theoretical perspective suggest that the three dimensions of perceived justice, i.e. procedural justice (the fairness of the complaint procedures), interactional justice (fairness of the interpersonal communications and behaviours), distributive justice (fairness of the outcome) are the principal antecedents of customer evaluations (Schofer and Ennew, 2005). Having understood how customers evaluate satisfaction, Hart et al (1999) recommend the following actionable guidelines for successful service recovery: measure the costs of effective service recovery, break customer silence and listen closely for complaint, anticipate needs for recovery, act fast, train employees, empower the front-line and close the customer feedback loop.

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However, the above research is rather separated and did not address the interrelationship between constructs. Smith, Bolton and Wagner (1999) contributed greatly to the understanding of service recovery by developing a comprehensive model of customer satisfaction. This theoretical framework is based on exchange framework that integrated concepts from both customer satisfaction and social justice literature.

Failure context (failure type and magnitude) and recovery attributes (compensation, response speed, apology and recovery initiation) were identified as independent variables which will influence the dependent variable: perceived justice (See figure 1), which in turn affect customer satisfaction. The recovery attributes are very similar to the elements suggested by Hart et al (1990), and they can have different impacts on the three dimensions of perceived justice. While identifying the relationship between them, Smith et al provided managers with useful guidelines for establishing the proper fit between a service failure and the recovery effort. The Cappuccino maker bought by the customer is defective; the employee replaced the machine but treated the customer rudely.

Recommended Action for Top Management

Anticipate the problem. Starbucks have sold thousands of cappuccino makers and should be familiar with the defective rates of the machine. Therefore, the management team should develop some guidelines for front-line employees to follow when customers return a defect machine. Selection, training and empowering of front-line staff. Front-line staff should be understanding and sympathetic to their customers. They must be trained to consider the problem from the customer's perspective and show their willingness to help. In addition, they must have access to any resources they need to solve customers' problem.

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