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A Model of Profitable Service Recovery
Abstract
This chapter presents a model of service recovery designed to improve profitability by differentiating the recovery efforts offered to different customer segments. To predict customer responsiveness to recovery efforts, the model advocates the use of both (1) company knowledge and databases to classify customers by past profitability and (2) the severity of the service failure they have experienced. The chapter makes recommendations related to the level of recovery quality and the type of recovery effort that should be extended to customers in each segment of the classification scheme. Using this strategic model of service recovery, executives can avoid wasting costly resources on unprofitable recovery efforts and instead direct those resources to the customers most likely to respond favorably to recovery efforts. By focusing recovery efforts on these customers, the probability of generating a profit through recovery efforts is increased.
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