Compensate Group Service Failure Collectively

When running your business well, failures to service your customers won’t occur frequently, and when a service failure occurs, it will usually be a matter of resolving the issue with an individual shopper. Still, there are times in any business when a significantly sized group of your customers are impacted by the service failure. Maybe a large number of your employees call in sick so service slows down. Maybe a traffic accident or a bad storm causes late deliveries or a power outage in your store.
     Findings from consumer studies clearly indicate financial compensation for the shortfall heads off ill feelings toward the business. Researchers at University of Alabama, Copenhagen Business School, and Friedrich-Schiller University of Jena had a question about the circumstance where a group has been impacted: Should you tell shoppers in the group that all are receiving the same compensation for the service failure? The alternative is to tell each individually only what they are receiving.
     In answering this question, the researchers confirmed findings from previous studies concluding the relationship between the size of financial compensation and preservation of satisfaction follows a concave curve. At low levels of compensation, the more you give, the better the results. But at higher levels, the curve flattens out. You won’t get much better results by offering more.
     Attentiveness to customer reactions can tell you the point where the curve flattens. But the research findings do show this point occurs earlier when everyone in the group knows that all are receiving the same amount. You’ll need to spend less on giving credits toward future purchases or providing a discount on the current purchase.
     The explanation is that a sense of fairness itself enhances satisfaction. Knowing all have been compensated the same portrays fairness. This applies otherwise, too. In a store queue, shoppers become highly vigilant. One reason is the extra stress caused by being in close physical proximity to people they don’t know. Another reason is to be sure social norms are respected, such as nobody butting into line and each person waiting about an equal amount of time.
     There are qualifications. If you offer discounts not available to other customers when those privileged customers believe the others won’t learn about the favor, recipients’ satisfaction grows. It’s because of distinctiveness. Assuming superiority to others beats out concern others are getting more than you. The highest satisfaction level climbs higher still.

For your success: Retailer’s Edge: Boost Profits Using Shopper Psychology

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