So your company has let its customers down? Whatever you do, don't let them stew!

In the business world, it's a fact of life that companies sometimes let their customers down. Whether the letdown is minor - such as forgetting to provide silverware at a restaurant - or major, such as making airline passengers sit on a stuffy plane for 10 hours during bad weather - all companies have a vested interest in addressing such "performance failures" in a way that encourages customers to keep coming back.

How well-known companies work to retain customers after disappointing them, and how customers respond to such entreaties, is the subject of a new study co-authored by Michael Brady, an associate professor of marketing at Florida State University. Brady and a colleague, Michelle L. Roehm of Wake Forest University, have written "Consumer Responses to Performance Failures by High-Equity Brands," which is published in the current issue of the Journal of Consumer Research.

"Consumers expect a lot from high-equity brands such as Disney or Apple," Brady said of the study. "Because of this, when such brands fail us - perhaps by providing a product that doesn't work or service that is sub-par - we may be especially disappointed and become less enamored of the brand. In fact, we may become so disillusioned that our opinion of that brand dips below even that of less prestigious brands."

Ironically, the more severe the performance failure, the less likely it is to harm a company's reputation, at least in the short term, he said.

"As an example of how this works, imagine you're a traveler dealing with a sizable flight delay," Brady said. "After receiving an announcement, myriad questions may swirl in your mind: What caused the delay? How will it be rectified? What is the revised departure estimate? What assurance is there that the new time will be honored? How can I make the best of the situation? You might begin making phone calls to reschedule meetings at the destination. You might also weigh grabbing lunch in the airport and buying a magazine to kill time. You might even ponder rebooking on another flight and/or searching for a hotelreservation, if you suspect the initial flight will ultimately be canceled.

"Put simply, the rush of questions and plans that is brought on by the flight delay appears to occupy available mind space that you otherwise might spend assigning blame and re-evaluating the brand in ways that may be detrimental to its equity. In short, the need to grapple with a substantial problem may provide a temporary buffer that protects the company's reputation.

Such a buffer appears to be short-lived, however.

"Once the problem is understood and coping begins, a consumer's negative re-evaluation may commence. The lesson for managers is that, after serious lapses in performance, there may be a brief window of time in which a failed brand remains relatively unharmed. Strong marketers will use this temporary reprieve wisely, rectifying whatever has gone wrong before the consumer permanently changes his opinion of the brand."

Failure to do so can come at a high cost to the company's bottom line. Brady pointed to other studies indicating that an unhappy customer will relate his experience with eight to 10 other potential customers, causing exponential damage to the company's reputation.

"Just look at the recent situation involving the airline JetBlue," Brady said. "This past February, JetBlue planes sat on runways in New York for up to 10 hours because icy weather prevented them from taking off. Passengers were made to sit on the planes all that time until there were nearly onboard rebellions. Shortly afterward, after media coverage of the incident got out, JetBlue's stock price took a nosedive - and the company went from being admired to being mocked."

Companies with high-equity brands must look for ways to "soften the blow" when they have underperformed, Brady said. Offering refunds and free round-trip tickets are one possible approach. Companies also should consider making sure that televisions and other diversions are available to "distract" customers until the company can adequately address the performance issue.

"The worst possible thing a company can do is give an unhappy customer time to stew over the situation," he said.

Source: Florida State University

Related stories:

A company's good reputation can be a bad thing
Consumers expect a lot from high-equity brands such as Disney or Apple. When such brands fail us – perhaps by providing a product that doesn’t work or service that is sub-par – we may be especially disappointed. Our evaluations of formerly high-stature brands may even dip below those of low-equity brands. However, a new study from the Journal of Consumer Research finds that this drop in esteem may not always be inevitable after a failure. The study also reveals that, surprisingly, a high-equity brand fares better when the failure is severe.
RIM CEO: AT&T still testing delayed BlackBerry
(AP) -- A delayed top-of-the-line BlackBerry phone from Research in Motion Ltd. is still undergoing testing by AT&T Inc., and RIM's co-CEO implied that the carrier wants to avoid the chorus of complaints about performance that greeted the new iPhone this summer.
South Korea's free computer game model hits US
Free computer game play that is all the rage in South Korean is taking hold in a US market dominated by videogames sold on packaged disks or by online subscriptions.
Computer hardware 'guardians' protect users from undiscovered bugs
As computer processor chips grow faster and more complex, they are likely to make it to market with more design bugs. But that may be OK, according to University of Michigan researchers who have devised a system that lets chips work around all functional bugs, even those that haven't been detected.
Computer hardware 'guardians' protect users from undiscovered bugs
(PhysOrg.com) -- As computer processor chips grow faster and more complex, they are likely to make it to market with more design bugs. But that may be OK, according to University of Michigan researchers who have devised a system that lets chips work around all functional bugs, even those that haven't been detected.
T-Mobile uncaps data plan ahead of Google phone
(AP) -- In advance of the new Google phone, T-Mobile USA has changed the wording of the user agreement for its wireless data network and no longer claims the right to slow surfing to a crawl once a subscriber goes over a monthly usage limit.
Health insurance costs grow more gradually in 2008
(AP) -- Health insurance premiums rose a modest 5 percent this year for coverage that's getting skimpier, researchers say. The 5 percent increase was comparable to last year's uptick. Overall, premiums for family coverage increased to $12,680 and premiums for single coverage increased to $4,704, according to the Kaiser Family Foundation and the Health Research and Educational Trust. Employers pick up, on average, about three-quarters of that cost.
New IBM System Is First to Process 1 Million Transactions per Minute
IBM today announced two IBM System x servers featuring new six-core processor technology from Intel. The new servers offer exceptional power-efficiency, performance and virtualization capabilities for today's most demanding datacenters.

News discussion:

General Science news