My first customer service interaction didn't end well.

I was sixteen and had been on the job for 15 minutes. An irritated customer approached and I said the wrong thing. He stormed out of the store.

It was a terrible feeling to see a customer literally walk out the door. In that moment, I vowed to learn everything I could to prevent that from happening again.

I've been obsessed with service recovery ever since. This guide summarizes what I've learned about getting customers to give you a second chance after a service failure.

What is service recovery?

Service recovery is the action taken to regain the trust of a dissatisfied customer.

It's typically necessary after a service failure, which is a catch-all term for something the customer believes went wrong, whether it's a defective product or service, a restrictive policy, or a rude employee.

Service recovery requires more than just soothing an upset customer's anger. (Check out my comprehensive guide for doing that.)

The key to service recovery is restoring trust.

Why is service recovery important?

Regaining a customer's trust after a service failure has a direct impact on customer retention, customer acquisition, and efficiency.

Customer retention

For every customer your business loses, you need to attract two new customers to grow. A 2011 study by Venessa Funches revealed that 42 percent of customers stopped doing business with a company after a service failure, while an additional 35 percent reduced the amount of business they did. Service recovery can help prevent those losses.

Customer acquisition

Service recovery prevents negative word-of-mouth. Funches's study found that 70 percent of customers spread negative news about a company after experiencing a service failure. This included:

Online reviews
Social media posts
Sharing stories with friends

Efficiency

Service recovery can help us serve customers more efficiently. Upset customers contact us more, return products more often, and ask for more discounts, freebies, and upgrades. Their issues also take up more time, which creates the need for additional staffing and can cause otherwise happy customers to have to wait for service.

When do we need service recovery?

An attempt at service recovery should occur whenever a customer experiences a service failure. The most obvious opportunity is when a customer contacts your company to get help resolving a problem.

Yet customers don’t always proactively tell you about their problems or frustrations. This makes service recovery more difficult since you can't work to regain a customers' trust unless you find out it's been broken.

Here are just a few ways to identify unreported service failures:

Ask customers directly. For example, "How is everything?"
Survey customers.
Read (and analyze) online reviews.
Proactively monitor your operations for service failures. For example, a late delivery.
Follow-up with customers who cancel or don't renew.

As the membership director for a professional organization, I helped increase membership by 67 percent by contacting former members and listening to the reasons they didn't renew.

Their eye-opening feedback helped our association learn about some big issues that never showed up in our member surveys. Many members ultimately renewed once we demonstrated that we were willing to listen and fix the problems they had experienced.

How can you recover from service failures?

There are three general steps involved in regaining a customer's trust after you identify a service failure:

Contact customers
Investigate issues
Demonstrate accountability

Let's take a closer look at each one.

Step 1: Customer contact

Start by listening to your customer. This is easier to do if they proactively complain about a service failure, but it might require proactive follow-up if you learn about the issue later.

Try to understand the service failure from the customer's perspective. There's often a gap between what we think the problem is and what the customer perceives.

For example, a customer service rep for a propane company thought a customer was worried about getting their delivery rescheduled after a recent delivery was missed. What the customer really worried about was running out of propane and not being able to heat their home in the winter.

Effective listening is sometimes all that's needed to win back a customer's business.

A staffing agency executive decided to call clients who had recently stopped doing business with his company. His proactive outreach recovered business worth over $75,000 in net profit in just a few weeks by showing former clients that he valued them.

Step 2: Investigate the issue

It's important to investigate the root cause of service failures once a customer shares their feedback. This not only demonstrates your commitment to making things right, it helps you find a solution and prevent the same service failure from happening again.

One manager discovered a problem with his company's billing software after the same client complained about a billing error multiple times. The client would have forgiven one error, but he was losing trust in the business because the same error kept happening.

The manager was shocked to find that other clients had experienced the same issue, but either didn’t notice or didn't think it was worth complaining about. Even worse, the error was costing the company $50,000 per year.

It took just a few moments to fix the issue, save the company money, and prevent other customers from experiencing the same problem. Best of all, the unhappy client was willing to give the company another chance once he learned that the manager had listened to his feedback and investigated the problem.

Step 3: Demonstrate accountability

Customers are more likely to give you and your business another chance if you demonstrate accountability for the issue and prove you are working to prevent the problem from happening again.

The fix is sometimes simple.

Most baristas will gladly remake your latte if you don't think it tastes right. That instantly regains your trust so long as it doesn't take too long to remake your drink and the issue doesn't happen too often.

Other situations might require more expense and effort.

A mechanic once scratched my car door while it was in for service. While I wasn’t happy about the scratch, the service advisor immediately took responsibility. He offered to fix the scratch plus another scratch on the same door that the dealer didn’t cause. It would take a couple of days to make the repair, so he offered me a loaner car to use in the meantime.

This was a costly repair for the mechanic, but the accountability and extra effort demonstrated by the service advisor earned my repeat business.

Do you always need to give a freebie or discount?

Some people mistakenly believe that service recovery always includes giving customers a freebie or a discount. A few even worry about unscrupulous customers inventing problems just to get something for free.

Freebies and discounts should be used cautiously. They aren't always needed for service recovery, and sometimes they can make issues worse.

A better approach is to focus on regaining your customer’s trust.

Conclusion

Service failures can and will happen. That makes service recovery a valuable business function. Regaining a customer's trust after something goes wrong is essential to earning their repeat business, enjoying positive word-of-mouth, and reducing your servicing costs.