Leading home builders invest considerable resources into developing products and processes that delight customers with consistently great homes and custom experiences. However, mistakes will happen, and that is why having a clearly defined “service recovery strategy” can be a builder’s best investment.

A service recovery strategy is analogous to the pit crew in NASCAR racing. A winning NASCAR team is always working to ensure that their car is in peak condition. They do, however, spend an equal or greater amount of time strategically planning and training for when the inevitable problems occur. This ensures that they are prepared to get their car back on the track faster than the competition. If there were not a defined strategy in place to recover from a breakdown, there would be little hope of victory. In fact, it is often said that the races are won and lost in the pits, and the same may be true when it comes to service recovery in home building.

In home building, there is tremendous opportunity to create delighted customers by having defined processes that deliver exceptional experiences and produce homes free of defects and deficiencies at closing. That is similar to the occasional NASCAR race won due to high performance and no breakdowns. Then there are the times when people, processes, or products create a breakdown and customer delight depends on the proverbial pit crew’s ability to seamlessly execute a deliberate service recovery strategy.

A Look Under the Hood

A service recovery strategy should not involve providing a discount or credit in an attempt to appease a customer, as it is has been studied and proven that customer loyalty cannot be bought. This is especially true with home buyers, as money will not take the edge off the disappointment of getting less than expected or having to accept inferior quality. A homeowner will quickly forget about a credit or discount, but they will be reminded about any concessions in quality for years to come.

According to preliminary findings from the AboutFace’s Service Recovery Index designed by Jane Edwards-Hall and Paige Hall in cooperation with Rexer Analytics, the behaviors that matter most to consumers during a service failure are responsiveness, empathy, attentiveness, and direct problem resolution. These are key ingredients that must become embedded in any service recovery strategy. Leading home builders understand that service recovery is not a haphazard attempt to right a wrong, but rather a systematic method that can close the loop on customer loyalty and increase referral sales.

Handled effectively, customer breakdowns provide unique opportunities for customer loyalty breakthroughs. Effective service recovery can, in fact, create a higher level of customer loyalty than what might have been achieved if a service failure did not occur, as illustrated in the graph below.

Service Recovery Builds Brands

Many customers today expect to encounter difficulties when getting issues resolved, which provides a great opportunity for companies that have a service recovery strategy in place. Indeed, the use of a defined service recovery strategy can differentiate and create value for a company’s brand. Furthermore, handling customer issues effectively restores trust with customers, which is essential for referrals to occur.

Positive or negative word-of-mouth advertising by customers can now leverage the megaphone of social media, and it is dangerous and foolish for any company to trivialize the power and far-reaching impact of the voice of customers. According to a study conducted by Forrester Research, 71 percent of consumers who said that problem resolution fell far below their expectations also said that they are very likely to tell someone about their experience. Similarly, 65 percent of those who said that problem resolution far exceeded their expectations also said that they are very likely to tell someone. If a service failure occurs, this is definitely not the time to underwhelm the customer further or leave customer issues unresolved.

In home building it is vital to ensure that your people, processes, and products are operating at peak performance levels, just like in NASCAR. It is equally important to be sure that service recovery is planned, practiced, and ready to be engaged whenever inevitable problems occur. NASCAR pit crews are able to turn breakdowns into victories, and a well-developed service recovery strategy can similarly ensure that a home builder takes the checkered flag in the race for referral sales.

Tim Bailey is General Manager of AVID Canada, a leading provider of customer loyalty research and consulting to the home building industry. Through the AVID system, Tim’s team improves referrals, reduces warranty costs, and strengthens the brand of its industry-leading clients. He can be reached at tim.bailey@avidglobal.ca.