How to Compensate Guests and Simultaneously Generate Revenue
I frequently speak about the importance of soliciting guest feedback to continually improve the quality of your guests’ experience. As a result, if you actively are seeking complaints, you end up in a position where you are dishing out more service recovery, or compensation, for the negative experiences. In some cases, this can become quite costly. That brings up an important question: is your service recovery working for you or against you?
We are constantly being challenged to find alternative solutions to providing refunds to complaining guests. There are, in fact, several options for offering compensation to guests that will generate revenue for the business in the future. Examples of these types of compensation would be discounting your product for a future visit (such as a restaurant meal, hotel room, attractions admissions), or providing the product that caused their dissatisfied for free on the guests’ next visit (assuming all the bugs are worked out by then). The key purpose of this technique is to spend only a little (or nothing, ideally), and have it result in the greatest amount of satisfaction from the guest.
Because we are in an industry where our product is largely intangible, we have an advantage over other industries in regards to what we can provide to our guests for free, or for little cost, without depleting our margins. In fact, we are in a position to make giving things away a revenue-generating component of our business. It sounds strange, but we can capitalize on our failures. Here are three benefits to designing your service recovery systems in your favor:
Requires the guest to return. As a rule of thumb, always strive to provide compensation that goes into effect on the guest’s next visit, even if it is in addition to any immediate action being taken. This will require for the guest to continue frequenting the business, and while they may be entitled to something free or discounted in the future, they will likely still be required to pay for something when they come back. For this reason, this may result in resistance at first due to the guests’ unwillingness to return because of the service failure; however, after explaining the long-term benefits of the compensation, they are more likely to be onboard. In addition, this allows the guest to give the business the opportunity to prove that the service failure that occurred is not common practice.
Creates a win-win solution. When you compensate from a service failure with a revenue-generating recovery option while appeasing the upset guest, both parties are satisfied. This win-win solution will aid in the development of the long-term relationship between your business and your guest. Just like negotiating any deal, all parties must be satisfied, and if the relationship is executed correctly, it has great potential to lead to lifelong loyalty.
Value of compensation exceeds the value of cash. Regardless of whether the product is tangible or intangible, no matter how much of it you give away, it is very unlikely that its value will exceed that of the price you would normally charge for it. Therefore, delivering compensation that generates revenue in the future will always be substantially cheaper than giving a refund of any kind. For example, the actual cost of a theme park admission ticket is the cost of the physical ticket that the guest uses to get in, not the price that the guest would otherwise pay for the experience. Refunding a guest’s purchase or experience will always be the most expensive form of compensation, and should always be the last resort after all other options have been exhausted.
Here are some examples of service recovery, or compensation types, that are generally seen to be effective and ineffective, in regards to generating future revenue for the business. I’ve named them as generically as possible, so feel free to alter this in your own setting with your specific terminology, verbiage, and products.
Effective Service Recovery Solutions
- Free admission
- Discounted admission
- Discounted admission for friends and family
- Money that can only be spent on property (aka store credit)
- Minimized queuing options
Ineffective Service Recovery Solutions
- A promise that their concerns will never be an issue again
- An apology that takes blame and/or liability for the service failure
- Compensation that will not benefit the guest
Of course the list goes on and on for each. It is likely that due to circumstances beyond our control, we receive repeats of the same complaint, over and over again. As a result, we effectively come up with a solution that appeases current guests while we work toward a long-term solution. For instance, a guest that expresses concern regarding lengthy wait times may be compensated with VIP access or otherwise reduced wait times on a future visit. The compensation delivered matches the service failure directly. Long lines on this visit = no (or less) lines on a future visit. The compensation requires the guest to return, with the indication that they will not have the concern next time.
Josh Liebman specializes in guest experience within attractions, tourism, and hospitality, including service standards, complaint resolution, and driving guest loyalty. Josh is a serial entrepreneur, podcaster, consultant, and speaker. Josh has worked for some of the top attraction operators in the world, including, but not limited to Walt Disney World, Universal Orlando, Merlin Entertainments, and Cedar Fair. Josh has been integral to the openings of multiple attractions in various leadership capacities. Additionally, Josh has consulted for many of the world’s leading hospitality brands, including Ritz Carlton, Four Seasons, Waldorf Astoria, and many more. Josh is Co-Host of the AttractionPros Podcast, which brings the audience into the room with the top leaders, executives, and influencers in the attractions industry.