The Goodwill Bank

What it is

The book places it in Chapter 5, 'The Preference Payoff', from page 69, among the attributes through which helpfulness turns into customer preference. The economy of the image is its strength. An airline that loses a bag after eleven good flights is in a different position from one that loses it on the first, and nothing about the failure itself differs.

The book uses it in experience recovery, its broader reading of service recovery, where banked goodwill buys the time and patience a repair needs. It offers no instrument, no unit and no exchange rate between a good experience and a bad one, so the vault files it as the authors' way of thinking rather than as a finding.

In effect

The research that comes closest to measuring it belongs to one of the authors. Tom DeWitt and Michael Brady reported four studies in the Journal of Service Research in 2003 showing that an existing rapport between customer and service provider raised satisfaction after a failure, raised repatronage intentions and reduced negative word of mouth. That is close to an empirical version of the bank: a balance built before the failure changes what the failure costs.

The limit comes from Stephen Tax, Stephen Brown and Murali Chandrashekaran in 1998. They tested competing accounts of how prior experience and complaint handling combine and found support for what they called a quasi brand equity view. Satisfaction with complaint handling had a direct impact on trust and commitment, and prior positive experiences mitigated the effects of poor complaint handling only to a limited extent.

Both hold, and together they give the metaphor its proper scope. Goodwill cushions a failure. It does not pay for a bad recovery, and a customer with a large balance who is handled badly still loses trust.

What it does not say

It does not say goodwill can be counted. Nobody has a balance, and the book does not claim to measure one.

It is not a loyalty programme. A points balance is a contractual entitlement the customer holds. A goodwill balance is a disposition, and the book argues that confusing the two is one way firms persuade themselves of a loyalty that is not there.

And it does not say what a recovery should contain. That is set out, part by part, in the research on outcome, procedure and treatment summarised on the pages for distributive, procedural and interactional justice.

How the article treats it

The article on what a customer apology must contain gives the goodwill bank a place and a limit. The place is real: DeWitt's 2003 studies found that an existing rapport between customer and employee raised satisfaction after a failure, raised intentions to return and reduced negative word of mouth. The limit comes from Tax, Brown and Chandrashekaran's 1998 finding that prior good experience softened the damage of poor complaint handling only to a limited extent. The article's summary is that banked goodwill buys patience and does not pay for a bad recovery. The metaphor also has no unit, so the article does not try to say how many good experiences offset one failure. The sources it draws on were mostly read at the level of their published abstracts, and the book itself is used for the metaphor and not as evidence that the balance can be measured. The same caution applies to any firm that claims to know its customers' balances. What a firm can actually do is keep the ordinary days good, so that a failure meets a customer who already has reason to be patient.

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