Benedetta Crisafulli

Service guarantee as a recovery strategy: The impact of guarantee terms on perceived justice and firm motives

Abstract Purpose – When services fail, recovery efforts are often contingent upon the terms set in service guarantee policies. Service guarantees set the pledged recovery compensation (payout) and procedures (ease of invocation), and these two terms signal justice rendered to customers and the firm’s motives. This study focuses on how service guarantees are implemented as recovery strategies, and the impact of guarantee terms on customer justice perceptions, motive attributions and repatronage intentions. Design/methodology/approach – A between-subjects experiment was conducted in parcel delivery services. Findings – Customer justice perceptions vary across guarantee payout levels. Payout in the form of discount does not restore justice, and leads to inferences that the firm offers the guarantee to maximise its profits. Conversely, full refund restores justice. Full refund plus discount is perceived as undeserved, and does not enhance justice perceptions. A moderately easy-to-invoke guarantee is perceived as fair, when it includes full refund. Inferences of negative firm’s motives, however, diminish perceived fairness of easy-to-invoke guarantees. Research limitations/implications – Future research could examine the interaction of guarantee scope with payout and ease of invocation, and how types of motives differentially impact justice perceptions. Practical implications – Full refund can enhance justice perceptions, whereas discount is perceived as unfair. Firms should offer full refund as guarantee payout, but refrain from offering a discount. Flexibility should be embedded in guarantee invocation procedures. Originality/value – This study demonstrates that service guarantees employed as recovery strategies signal justice and the firm’s motives.

Managing online service recovery : procedures, justice and customer satisfaction

The internet has changed the way services are delivered and has created new forms of customer-firm interactions. Whilst online service failures remain inevitable, the internet offers opportunities for delivering efficient service recovery through the online channel. Notwithstanding, research evidence on how firms can deliver online service recovery remains scarce. The purpose of this paper is to investigate the impact of two online service recovery strategies – online information and technology-mediated communication – on customer satisfaction, switching and word of mouth intentions.,A scenario-based experiment is employed. Data are analysed using partial least squares structural equation modelling.,Online information and technology-mediated interactions can be used as online service recovery strategies. When fair, online service recovery can restore customer satisfaction, lower switching and enhance positive word of mouth. Interactional justice delivered through technology-mediated communication is a strong predictor of satisfaction with online service recovery. Yet, customers in subscription services show greater expectations of online service recovery than those in non-subscription services.,Further research could examine the impact of online service recovery on relational constructs, such as trust. Since customers participate in the online recovery process, future research could investigate the role of customers as co-creators of online service recovery.,Service managers should design online recovery strategies that meet customer need for interactional justice, for example, bespoke e-mails, and virtual chat communications with genuine customer care.,Online information and technology-mediated communication function as online service recovery strategies. Customer perceptions of justice towards online service recovery restore satisfaction, and encourage loyal behaviour.

Customer Responses to Service Failure and Recovery Experiences

Service firms strive to deliver high quality services to customers, yet often fail to meet customer expectations, resulting in service failures. To rectify the failure, service recovery is attempted. Effective recovery is fundamental to restoring customer confidence in the organisation and repatronage intentions. Service failure events and subsequent recovery shape customer experience with the service. Service failure and recovery can thus be seen as representing two stages of the same service experience. Customer responses at each of the two stages involve complex psychological processes. A comprehensive understanding of these psychological processes is crucial for management to be able to design effective service recovery strategies. This chapter takes an overarching view of customer responses to service failure and recovery, and critically reviews research evidence in this domain. The review draws upon research from consumer and social psychology, in an effort to explain how service failure and recovery experiences shape customer perceptions, attitudes, and behaviour. The chapter also accounts for additional factors such as customer-firm relationship and brand equity, and their influence on customer responses to service failure and recovery experiences. To conclude, a number of avenues for further research are identified.

Too good to be true? Boundary conditions to the use of downward social comparisons in service recovery

Evidence shows that downward social comparisons (DSCs), messages delivered by frontline employees describing how service experiences turned out even worse for others, can reduce customers’ anger following a service failure. This study contributes to the literature on DSCs and service recovery by highlighting pitfalls associated with the use of these messages in service recovery and showing the conditions necessary for their effectiveness. Building on persuasion knowledge theory, we show that customers draw manipulative inferences about DSCs because of the perceived bias associated with the source of the message and the implicit derogation of a competitor that DSCs entail. To reduce inferences of manipulative intentions, frontline employees should both accompany DSC messages with intense apologies and use self-derogation to reduce the perception that they are criticizing another firm. Past claims on the generalized effectiveness of DSCs need to be revised. Managers should craft social comparison messages carefully to avoid negative reactions from customers. Our research indicates that once adapted to address these concerns, DSCs can be an effective recovery strategy among individuals with a strong need for social comparison information.

Case Study 4: Managing Customer Complaints: The Case of Imperial Orchid Hotels in Thailand

This case study provides an overview of current practices in complaint-handling and service recovery management at hotel businesses operating in Thailand, a fast growing emerging economy. Specifically, the case depicts real-life customer experiences of service failure and recovery at Imperial Orchid Hotels, a well-reputed hotel group in Thailand (a fictitious name). The case includes a critical appraisal of the efficacy of the service recovery efforts provided by Imperial Orchid Hotels, in the light of empirical evidence in services research. The appraisal offers insights into how consumers evaluate different aspects of service recovery encounters, including compensation, the transparency and timeliness of recovery processes, and employee behaviour. Moreover, the case illustrates how cultural background of the customers influences the evaluation of service failure and recovery encounters.

‘If Only They Were More Careful’: The Role of Counterfactuals and Emotions in Customer Coping with Health Service Failures (An Abstract)

Service failures are recurrent problems faced by firms. When services fail, firms endeavour to deliver service recovery. Notwithstanding, service recovery is often inefficacious in lowering customer discontent and leads to double deviations, whereby both the service and recovery fail. The recovery strategies may not be perceived as effective as desired by the firms due to counterfactual thoughts triggered by service failures, whereby customers imagine alternative actions the organisation could or should have taken in order to handle the failure. Counterfactual thoughts, in turn, can impact how customers cope with a service failure. Understanding customer counterfactual thoughts and subsequent coping mechanisms is crucial for understanding the reason why customers perceive seemingly effective service recovery strategies as unsatisfactory. Despite its managerial importance, research evidence in the area is lacking. Counterfactual thoughts are prompted by highly negative, stressful and emotion-laden events, such as failures in the health services. Health service failures, such as medical errors and delays in access to diagnostic tests, occur frequently, with negative consequences for patient health and the finances of service providers. Drawing on the norm theory, this study investigates the role of counterfactual thoughts in shaping customer coping with double deviations in health services. Specifically, it examines how the two dimensions of counterfactuals—direction and structure—impact customer problem-focused and emotion-focused coping differentially. Further, the study considers how failure-elicited emotions contribute to explaining customer coping with health service failures. The study employed a scenario-based experiment including five conditions: structure (additive vs. subtractive) and direction (upward vs. downward) plus a control group. The scenarios depicted a customer experience of double deviation with a healthcare service provider. An online, self-administered questionnaire was used for data collection. At the pilot stage, realism and manipulation checks confirmed the ecological and internal validity of findings (n = 45). The main study included a convenience sample of UK consumers who regularly use health services (n = 250). For data analysis, the dummy variable approach to partial least squares structural equation modeling (PLS-SEM) was employed. The study’s findings reveal that counterfactual thoughts influence customer coping with double deviations in health services. Specifically, upward and additive counterfactuals lower planful problem solving and confrontative coping. That is, customers avoid confrontation when imagining alternative actions the service provider could have taken that would have led to better failure resolution. Downward and subtractive counterfactuals, on the other hand, lower mental and behavioural disengagement, as well as support seeking, whilst enhancing self-control. Hence, customers regulate their emotions and avoid asking for moral support if they imagine how the situation could have turned out even worse. Emotions were found to amplify the above effects. The study makes three novel theoretical contributions. First, examining service recovery through the lens of counterfactual thinking provides an explanation that why seemingly effective recovery strategies may be considered inefficacious by customers. Second, the study demonstrates how the direction and structure of counterfactuals differentially impact customer coping with health service failures. Third, the dual lens of coping and counterfactual theories offers useful insights on customer responses to double deviations. The results suggest that customer emotions heighten the following health service failures. In such events, therefore, actions aimed at lowering customer negative emotions are crucial. Health service providers should invest in providing bespoke solutions addressing customer coping mechanisms. Service providers should endeavour to understand customers’ counterfactuals in order to augment their service recovery strategies.

Managing online service recovery at iMAGE Telecom

This business case provides an account of inadequate business practices in service recovery management by describing a real-life customer experience of service failure and subsequent online service recovery provided by a renowned telecommunications company called iMAGE Telecom. The case encourages critical thinking and reflection on the efficacy of current practices in service recovery management at large organisations. The appraisal of the online service recovery efforts delivered by iMAGE Telecom offers insights into how customers respond to different aspects of service recovery encounters, such as the type and size of compensation offered, the transparency and timeliness of recovery processes, and employee behaviour. The case ends with a set of questions designed to facilitate discussion and the appreciation of abstract business concepts.

Customer coping behaviour during health service failures: the role of self-efficacy and failure severity

Due to the complexity of services, service failures are inevitable events for service organisations and can make customers dissatisfied and willing to switch. When these events occur, organisations often attempt service recovery. Notwithstanding, recovery efforts do not always reduce customer discontentment and restore repatronage intentions. This is attributed to other factors outside the firm’s control, including how customers cope with service failures. Some customers cope with equanimity, whilst others vent their frustration and anger by complaining and generating negative word-of-mouth. Service failures are stressful and emotion-laden events, which trigger coping processes; thus, understanding these processes is vital for service organisations. However, evidence in this research area is rather sparse. This study investigates the role of individual characteristics and situational factors in shaping customer coping with service failures. In particular, the study examines how self-efficacy and failure severity, and their interaction, influence customer coping mechanisms in the context of failed health services. In the healthcare sector, patient safety is a priority for health service providers. Yet, ensuring patient safety is challenging. Medical errors occur frequently, with serious consequences for patient health and the finances of health service providers. The healthcare sector, therefore, provides a timely and relevant context for examining customer coping. The study employed a scenario-based experiment. For data collection, a self-administered questionnaire was designed embedding a scenario of a customer experience of service failure with a private US healthcare service provider. Two versions of the same questionnaire were designed based on the manipulation of failure severity set at two levels, high and low. Prior to the main study, a pilot test was conducted (n = 30) in order to establish the ecological and internal validity of findings. In the main study, respondents included a convenience sample of US consumers using a private healthcare service provider (n = 113). For data analysis, linear and moderated regression analyses were conducted. The study’s findings reveal that individuals high in self-efficacy are inclined to use their individual capabilities to actively attempt to find a solution, especially when health service failures are low in severity. When failures are severe, on the other hand, customers foresee the lack of capability to resolve the failure, thereby engaging less in active coping. Further, results show that customers high in self-efficacy rarely engage in denial coping, thereby avoiding that the service failure even happened. The study makes two important theoretical contributions. First, it investigates customer coping in the private healthcare service context, which has been largely overlooked in past research. Second, it demonstrates how self-efficacy differentially impacts customer coping strategies depending on the level of failure severity. From a managerial perspective, the study’s findings indicate that some customers are keen to be actively involved in the recovery process, especially in the context of high involvement health services. Service providers could identify efficacious customers and engage them in co-created service recovery. Further, employees could be trained to deal with different types of customer coping behaviour.