Compensating Service Failures: The Moderating Role of Customers’ Political Ideology

Abstract

When service failure occurs, the service provide often dispenses compensation to manage customer relations. However, little research has studied who accepts larger or smaller compensation amounts. Presently, we use political ideology as a basis to segment customers. Drawing on prior work on System Justification Theory, we hypothesize that politically conservative customers accept a lower amount of compensation than liberals as conservative customers more likely believe that whatever amount the service provider offers is just and fair. Importantly, we propose that the effects are specific to economic conservatives, not social conservatives. The findings are consistent with our predictions, with (economic) conservatives’ customers’ system justification beliefs serving as a mechanism. Theoretically, our work is the first to examine who accepts different levels of compensation while also broadly suggesting that political ideology is an important customer segmentation basis in the tourism and hospitality sectors. Our work also contributes to the literature on political ideology by being one of the first to empirically tease apart the distinct effects of economic and social conservatism.