Abstract
Our research examines the effectiveness of monetary compensation and the promptness of response during electronic word-of-mouth (eWOM)-triggered service recovery. Drawing upon restorative justice theories, we explore three main questions: whether the hotel's response to negative online reviews are always beneficial; whether offering compensation or responding promptly is more efficient under different levels of service failure severity; and how the hotel's response influences consumers' future engagement through eWOM media. Experimental results reveal that making minimum online service recovery effort is only effective in fixing consumer attitudes for less severe service failures. Compensation is the optimal solution for less severe failures, while prompt response is optimal for more severe service failures. The hotel's responsiveness to negative reviews and the service recovery outcome positively influence consumers' future eWOM behaviours through the same online medium. Implications for hotels seeking cost-effective management of negative reviews and for online media owners are offered.
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