Relationship Level and Customer Response to Service Recovery

Abstract

Service failure is inevitable. A better understanding of how relationship level (RL) influences a consumer’s response to service failure and recovery is an important topic for academics and practitioners. This study investigates the connections among consumer RL, failure attributions (i.e., stability and controllability), service failure severity, perceived equity (PE), compensation, and consumers’ future behavior in the context of restaurant service and online shopping. Using equity theory, this study explored the importance of consumers’ entire history of shared interactions with service organizations. Specifically, the study empirically tested the different consequences of compensation by manipulating consumer RL. Consumer RL motivates consumers to follow a different attribution process to judge the severity of service failure and determines consumers’ PE. Moreover, consumers’ PE could then influence their future behavioral intentions, especially how they continue the relationship with the service organization. Findings from the two studies indicate that when additional compensation is offered after a service failure, PE increased regardless of consumer RL. The influence of compensation on PE thus varies as a function of RL. Consumers with a low RL are more sensitive to compensation. Furthermore, enhanced equity perception automatically means that corresponding future relationship continuity is also enhanced. The results further demonstrate that controllability attribution influences service failure severity, which has a negative impact on the PE of the exchange and mediates the effectiveness of compensation as a recovery effort.