Abstract
Online service recovery tools such as managerial responses are increasingly used by service providers to address customer concerns in online WOM platforms. In this paper, we analyze the effectiveness of such online service recovery effort on customer satisfaction using data retrieved from a major online travel agency in China. We find that online service recovery is highly effective among the least satisfied customers but has limited influence on other customers. Moreover, we show that the public nature of online service recovery introduces a new dynamic among customers. While online service recovery increases future satisfaction of the complaining customers who receive the recovery effort, it significantly decreases future satisfaction of those complaining customers who observe but do not receive the recovery effort. We show the result is consistent with the peer-induced fairness theory. In addition, this study reveals that a customer’s satisfaction with a service provider demonstrates mean reversion over multiple interactions. It is important to control for such dependence in assessing the true impact of online service recovery.
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