The relative impact of advertising and referral reward programs on the post-consumption evaluations in the context of service failure

Abstract

This study investigates the differences in the post-consumption evaluations of customers acquired through advertising and RRPs in the context of service failure. The three laboratory experiments demonstrated that when a service failure happens, customers acquired through RRPs will have more positive post-consumption evaluations than those acquired through advertising. This effect is mediated by customers’ attribution the failure as a one-time event. In addition, this study revealed that the buffering effect of RRPs relative to advertising only exists when the tie strength between the referrer and the referred is strong or the failure severity is low. This research not only extends the literature on the service failure and the comparative effects of different marketing methods, but also provides feasible suggestions for the enterprises to design marketing activities and do more effective failure recovery.