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The purpose of this study is to determine which level of tangible compensation for a service failure leads to high levels of customer satisfaction for moderate- versus high-involvement services as well as for different conditions of responsibility for the failure and failure severity.

The study is based on a 4 (tangible compensation: gift, discount, credit for future consumption, refund) × 2 (responsibility for the failure: restaurant vs customer) × 2 (failure severity: low vs high) × 2 (involvement: moderate vs high) design using scenarios in a restaurant context.

The results reveal that, for moderate-involvement services, all types of compensation are equally appropriate, except for when customers are responsible for a severe failure. In this condition, they expect tangible compensation of higher benefit. For high-involvement services, the more severe the failure, the higher the benefit of tangible compensation should be, independent of responsibility.

The findings suggest that managers should consider the level of service involvement as well as responsibility for and severity of the failure when choosing the level of tangible compensation.

The results of this study provide new insights into how to choose appropriate and efficient service recovery measures.