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Article
Publication date: 18 May 2012

Namin Kim and Francis M. Ulgado

The present study compares two types of compensation – i.e. on‐the‐spot and delayed – and tries to reveal how and when firms can utilize delayed compensation effectively. For…

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Abstract

Purpose

The present study compares two types of compensation – i.e. on‐the‐spot and delayed – and tries to reveal how and when firms can utilize delayed compensation effectively. For this, failure severity is considered how these two types of compensation affect satisfaction and repurchase intentions.

Design/methodology/approach

A scenario‐based experiment in the hotel and restaurant industries was used with a sample of 292 students.

Findings

The results show that failure severity acts as a moderating variable in a recovery process of compensation‐satisfaction‐repurchase intention. The more severe consumers perceive the failure is, the more they depend on satisfaction to decide repurchase intentions. The two types of compensation are also moderated by failure severity on their effects on satisfaction and repurchase intentions. On‐the‐spot compensation leads to more satisfaction and repatronage intentions when failures are severe, but the results are not as straightforward when failures are insignificant. Under such a condition, while delayed compensation does not engender customer satisfaction with recovery as much as on‐the‐spot compensation, repatronage intentions for both types of compensation were similar in the hotel industry and even higher in restaurant services.

Research limitations/implications

Industry differences such as ease of visit, frequency of visit, competition factors, and primary value (e.g. hedonic versus utilitarian) are expected to influence the effects of on‐the‐spot versus delayed compensation.

Practical implications

The study provides practitioners with the implication that the timing of compensation should be approached strategically according to the severity of failure and recovery outcomes they expect to achieve.

Originality/value

The present study tries to focus on compensation, one of the most commonly used recovery strategies, and tries to find the effects of different timings of it.

Article
Publication date: 10 July 2018

Jiarong Luo, Xiaolin Zhang and Chong Wang

The purpose of this paper is to value put option contracts in hedging the risks in a supply chain consisting of a component supplier with random yield and a manufacturer facing…

Abstract

Purpose

The purpose of this paper is to value put option contracts in hedging the risks in a supply chain consisting of a component supplier with random yield and a manufacturer facing stochastic demand for end products.

Design/methodology/approach

This paper adopts stochastic inventory theory, game theory, optimization theory and algorithm and MATLAB numerical simulation to investigate the manufacturer’s ordering and the supplier’s production strategies, and to study the coordination and optimization strategies in the context of random yield and demand.

Findings

The authors find that put options can not only facilitate the manufacturer’s order but also the supplier’s production, that is, the manufacturer and the supplier can effectively manage their involved risks and earn more expected profits by adopting put options. Further, the authors find that the single put option contract fails to coordinate such a supply chain. However, when combined with a protocol, it is able to coordinate the supply chain.

Originality/value

This paper is the first effort to study the intersection of put option contracts and random yield in the presence of a spot market. From a new perspective, the authors explore the supply chain coordination. The authors propose a mechanism to coordinate the supply chain under put option contracts.

Details

Industrial Management & Data Systems, vol. 118 no. 7
Type: Research Article
ISSN: 0263-5577

Keywords

Article
Publication date: 1 April 2004

Jochen Wirtz and Anna S. Mattila

This experimental study examined how the three dimensions of fairness (distributive, procedural and interactional) influence consumers' attributional processes, their…

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Abstract

This experimental study examined how the three dimensions of fairness (distributive, procedural and interactional) influence consumers' attributional processes, their post‐recovery satisfaction and behavioral responses (repatronage intent and negative word‐of‐mouth) in a service failure context that does not involve monetary costs to the consumer. Our results indicate that recovery outcomes (e.g. compensation), procedures (e.g. speed of recovery) and interactional treatment (e.g. apology) have a joint effect on post‐recovery satisfaction. Specifically, our findings suggest that compensation may not enhance satisfaction when the recovery process is well‐executed (an immediate response combined with an apology). Similarly, compensation failed to lessen dissatisfaction with a poor recovery process (a delayed response without apology). It thus seems that compensation is a poor substitute for a good recovery process. However, offering compensation was effective in increasing satisfaction in mixed‐bag recovery situations (delayed recovery with an apology, or immediate recovery without apology). Furthermore, we found that service recovery satisfaction acted as a full mediator between service recovery attributes (compensation, recovery speed and apology) and behavioral intentions (repurchase intent and negative WOM). Finally, our findings suggest that consumer attributions for stability and controllability for the failure vary across recovery efforts. Managerial implications for these findings are discussed.

Details

International Journal of Service Industry Management, vol. 15 no. 2
Type: Research Article
ISSN: 0956-4233

Keywords

Article
Publication date: 10 August 2015

Silke Bambauer-Sachse and Landisoa Eunorphie Rabeson

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…

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Abstract

Purpose

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.

Design/methodology/approach

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.

Findings

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.

Practical implications

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.

Originality/value

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

Details

Journal of Services Marketing, vol. 29 no. 5
Type: Research Article
ISSN: 0887-6045

Keywords

Article
Publication date: 7 October 2013

Chia-Chi Chang and Chia-Yi Chen

Limited research has explored the potential marketing strategies to counter the damage associated with delayed recovery. Based on the construal level theory, this study seeks to…

Abstract

Purpose

Limited research has explored the potential marketing strategies to counter the damage associated with delayed recovery. Based on the construal level theory, this study seeks to suggest that customers tend to focus on different aspects of the compensation according to the speed of recovery. Thus, providing an adequate explanation to customers corresponding to expected recovery speed can effectively alleviate customer dissatisfaction with a delayed recovery.

Design/methodology/approach

This study examined the proposed hypotheses using a 2 (immediate vs delayed) by 2 (explanation: process-focused vs outcome-focused) experimental design.

Findings

The analytical results show that when an immediate recovery is available, an outcome-focused explanation will result in higher post-failure satisfaction than will a process-focused explanation. Conversely, when a delayed recovery is expected, post-failure satisfaction is higher for customers who receive a process-focused explanation than for those who receive an outcome-focused explanation.

Practical implications

This study thus recommends that firms should provide explanations compatible with expected recovery speed to better enhance post-failure satisfaction.

Originality/value

This study contributes to the body of service recovery literature by examining the differential effectiveness of outcome-focused and process-focused explanations under immediate and delayed recovery conditions. The findings provide a guideline that managers can use to formulate suitable explanations to alleviate the detrimental effects of delayed recovery.

Details

Journal of Services Marketing, vol. 27 no. 7
Type: Research Article
ISSN: 0887-6045

Keywords

Article
Publication date: 1 July 2005

Dave Ulrich and Wayne Brockbank

In the first of two articles, Dave Ulrich and Wayne Brockbank examine the ways in which HR adds value. Here, they present menus of ways HR can add value for investors, customers…

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Abstract

In the first of two articles, Dave Ulrich and Wayne Brockbank examine the ways in which HR adds value. Here, they present menus of ways HR can add value for investors, customers, employees and line managers in two key areas: people and performance. In their next article they present menus for the areas of information and work.

Details

Strategic HR Review, vol. 4 no. 5
Type: Research Article
ISSN: 1475-4398

Keywords

Article
Publication date: 17 July 2018

Seung Hyun Lee

The ongoing challenge for hospitality firms is not to avoid service failures completely but rather to find effective ways of recovering from them. The purpose of this paper is to…

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Abstract

Purpose

The ongoing challenge for hospitality firms is not to avoid service failures completely but rather to find effective ways of recovering from them. The purpose of this paper is to adopt conjoint analysis to examine guest preferences for service recovery actions that are taken simultaneously and the effect of such actions in the context of hotels in order to seek answers to the following research questions: what type of compensation bundle is most preferred by guests? and How effective are compensations in terms of recovery satisfaction, especially with regard to subsequent behavioral intentions?

Design/methodology/approach

In order to study guest preferences for compensation, choice-based conjoint (CBC) experiments were used. The CBC survey method involves presenting respondents with several hypothetical scenarios that include numerous combinations of compensation attributes. The survey sample was recruited through web-based panels run by a marketing firm. The online survey was designed and built in the Sawtooth Software platform. Conjoint analysis was carried out.

Findings

The conjoint analysis results show that among the different compensation attributes, consumers preferred discounts the most, followed by corrective actions and loyalty points. Among the discount levels, consumers favored “free one night certificate for a future stay” over “100 percent off one night’s room bill.” Regarding loyalty points, consumers desire more points than fewer points. In terms of correction levels, consumers appear to desire an “upgrade to a suite” over just moving to another room or having the original room cleaned. Moreover, consumers prefer that service recovery be handled by upper-level management.

Research limitations/implications

Several limitations should be discussed. For example, the type of service failure studied was limited to a booked room not being clean upon check-in. Different types and magnitudes of service failures may result in a different set of preferences for compensation bundles. In addition, the compensation attributes and levels were limited in scope even though they were obtained from interviews with managers at midsize hotels. Other attributes and attribute levels can be included in future studies.

Originality/value

Although an abundant number of studies have been done regarding service failure and recovery, the extent to which service recovery needs to be carried out before it translates into actual recovery remains unanswered. Using conjoint analysis, the study identified exactly which bundle of compensation items was most preferred by guests.

Details

Journal of Hospitality and Tourism Insights, vol. 1 no. 3
Type: Research Article
ISSN: 2514-9792

Keywords

Article
Publication date: 13 October 2020

Pantea Fouroudi, Philip J. Kitchen, Reza Marvi, Tugra Nazli Akarsu and Helal Uddin

This paper aims to study the citations made in service failure literature and assesses the knowledge construction of this region of exploration to date.

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Abstract

Purpose

This paper aims to study the citations made in service failure literature and assesses the knowledge construction of this region of exploration to date.

Design/methodology/approach

The bibliometric investigation assesses 416 service failure articles in business associated research. Multidimensional scaling is used to uncover the scope of the scholarly impacts that have helped understand the nature of the service failure literature. The establishment of knowledge in the service failure literature is revealed by analysing co-citation data to identify significant topical impacts.

Findings

The theoretical model combines five areas with significant propositions for the future improvement of service failure as an area of investigation. The most important research themes in service failure literature are service failure, service failure communication, recovery process, recovery offer and intention.

Research limitations/implications

Potential research concentrating on the service failure literature could use search terms improved from the literature review, or use a comparable approach whereby a board of well-informed scholars approved the key words used.

Practical implications

This paper is beneficial for any reader who is interested in understanding the components of the perception of justice and recovery and how it improves repurchase intention.

Originality/value

The study seeks to influence resource and recovery-based concepts and utilises the five supporting knowledge groups to suggest a plan for future research that fills existing gaps and offers the possibility of expanding and enhancing the service failure literature.

Details

European Journal of Marketing, vol. 54 no. 10
Type: Research Article
ISSN: 0309-0566

Keywords

Article
Publication date: 24 May 2022

Ke Ma and Si Qian

Service failure is detrimental for both enterprises and customers; therefore, it is particularly important and cost effective for service enterprises to take precautionary…

Abstract

Purpose

Service failure is detrimental for both enterprises and customers; therefore, it is particularly important and cost effective for service enterprises to take precautionary measures rather than provide recovery after service failure. Based on the inoculation theory, this research examines the impact and the boundary conditions of inoculation messages on the effectiveness of service recovery.

Design/methodology/approach

The proposed research model is examined through two scenario-based experimental studies. A total of 627 datasets was collected and analyzed with the SPSS program with the PROCESS tool to examine the moderation (Model = 1) and three-way interaction (Model = 4) effects.

Findings

The research findings show that inoculation messages moderate the relationship between recovery measures and customer satisfaction. Specifically, there is a positive relationship between service recovery and recovery satisfaction, which can be further boosted with inoculation messages. Importantly, inoculation messages eliminate the significant difference between the effects of expected recovery and high recovery. However, inoculation messages are only effective for enterprises with high brand equity.

Originality/value

These findings have important theoretical and practical implications for the service recovery practice of service enterprises.

Details

Marketing Intelligence & Planning, vol. 40 no. 6
Type: Research Article
ISSN: 0263-4503

Keywords

Article
Publication date: 6 October 2021

Hai-Anh Tran, Yuliya Strizhakova, Hongfei Liu and Ismail Golgeci

This paper aims to examine counterfactual thinking as a key mediator of the effects of failed recovery (vs. failed delivery) on negative electronic word-of-mouth (eWOM). The…

Abstract

Purpose

This paper aims to examine counterfactual thinking as a key mediator of the effects of failed recovery (vs. failed delivery) on negative electronic word-of-mouth (eWOM). The authors further investigate the effectiveness of using recovery co-creation in minimizing customers’ counterfactual thinking.

Design/methodology/approach

This research includes textual analysis of online reviews (Study 1) and three scenario-based experiments (Studies 2, 3a and 3b). In addition to using item-response scales, the authors analyze negative online reviews and participants’ open-ended responses to capture their counterfactual thinking.

Findings

Failed recovery (vs failed delivery) increases counterfactual thinking, which, in turn, increases negative eWOM. These mediating effects of counterfactual thinking are consistent across textual analyses and experimental studies, as well as across different measures of counterfactual thinking. Counterfactual thinking also impacts customer anger in experiments; however, anger alone does not explain the effects of failed recovery on negative eWOM. Counterfactual thinking can be minimized by co-created recovery, especially when it is used proactively.

Practical implications

The findings demonstrate the detrimental effects of counterfactual thinking and offer managerial insights into co-creation as a strategy to minimize customers’ counterfactual thinking. The authors also highlight the importance and ways of tracking counterfactual thinking in digital outlets.

Originality/value

The authors contribute to counterfactual thinking and service recovery research by demonstrating the effects of failed recovery on counterfactual thinking that, in turn, impacts negative eWOM and offering a novel way to measure its expression in online narratives. The authors provide guidance on how to use co-creation in the service recovery process to minimize counterfactual thinking.

Details

European Journal of Marketing, vol. 55 no. 12
Type: Research Article
ISSN: 0309-0566

Keywords

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