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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.

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

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.

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.

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.

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.

Previous research has found that interactional justice and distributive justice are critical factors influencing customer satisfaction after a service recovery. In addition, previous service recovery research has found that satisfaction is an important determinant of key outcome variables such as trust, commitment, and negative word‐of‐mouth. The current study extends previous research by investigating the role of service failure severity within the existing framework of service recovery research. The results indicate that service failure severity has a significant influence on satisfaction, trust, commitment, and negative word‐of‐mouth. The results also provide partial support for a moderating influence of service failure severity. Implications and areas for future research are discussed.

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.

This study aims to examine the perceived fairness of overcompensation for severe service failures. The mediating effect of perceived fairness in the overcompensation‐negative word‐of‐mouth (NWOM) intent relationship is also explored.

An experimental design approach was utilized to test the study's hypotheses. Overcompensation amount was manipulated at three levels (50 percent, 100 percent, 200 percent of purchase price), with two forms of overcompensation (cash or credit) tested.

Cash‐based overcompensation yielded higher perceptions of distributive justice than full compensation, with no significant difference in distributive justice perceptions across cash amounts. Credit‐based overcompensation was perceived as no fairer than full compensation. Perceived distributive justice fully mediates the overcompensation‐NWOM intent relationship.

The study's findings are based on a single service context. Further research across different service environments is needed to confirm the robustness of the results. The results are based on scenarios rather than real events. A longitudinal field study that examines consumer reaction at the point of service recovery and tracks actual subsequent behaviors is merited.

The study's findings suggest that, when a severe service failure occurs, service firms should consider going beyond full compensation, offering the consumer an additional cash amount. However, more is not necessarily better – a small additional cash amount may induce similar perceptions of fairness to larger amounts.

This study yields insights into the perceptions of distributive justice associated with different amounts and forms of overcompensation for severe service failure, and demonstrates the mediating effect of perceived distributive justice in the overcompensation‐NWOM intent relationship.

Given the fierce competition in financial services, service failure management and trust restoration tactics are becoming strategic priorities. Studies investigating trust restoration have increased over the years due to the significance of trust in services and the frequency of trust violations. Drawing on the sense-making and defensive approaches of attribution theory, this study aims to explore the effectiveness of various trust recovery tactics (e.g. apology, explanation, and investigation) in financial services considering the prevalence of service failure severity.

Based on a scenario-based survey, this study gathered data from 402 consumers of different banks in Pakistan. The study analyzed the data using ordinary least square regressions and structural equation modeling.

The study indicated that explanation is more effective in repairing character-competence and commitment-based trust, while investigation remained highly effective for inducing congruence-based trust. Interestingly, an apology was more effective for communication-based trust repairing, while context-based trust recovery was unaffected against all recovery tactics. Despite the prevalence of severe service failure, recovery actions proved fully effective for character-competence and commitment-based trust while partially effective for congruence-based trust recovery. This study also found that severe service failure undermines the effectiveness of recovery actions in repairing communication and context-based trust.

The study extends the literature on trust recovery by integrating sense-making and defensive attribution theory. The sense-making approach contributes to the existing knowledge on trust recovery by elucidating how consumers and service providers develop a shared understanding to facilitate the recovery mechanism of multidimensional trust in financial services.

The purpose of this paper is to investigate the effect of online service failure on online customer satisfaction and offline customer loyalty, and the moderating role of brand strength is also examined. While extant research on brick and click service mode recognizes the positive spillover effect from offline stores to online stores, this study analyzes the negative spillover effect from online stores to offline stores.

This paper tests the hypotheses by two studies. Study 1 is based on a 2 (failure severity: mild vs severe) × 2 (brand strength: strong vs weak) between-subjects experimental design using scenarios in a brick and click retailer context, while study 2 is based on data collected from a scenario-based questionnaire survey and analyzed through the structural equation modeling.

The results indicate that participants exposed to severe online service failure show lower online satisfaction as compared to their counterparts exposed to mild online service failure, but they show the similar level of offline loyalty in both degrees of online service failure. Nevertheless, these results are not moderated by brand strength significantly.

An experimental design and a scenario-based questionnaire survey are used to test the framework. However, the generalizability of the research findings is still limited to a specific study setting. Future research in a different setting is needed to further validate the presented findings.

The findings suggest that physical service providers should adopt aggressive online expansion strategy to seize the market and pay more attention to online service quality rather than online marketing only.

This is one of few studies to explore the risk of brick and click service mode, and provide a clear understanding of the likely occurrence of online service failure and its impact on online customer satisfaction and offline customer loyalty. It extends prior research by exploring non-existence of negative perceptual effect from online service failure to offline customer loyalty in the short run and weakening brand effect, which contributes to cross-channel spillover effect in the integrated multi-channel context and brand building in the internet era.

Drawing on the corporate association framework and attribution theory, the purpose of this paper is twofold: first, to examine the shield effects of CSR-linked sport sponsorship on consumer attitudes toward a sponsor, attribution patterns in a sponsor’s service failure and repurchase intentions and second, to investigate the halo effect of CSR-linked sport sponsorship on corporate ability (CA) associations and the relationship between CA associations and consequential variables in the context of service failure.

A scenario-based two-factor (sponsorship types: baseline vs sport sponsorship vs CSR-linked sport sponsorship × service failure types: flight delay vs cancellation) experimental design was employed.

The results indicate that CSR-linked sport sponsorship outperforms non-CSR sport sponsorship in forming CSR association and developing CA association. Both CSR and CA associations are found to positively influence the consumer’s attitude toward a service provider. Consumers with positive attitudes attribute the sponsor’s service failure to external factors, leading to repurchase intention after a service failure.

This study connects two fields of research, service failure and sport sponsorship, thereby providing evidence on how CSR-linked sport sponsorship can play a shield role in the context of service failure and whether CSR-linked sport sponsorship can be a proactive strategy for service providers in industries where service failures are inevitable. Additionally, this study provides empirical evidence on whether CSR-linked sponsorship can lead consumers to perceive service quality as “doing right leads to doing well” by creating a halo effect.

Online consumer reviews (OCRs) have emerged as a particularly important type of user-generated information about a brand because of their widespread adoption and influence on consumer decision-making. Much of the existing OCR research focuses on quantifiable OCR features such as star ratings and volume. More research that examines the influence of review elements, aside from numeric ratings, such as the verbatim text, particularly in services contexts is needed. The purpose of this research is to investigate the impact of service failures on consumer arousal and emotions.

The authors present three behavioral experiments that manipulate service failure and linguistic elements of OCRs by using galvanic skin response, survey measures and automated facial expression analysis.

Negative OCRs lead to the greatest levels of arousal when consumers read OCRs. Service failure severity impacts anger, and referential cohesion, an observable property of text that helps a reader better understand ideas in the text, negatively moderates the relationship between service failure severity and anger.

The authors are among the first to empirically test the effect of emotional contagion in a user-generated content context, demonstrating that it can occur when consumers read such content, even if they did not experience the events being described. The research uses a self-report and physiological measures to assess consumer perceptions, arousal and emotions related to service failures, increasing the robustness of the literature. These findings contribute to the marketing literature on OCRs in service failures, physiological measures of consumers’ emotions, the negativity bias and emotional contagion in a user-generated content context.

The purpose of this paper is to examine the role of empathy and apology in service recovery, and more specifically, establish how these factors promote positive service outcomes, typified by reconciliation and mitigate negative occurrences, characterised by customer retaliation and avoidance.

This study used an online panel to collect data from 213 US residents, who were asked to recall a service failure episode they experienced within the past six months, write briefly about it and answer a questionnaire measuring constructs of interest in relation to their previous experience. Structural equation modelling was used to analyse the quantitative data.

Both service employee empathy and apology were found to have a moderating effect on the relationship between service failure severity and reconciliation, retaliation and avoidance.

The combination of empathy and apology as moderators into a single framework represents a unique contribution of this research. Furthermore, outcome variables of reconciliation, retaliation and avoidance are utlilized to measure relationship outcomes following service failure. This study highlights the need for managers to design hiring and training policies to promote empathy and the use of sincere apologies throughout customer interactions.

The purpose of the paper is to examine the conditional role of webcare as a service failure recovery strategy on customers’ hotel booking intentions in presence of different levels of observed severity and review agreement. Furthermore, the study also examines the mechanism through which webcare can shape the adverse effect of observed severity and review agreement on hotel booking intentions.

A 2 (severity: high or low) × 2 (agreement: high or low) × 2 (webcare: webcare or no webcare) between-subject experimental design was conducted to collect responses. Analyses of variance and moderated mediation analysis were performed to analyze the study data.

Prospective customers who observed high severe service failure from a review reported less booking intention. Further, customers’ observed agreement strengthened these behaviors, i.e. customers who are exposed to high severe service failure in high-agreement condition reported low booking intention, as compared to those who exposed to low review agreement condition. Furthermore, results supported the fact that use of appropriate webcare plays a significant role to shape or mitigate the negative effect of severity and agreement on hotel booking intentions via perceived trust.

This is the first in its stream of studies that examined how webcare can be used to tackle the adverse effects of observed severity and agreement, so that perceived trust would be formed to create hotel booking intention.