A New Conceptualisation Of Service Recovery : Contractual , Interactive And Relational Orientations

When service failure occurs, firms are advised to put in effort to recover customers, because lost customers typically result in substantial financial and reputational loss (Hogan, Lemon & Libai, 2003). However, despite such effort, 81% of customers who complained are still not happy with the complaint handling process (TARP, 2001). Hence, Davidow (2003) argues for improvement in strategic recovery because currently used recovery strategies are largely ineffective across different service settings. We argue that understanding the differences in service recovery from the customer’s perspective is the key issue, as a understanding customer experience increases the likelihood of successful service recovery. Hence, we propose an integrative service recovery model that challenges the traditional provider’s perspective, and explains the effects of service recovery on customer satisfaction with recovery and repurchase intention across different service settings. The model highlights the importance of co-production, and provides new insights into service recovery. Important theoretical and managerial implications of the findings are discussed. 1. Conceptualising the model We propose an integrative model which is based on: (1) justice theory; (2) choice theory and; (3) communal relationship. First, justice has been extensively used as the principal theoretical framework in service failure and recovery research (Smith & Bolton, 2002; Smith, Bolton & Wagner 1999, Tax, Brown and Chandrashekaran 1998). Three dimensions of justice are: distributive justice, interactional justice, and procedural justice. When applied to services failure and recovery research, distributive justice focuses on the outcomes (compensation), procedural justice focuses on how the service is conducted, and interactional justice focuses on the ways the customers are treated throughout the service encounter (Chan, 2002; Maxham & Netemeyer, 2002; Smith, Bolton & Wagner, 1999; Tax, Brown & Chandrashekaran, 1998). Second, we use post-choice discomfort, an aspect of choice theory, to examine the impact of a customer’s perceived level of choice of options on post-choice emotion and behaviour. Specifically, when customers have several choices, service failure produces a regretful feeling of making a poor decision in choosing between options (Anderson, 2003; Zeelenberg & Pieters, 2002). Third, we focus on the communal aspect of the relationship between the customer and the service provider. We argue that this perceived communal relationship creates a sense of altruism in customers, by which they treat the provider as a ‘friend’ (Price & Arnould, 1999). Correspondingly, in this context, customers expect high levels of effort and customisation in recovery attempts. Justice theory suggests that customers will be satisfied with the service recovery attempt if they receive a fair outcome (distributive justice), fair conduct (procedural justice) and were treated in a respectful manner (interactional justice). However, in recovery literature, justice theory is applied from the provider’s perspective. The provider’s perspective assumes that the customers will passively receive the recovery attempt, and the more effort invested in the recovery by the providers, the more likely that the customer will be happy. We argue that, in different service settings, these justice dimensions are not equally preferred by the customers. Rather, customers will focus on different aspects of the service failure, and hence expect a ANZMAC 2005 Conference: Services Marketing 197 different type of recovery. Capturing these different views is critical for effective service recovery in multiple settings. Hence, based on Berry’s (1995) the multilevel level relationship marketing, we propose three types of service recovery: (1) contractual; (2) interactive; and (3) relational recovery. We posit that a customer will focus on one of the three recovery perspectives in a particular service setting. When the service provider offers a different recovery attempt from what the customer considers appropriate then the customer is expected to be dissatisfied with the recovery. In a contractual recovery context, customers focus on the outcome of recovery such as compensation for the failure and related consequences. An interactive recovery is the process of co-production, when the customers expect to have opportunity to participate in the decision making process. In this type of recovery, customers focus on the problem handling procedures, and whether they have control over the solution. Lastly, in a relational recovery context, customers perceive that they are loyal and valuable customers of the organisation. Here, there is a sense of friendship so the customer expects the service provider to go beyond the company policy. When customers have to choose between service options, and their options turn out to be poor results (service failure), they often regret their initial choice (Zeelenberg et al., 1998). In addition, the customer’s regret increases the perceive attractiveness of the forfeited options. When other options or substitutions are easily imagined and achieved, the customer’s regret will lead to a decision to try to reverse the situation (switching behaviour) (Carmon, Wertenbroch & Zeelenberg, 2003; Luce, 1998). Based on the option attachment concept, which focuses on the affective aspect of the choice decision, we propose a new concept of purchase deliberation recollection. It refers to the individual’s attachment to the multiple options, and the level of deliberation in choosing between options. It is suggested that when customers engage highly in the choice decision making process, they develop a sense of ownership with these options. This makes choosing feel like losing because they have to forfeit other options (Carmon et al., 2003). When service failure occurs, that ‘losing’ feeling is heightened because it confirms that the customer made a poor decision in the first place. Communal relationship is defined as the closeness of the relationship that leads to motivation to act for the other’s interests (altruism) (Cialdini, Brown, Lewis & Luce, 1997). It represents an aspect of commitment where an individual perceives a high level of interpersonal and emotional ties with the object (a group or an organisation). This high level of commitment creates a high level of effort in solving the problem, sharing information, building morale and developing a strong bonding relationship between the involved parties. Similar to option attachment, we argue that some long term customers develop a sense of emotional attachment with the service provider. Hence, our integrative model (Figure 1) depicts the relationships between these three perceptions of service recovery and their emotional and purchase deliberation recollection. The model suggests that customers expect different service recovery in different contexts. We hypothesise that contractual recovery is associated with a low level of purchase deliberation recollection and a low level of emotional attachment. Interactive recovery is likely to be associated with a medium level of option and emotional attachment, and relational recovery is likely to be associated with a high level of purchase deliberation recollection and emotional attachment. Thus, if the provider correctly identifies the customer’s levels of emotional and purchase deliberation recollection, then they can predict what type of recovery the customer ANZMAC 2005 Conference: Services Marketing 198 expects. Otherwise, a mismatch in the customer’s perception and the provider’s recovery attempt occurs. These mismatches typically lead to customer dissatisfaction with the recovery attempt, and subsequent switching behaviour. ANZMAC 2005 Conference: Services Marketing 199 Figure 1: The integrative model