Effects of Service Recovery on Customer Satisfaction and Relationship Retention in Catering Industry

The raise of consumer awareness in modern competitive catering markets presents that the discontented customers are likely to express the discontentment through word of mouth. Consumers would directly or indirectly express when the quality of the service process does not conform to the expectation. Service recovery therefore cannot be avoided and neglected in catering industry, and it relates to the service performance and the customer retention. It was found in the past research that, when there was a service failure, the perceived justice of customers towards the service recovery policies of an enterprise could enhance the customer satisfaction and promote the reliability towards the catering enterprise so that they would be willing to retain the transactional relationship. For this reason, this study would like to discuss the relations between service recovery and relationship retention and explore the mediating effects of customer satisfaction. The customers of Noble Family in northern Taiwan, as the research samples, are distributed 500 copies of questionnaires. Total 267 valid copies were retrieved, with the retrieval rate 53%. The research findings are concluded as 1. Service recovery presents significant correlations with customer satisfaction. 2. Customer satisfaction shows remarkable correlations with relationship retention. 3. Service recovery reveals notable correlations with relationship retention. 4. Customer satisfaction appears partial mediating effects on the correlations between service recovery and relationship retention. Address for correspondence: Jeng-Hwan Wang Department of Food and Beverage Management, Mackay Junior College of Medicine, Nursing and Management, Taiwan,ROC E-mail: [email protected] INTRODUCTION CommonWealth Magazine investigated Top 1000 enterprises with the rapidest growth on various revenues, including Happiness, Green, Health, and Action, in 2012. From the data in the past five years, four mainstream markets grew more than 30% in 2007-2011, clearly presenting the explosive effort. Tourism and catering industry, related to Happiness in the four mainstream industries, increased the revenue about as much (46%). Moreover, one out of five enterprises in top 50 service enterprises was retail and catering service related enterprises this year, showing the potential business opportunities of catering industry in Taiwan. According to Department of Statistics, Ministry of Economic Affairs (2012), the total revenue of domestic catering industry was 372 billion dollars and the annual growth rate 7.94% in 2011, andthe annual revenue revealed positive growth since 2004.The revenue also appeared slight growth even whenencountering the economic impact of the financial tsunami few years ago, showing the growth and competitiveness of domestic catering markets. Hospitality industry is labor-intensive, which obviously requires more manpower, and the quality of human resources is rather critical. Each part of the services, from making reservations, ushering, ordering, serving, tobilling, should be carefully completed the standard processes. The responses of the staff are further tested when the customers propose special service requests. However, the high turnover rate in catering enterprises has increased the difficulty in management. Based on Nature of Service Demands and Types of Service Organization and Customer Relationship, catering industry presents the characteristics of wide waviness with time, exceeding production capacity at peak hours, non-continuous delivery nature, and informal relation858 TING-YU CHUEH AND JENG-HWAN WANG AND HSIN-HSING LIAO ship between the service organization and the customers. Moreover, catering services are hightouch services as the customers are in the service areas directly participating in the services in the process and touch with the service personnel (Lovelock, translated by Chou 1999). Such characteristics increase the difficulties and challenges of management in catering industry that the service recovery strategies after the service failure become the primary tests for catering enterprises. Relationship Retention of existing customers is critical in making profits in catering industry (Chen and Chen 2014). Service Recovery policies in catering industry are also the key issues in the management of customer relationship. The success would highlight the competitiveness of the enterprise in catering industry. Definition and Hypothesis