Service Recovery and Pre-Emptive Strategies for Service Failure: Both Lead to Customer Satisfaction and Loyalty, But for Different Reasons

Abstract

ABSTRACT Recent research has shown that giving an informed choice to customers can be an effective pre-emptive strategy to offset the damaging effects of service failure. The principle behind this strategy is that customers given an informed choice have increased feelings of self-attributions, share the responsibility for the service failure, feel more regret and stay more loyal. The research has shown that this strategy of informed choice keeps customers more loyal, whether they choose a risky or safe alternative. However, does this strategy work when service failure occurs and the normal service recovery strategies of an apology and/or compensation are given? Would customers still feel some responsibility for the outcome and still be satisfied and stay more loyal? Or would an apology and/or compensation give a mixed signal that the service establishment alone was responsible for the service failure? An alternative perspective would be that by combining pre-emptive and service recovery strategies, customers would feel appreciation and respect for the service company for their disclosure and commitment to complete customer satisfaction. The principle finding was that customer satisfaction and loyalty were higher after a service failure when either the pre-emptive strategy of giving informed choice or the service recovery strategy of an apology and/or compensation were used, than when no choice, apology or compensation were offered. However, the highest ratings for customer satisfaction and loyalty were recorded when both strategies were employed together. Interestingly, the reasons for the higher customer satisfaction and loyalty differed for the individual strategies as well as for the combination of the two strategies. The results have practical implications for service managers.