Does the Customer-Firm Relationship Affect Consumer Recovery Expectations?

Article excerpt

ABSTRACT

This study examined three different types of relationships between consumer and service organizations: affective commitment and continuance commitment with service organization, and personal relationship with service employees. Building on the expectation-disconfirmation paradigm, we posit that both affective commitment and continuance commitment will have a positive impact on consumer recovery expectations. Based on interdependence theory from the field of psychology, we develop two competing hypotheses, referring to the counterbalancing relationship between commitment to a service organization and consumer recovery expectations.

A total of 617 service encounter incidents involving undergraduate students were collected. First, students described a recent service encounter that occurred with a service provider. This was followed by the measurements of the relationship between the student and the said service organization. The results from this study suggest that consumer affective commitment and continuance commitment are positively related to their recovery expectations. In addition, closeness to service employees is also positively related to consumer recovery expectations. The managerial implications of this study are significant. If consumers are more likely to forgive the mistakes made by service providers because of the close interpersonal relationship developed with their employees, it follows that encouraging their employees to build personal relationship with customers is likely to combat the negative effect of service failures.

INTRODUCTION

In the past century, exchanges of tangible goods dominated business- and customer-based relationships. After entering the twenty-first century, the marketing concept evolved into a new dominant logic (Vargo & Lusch, 2004), also called the service-dominant logic (Vargo & Lusch, 2008). According to the service-dominant logic, the fundamental unit of exchange is the application of specialized skills and knowledge. Goods are considered only the distribution mechanisms for service provisions. Likewise, the customer is always considered a co-producer. The service dominant logic focuses on the customer-firm relationship.

Once the importance of forming the relationship with customers is realized, companies design various forms of loyalty programs to build the customer-firm relationship. Since service is essentially the exchange between business and customer, providing a customer with a satisfied experience is the key to building loyal relationships between the service provider and the customer. Quality relationships can bring about many advantages for service providers such as increased profitability, reduced service cost, and increase in positive word-of-mouth advertising (Ostrowski, O'Brien, & Gordon, 1993; Terrill & Middlebrooks, 2000). However, one characteristic of any service is that it involves human endeavor and that "zero defect" is virtually impossible. Once a service failure occurs, a service recovery provides organizations with an opportunity to resolve the problems that led to the service failure in the first place. As such, a service recovery strategy is a significant determinant of customer satisfaction and loyalty (Mattila, 2001; Maxham & Netemeyer, 2002; McCollough, 1995).

In order to recover appropriately from a service failure, service providers must be able to understand consumer recovery expectations. Previous studies have identified several antecedents of consumer recovery expectations such as consumer-perceived quality and customer organizational commitment (Kelley & Davis, 1994), severity of failure and service guarantee (Craighead, Karwan, & Miller, 2004; Hess, Ganesan, & Klein, 2003; Miller, Craighead, & Karwan, 2000), and attribution of failure (Hess et al., 2003). This study is focused on identifying various forms of relationship between the firm and the customer, and identifying various forms of relationships that affect consumer recovery expectations. …