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.
Expectation-Disconfirmation Paradigm in the Service Failure and Recovery Context
The expectancy-disconfirmation paradigm is probably the most recognized model in consumer behavior literature for understanding customer satisfaction/dissatisfaction (Bearden & Teel, 1983; Oliver, 1980, 1981, 1993; Oliver & Bearden, 1985; Swan & Trawick, 1981). The expectancy-disconfirmation paradigm states that consumers compare their prior expectations to post-performance perceptions (Bearden & Teel, 1983; Churchill, 1982; Oliver, 1980). Disconfirmation strongly determines consumer satisfaction. Even though support for the disconfirmation model is mixed, no study has shown convincing evidence to reject disconfirmation as a general model of customer satisfaction/dissatisfaction. It is generally agreed that disconfirmation is an antecedent of consumer satisfaction/dissatisfaction.
In service encounters involving failure and recovery, the service encounter satisfaction should include disconfirmation and expectations in both failure and recovery phases. Therefore, there are two sets of disconfirmation in failure/recovery encounters. Service encounter satisfaction is determined not only by the disconfirmation of service performance (failure), but also by the disconfirmation of service recovery (Smith & Bolton, 1998). In the first phase of service delivery, consumers hold pre-consumption expectations of service performance, and compare the perceived performance with their expectations. …