service recovery: impact on satisfaction and intentions

Empirical evidence, observed across a variety of service industries, indicatesthat customers who have experienced problems with service suppliers areoften dissatisfied with the ways in which problems are resolved. Forexample, an early study revealed that only 30-53% of customers whoexperienced problems with one of seven services they purchased weresatisfied with the resolution (Andreasen and Best, 1977). In more recentresearch, only 50-67% of customers who experienced difficulties with one offive service companies were satisfied with the outcome (Berry andParasuraman, 1991). Furthermore, it appears that, while marketing ofproducts and services differs in many ways, customer satisfaction withservices is particularly tied to the resolution of problems. Since word-of-mouth (WoM) regarding problem resolution can be a major positive ornegative force in building a firm’s reputation and retaining customers(Reichheld and Sasser, 1990), the reward to companies which resolveproblems to the customer’s satisfaction appears to be very high (Hart et al.,1990).

Given the acknowledged importance of service recovery, it is surprising thatso few large-scale field studies have focussed on this topic; as Kelley andDavis (1994) succinctly state: “…A dearth of empirical research confinesany theoretical discussion to anecdotal reports” (p. 52). This study examinesthe relative importance of service recovery activities in determining overallsatisfaction and consequent behavioral intentions. Data from a large fieldstudy are analyzed to address the research questions.

Background and research questionsTo some degree, overall satisfaction in a service failure situation isdetermined by two factors: the outcome of the original service encounterbased on specific service attributes (Singh, 1991), and attributes associatedwith the service recovery process (Parasuraman et al., 1991). Servicerecovery processes are those activities in which a company engages toaddress a customer complaint regarding a perceived service failure(Grönroos, 1988). For example, a service failure could be a core-serviceproblem such as unavailability of the service (no service personnel with theappropriate skills are available), exceptionally slow service, mistakes in theservice (e.g. bank statement errors), etc. In addition, as suggested by Kelleyand Davis (1994), service failures can vary in seriousness – from somethingtrivial (e.g. a mover being a few minutes late in arriving to pick up one’shousehold goods) to being very serious (e.g. the mover damaging a pricelessfamily heirloom).

Parasuraman et al. (1988) identify two primary types of dimensionsoperating when consumers evaluate a service encounter: outcomedimensions and process dimensions. Though both dimension types occur inboth the original service encounter and the service recovery, the research ofBerry and Parasuraman (1991) indicates that outcome is the primary driverof consumer evaluations of service during the initial service encounter, whileprocess is the primary driver during service recovery: “A service failure is

JOURNAL OF SERVICES MARKETING VOL. 9 NO. 1 1995 15

Service recovery: impact onsatisfaction and intentionsRichard A. Spreng, Gilbert D. Harrell and Robert D. Mackoy

Service recovery

Dimension types

essentially a flawed outcome that reflects a breakdown in reliability…Eventhough reliability is of foremost concern to customers during initialperformance of a service, the process dimensions assume prominence duringrecovery service” (Berry and Parasuraman, 1991, p. 46). Thus, whereas theoriginal service outcome attributes have a strong effect on consumers duringtheir initial experience, the service recovery process dimensions may assumegreat importance when consumers have a complaint. Original service andservice recovery may play different roles in determining overall satisfaction,yet it is unknown how these two aspects of customer satisfaction influenceoverall satisfaction and behavioral intentions regarding future purchases ofthe service.

One might expect that satisfaction with the process of problem resolutionwill be more important than initial service attributes in influencing overallsatisfaction and those intentions (Bitner et al., 1990; Hart et al., 1990).Specifically, the role of customer-contact personnel during service recoveryis expected to be a key factor in determining overall satisfaction (Martin,1993). Past research has found evidence that complainers who were satisfiedwith the recovery response have higher repurchase intentions than those whowere satisfied and did not complain (Gilly, 1987). Service recovery effortsare likely to be very salient to consumers, due to heightened attention andevaluation as a result of the service failure. In addition, the recovery processis likely to be the last experience the consumer has had with the company,resulting in a recency effect. Thus, when the consumer contemplates aservice provider for the next transaction, the effectiveness of the servicerecovery effort may have a greater effect on intentions than the originalservice failure.

Further, ineffective service recovery efforts have the potential of increasingdissatisfaction. Hart et al. (1990, p. 150) found that “More than half of allefforts to respond to customer complaints actually reinforce negativereactions to service” (emphasis in original).

Within the Berry and Parasuraman (1991) framework, then, the question ofrelative influence of original versus recovery activities on satisfaction arises.Thus, the first key research question addressed in this study is: given that aservice problem has occurred, how important are service recovery processesrelative to the initial service outcomes in contributing to overall satisfaction?

Repeat purchase behavior is an important issue for most marketers. Whilemany marketing activities are designed to gain new customers, concern forrepeat purchasing by current customers is designed to maintain existingcustomers by decreasing customer exit. Since the cost of gaining a newcustomer usually greatly exceeds the cost of retaining a customer, managersare increasingly concerned with minimizing customer defections. Researchhas consistently found a relationship between satisfaction and repurchaseintentions (see Yi, 1990, p. 104 for a review). Therefore, one of theimportant consequences of satisfaction is increased repurchase intentions.Halstead and Page (1992) found that satisfaction with the complaintresponse led to higher repurchase intentions for dissatisfied consumers, i.e.satisfaction with the service recovery process influenced intentions.

Similarly, WoM has been identified in past research as an importantpostpurchase behavior for several reasons (Day, 1980). WoMcommunication provides face-to-face, often vivid information that is highlycredible. This information can influence others’ beliefs about a particularfirm, and their intentions to purchase from the firm. There is also evidence

16 JOURNAL OF SERVICES MARKETING VOL. 9 NO. 1 1995

Service recoveryeffort

Word of mouth

that consumers give negative information and non-marketer controlledsources of information greater weight in their purchase decisions (Lutz,1975). Finally, satisfaction/dissatisfaction has been found to an antecedent toWoM behavior (Yi, 1990).

Because the effect of service recovery versus the initial service failure onrepurchase intentions and WoM has not been well researched, the secondkey research question addressed in this study is: among consumers who haveexperienced a service problem, how is satisfaction related to intentions torepurchase and to engage in positive word-of-mouth behaviors?

To address these two research questions, we studied consumers experiencingproblems in a highly involving service: interstate movement of householdbelongings. This business is characterized by wide variance in customersatisfaction and uneven repeat purchase. The service failure examined wasperceived damage of the consumer’s personal household goods by a movingcompany; the service recovery opportunity occurred when consumerssubmitted claims for the damage.

Overall satisfaction was modeled as depending on customer satisfaction withspecific attributes of the moving experience. Overall satisfaction theninfluences repeat purchase and word-of-mouth intentions. (It should benoted that, given the long repurchase cycles in this industry, firms aregenerally more concerned with word-of-mouth.)

Attributes of satisfaction and hypothesized relationshipsThe household moving arena is complex, and there are many points at whichdamage to goods can occur. First, the company’s packing crew packshousehold goods in the consumer’s home. Next, the driver comes andsupervises the same or often a different crew in moving the items into thetruck. The driver then supervises another team in unloading and unpackingat the destination. Finally, in the case of damaged or lost goods, customersinteract on the telephone and in person with company claims agents.Unfortunately, although structural frameworks exist to analyze some servicesituations (for example, Garland and Westbrook, 1989; Singh, 1991), theyare not applicable here. Prior exploratory research indicated, however, thatsalient attributes of the move might include:

● packing of goods;

● the timeliness of packing and pick-up;

● the driver;

● the amount of damage to the household belongings; and

● the service after delivery (claims handling).

We have classified the first four items as original service outcome attributesand the last item as a service recovery process dimension. From both theconsumer’s and the firm’s perspective, the most important service failure isdamaged goods, and the biggest opportunity for service recovery is after-service claims handling.

It was hypothesized that behavioral intentions for WoM and repurchaseintentions are influenced by overall satisfaction, which in turn depends onspecific attributes, including satisfaction regarding packing, the driver,timing and damage, as well as the process attribute of service after delivery.The five dimensions expected to influence behavioral intentions areindicated in Figure 1.


Overall satisfaction

Summary of study methods and findingsKey research questions were addressed using data from 410 customers whoreported damage following a move of their household goods. Pathcoefficients were estimated for the conceptual model shown in Figure 1, andform the basis of the discussion which follows. The Appendix containsadditional details regarding the study methodology and results.

The first four variables indicated in Figure 1 all relate to customersatisfaction with specific attributes of the original service, while the fifth(“claims personnel”) is associated with the service recovery process. All fivewere measured on five-point “extremely dissatisfied” to “extremelysatisfied” scales. Each of the five variables is hypothesized to affect overallsatisfaction, which in turn influences repurchase intentions and positiveword-of-mouth intentions. All paths indicated were found to be significantand positive. The model fits well and 74% of the variance in overallsatisfaction is explained by the four original service and one servicerecovery variables.

The largest determinant of overall satisfaction is satisfaction with claimspersonnel, the service recovery variable; its effect even exceeds the effect ofthe damage variable, the original cause of the service failure. The servicerecovery variable also has the largest indirect effect on both intentions torepurchase and intention to recommend the service provider to friends andrelatives, i.e. positive word of mouth (see Appendix). Thus, the study resultssupport the hypothesis that service recovery dominates overall satisfactionformation and positive intentions.

According to this research, for people with service problems related tomoving, satisfaction with post-delivery claims personnel during servicerecovery is more influential on overall satisfaction and behavioral intentionsthan is satisfaction with initial service outcome attributes. In fact, these data


Overall satisfaction

Word ofmouth

Repurchase intention

Satisfaction with pick-up

time

Satisfaction with driver

Satisfaction with proper

packing

Satisfaction with damage

Satisfaction with claims personnel

0.21

0.20

0.22

0.25

0.34

1.0

0.87

Figure 1. Service recovery model – service attributes, satisfaction, andbehavioral intentions (standardized path estimates)

Post-delivery claimspersonnel

Key researchquestions

show that service after delivery has a stronger effect on intentions than doessatisfaction with packing, timeliness, driver, and damage. Damage doesdirectly affect overall satisfaction; however, although damage is the initialcause of the dissatisfaction here, it appears that, once customers are in aservice recovery situation, their post-delivery treatment by customer-contactpersonnel is a very important factor. The degree to which the customerservice staff are successful in satisfying the customer has a strong directeffect on overall satisfaction and a strong indirect effect on repurchaseintentions and word of mouth. In other words, once a customer experiences aproblem and seeks resolution, the performance of recovery process elementssignificantly influences behavioral intentions. The magnitude of this effectdemonstrates the key role of this type of complaint handling.

Managerial implications and recommendationsThe finding that service recovery process variables have a relatively greatereffect on overall satisfaction and behavioral intentions than do originalservice outcome variables is congruent with results obtained from similarrecovery situations in a product-marketing context (Fornell and Wernerfelt,1987). In other words, the manner in which post-delivery service is handledcan have a larger influence on overall satisfaction and behavioral intentionsthan does the customer’s satisfaction with original service outcomes.Specifically, these results support the conceptual claims made by Berry andParasuraman (1991) that service recovery process variables are moreimportant than original service outcome variables during service recovery.

Service recovery processes may have this relatively large impact regardlessof whether the recovery process had negative or positive results. It ispossible that a negative result in recovery is magnified by virtue of it beingthe second time that the firm has failed (i.e. once in the original failure andnow in the recovery attempt); Bitner et al. (1990) describe this as “doubledeviation” from expectations. Positive results in recovery may diminish theeffect of the original failure for several reasons:

● Through effective recovery communications, the consumer is led tobelieve the service provider is fair (e.g. admits its mistakes, makesrestitution, etc.).

● The recovery effort “takes away” all the negative consequences of theservice failure.

● The service provider influences the consumer to make attributionswhich cause the consumer to place blame elsewhere.

Thus, in both positive and negative recovery outcomes, the recovery cantake on greater importance than the original service failure.

These results have implications for a wide range of service providers, andindicate the importance of the recovery process by which service failures arehandled. Once a problem occurs, the way in which the firm deals with thecustomer can both influence the consumer’s satisfaction with the aspect ofthe service failure (in this case “damage”) and affect overall satisfaction,repurchase intentions and word of mouth.

Several specific recommendations follow from these findings. Though someof these recommendations have been articulated previously, this is the firsttime the recommendations are supported by such strong empirical evidence.

First, companies should develop an excellent service recovery program. Theemphasis of such a program should be on training customer-contact and


Positive results inrecovery

Importance ofrecovery process

claims personnel. Service personnel who deal with dissatisfied customersmust understand their critical role. They should be trained not only to dealwith the actual service failure, but also to do so in such a way that theconsumer is satisfied with the way in which the problem is resolved. Theseservice recovery personnel also should be given the power necessary toaddress the service failure adequately. Unsolicited comments provided byrespondents indicated that “token” responses by a company resulted in themost vehemently negative responses. As an example of a company whichavoids this problem, Firnstahl (1989) describes a customer satisfactionprogram in which front-line employees were given responsibility andauthority to correct problems, without having to get approval frommanagers. When there is a service failure, any employee can do anything tomake the customer happy.

Second, once a service recovery program is in place, companies shouldactively encourage complaining behavior (see Halstead et al., 1993). Somefirms provide guarantees that offer substantial benefits for those whocomplain. For example, Embassy Suites provides a free stay if the customeris not 100% satisfied, and this guarantee is likely to elicit complaints thatwould not normally be made. Too often customers choose not to complain,and instead just take their business to a competitor. The company has abetter chance of retaining a customer by encouraging that customer tocomplain, and then addressing the complaint, than it does by assuming thatnon-complaining customers are satisfied. Identifying and contactingconsumers who have experienced service failure is a necessary first step intrying to rectify problems.

Third, because it is more cost effective to retain a customer than it is toattract a new customer (see Fornell and Wernerfelt, 1987), companies shouldreevaluate their relative budget allocations to these two activities. Areservice recovery programs adequately funded? As Firnstahl (1989) pointsout, although service recovery programs can be expensive, they can beviewed as opportunities to make service system improvements that willultimately result in more customers who are satisfied with the firm, as wellas reductions in costs through the improvements on the service deliverysystem. Since each complaint often represents many other customers whowere dissatisfied, but did not complain, actively encouraging customercomplaints for the purpose of improving the service delivery system is anexcellent way to collect information about the firm’s performance. Further,service recovery programs can provide benefits by viewing it as positiveword-of-mouth advertising.

The current study does raise additional questions. For example, why didservice recovery activities play such a large role in forming overallsatisfaction? Future research can address the specific reasons why this istrue. A second question concerns the accuracy of measuring customerevaluations only after the problem occurred. In this study, it is possible thatby collecting data only after the recovery process (and therefore, after thedamage occurred), consumer responses to other original service attributesare biased. Given how data were collected in this study and in virtually allother studies of service recovery, it is impossible to analyze the effects ofmeasurement timing. Future longitudinal studies can address the question ofwhether measurement bias is introduced by collecting data only at theconclusion of service recovery efforts.


Encouragingcomplaints

Reevaluating budgetallocations

The present study provides evidence of the importance of service recovery inproducing satisfied customers who intend to use the firm’s services in thefuture, and would provide positive word of mouth. Service recovery wasfound to be even more important than the original service failure that led tothe service recovery interaction. Firms can and should use service failures toidentify service system problems, reduce customer defections, and increaseloyalty and positive word of mouth.

References

Andreasen, A.R. and Best, A. (1977), “Customers complain – does businessrespond?”, Harvard Business Review, Vol. 55, July-August, pp. 93-101.

Berry, L. and Parasuraman, A. (1991), Marketing Services, The Free Press, NewYork, NY.

Bitner, M.J., Booms, B.H. and Tetreault, M.S. (1990), “The service encounter:diagnosing favorable and unfavorable incidents”, Journal of Marketing, Vol. 54,January, pp. 71-84.

Day, R. (1980), “Research perspectives on consumer complaining behavior”, inTheoretical Developments in Marketing, Lamb, C.W. and Dunne, P.M. (Eds),American Marketing Association, Chicago, IL, pp. 211-5.

Firnstahl, T.W. (1989), “My employees are my service guarantees”, HarvardBusiness Review, Vol. 67, July-August, pp. 4-8.

Fornell, C. and Wernerfelt, B. (1987), “Defensive marketing strategy by customercomplaint management: a theoretical analysis”, Journal of Marketing Research,Vol. 24, November, pp. 337-46.

Garland, B. and Westbrook, R. (1989), “An exploration of client satisfaction in anonprofit context”, Journal of the Academy of Marketing Science, Vol. 17, Fall,pp. 297-303.

Gilly, M.C. (1987), “Postcomplaint processes: from organizational response torepurchase behavior”, Journal of Consumer Affairs, Vol. 21, Winter, pp. 293-313.

Grönroos, C. (1988), “Service quality: the six criteria of good perceived servicequality”, Review of Business, Vol. 9, Winter, pp. 10-3.

Halstead, D. and Page, T.J. (1992), “The effects of satisfaction and complainingbehavior on consumer repurchase intentions”, Journal of Consumer Satisfaction,Dissatisfaction and Complaining Behavior, Vol. 5, pp. 1-11.

Halstead, D., Dröge, C. and Cooper, M.B. (1993), “Product warranties and post-purchase service”, Journal of Services Marketing, Vol. 7 No. 1, pp. 33-40.

Hart, C.W.L., Heskett, J.L. and Sasser, W.E., Jr (1990), “The profitable art of servicerecovery”, Harvard Business Review, Vol. 68, July-August, pp. 148-56.

Kelley, S.W. and Davis, M.A. (1994), “Antecedents to customer expectations forservice recovery”, Journal of the Academy of Marketing Science, Vol. 22, Winter,pp. 52-61.

Lutz, R.J. (1975), “Changing brand attitudes through modification of cognitivestructure”, Journal of Consumer Research, Vol. 1, March, pp. 49-59.

Martin, C.L. (1993), “Editorial – welcome new readers, new publisher”, Journal ofServices Marketing, Vol. 7 No. 1, p. 3.

Parasuraman, A., Berry, L.L. and Zeithaml, V.A. (1991), “Understanding customerexpectation of service”, Sloan Management Review, Vol. 32, Spring, pp. 39-48.

Parasuraman, A., Zeithaml, V.A. and Berry, L.L. (1988), “SERVQUAL: a multiple-item scale for measuring customer perceptions of service quality”, Journal ofRetailing, Vol. 64, Spring, pp. 12-40.

Peterson, R.A. and Wilson, W.R. (1992), “Measuring customer satisfaction: fact andartifact”, Journal of the Academy of Marketing Science, Vol. 20, Winter, pp. 61-71.

Reichheld, F.F. and Sasser, W.E., Jr (1990), “Zero defections: quality comes toservices”, Harvard Business Review, Vol. 68, September-October, pp. 105-11.


Increasing loyalty

Singh, J. (1991), “Understanding the structure of consumers’ satisfaction evaluationsof service delivery”, Journal of the Academy of Marketing Science, Vol. 19,Summer, pp. 223-44.

Yi, Y. (1990), “A critical review of consumer satisfaction”, in Zeithaml, V.A. (Ed.),Review of Marketing, Vol. 4, America Marketing Association, Chicago, IL,pp. 68-123.

AppendixMethodThe study population consisted of households completing interstate moves within thecontinental USA during a three-month period. A random sample of 5,520households was selected and received a mail questionnaire from a major university.An introductory note addressed the questionnaire to the person most responsible fordecisions regarding the move.

A total of 1,447 questionnaires were completed, and although the 26% response ratecompares favorably with research using the mail-out methodology, potentialnonresponse bias was still a concern. Therefore, a telephone validation survey with asample of respondents (143) and nonrespondents (72) was completed. The telephonesurvey used wording identical to that used here. Results were similar betweenrespondents and nonrespondents, although the former tended to be slightly moresatisfied on some measures. Since there was no evidence of differences in therelationships between specific attributes and overall behavioral intentions, it wasdeemed appropriate to proceed with detailed analysis of the mail-out results.Subjects were instructed to rate only those aspects of the move with which they hadcontact. Respondents who had damage to their belongings and who completed allrelevant measures were retained for this analysis. This produced a final sample sizeof 410.

Measures of constructsFive-point scales anchored by “extremely dissatisfied” (1) and “extremely satisfied”(5) were used for all measures except repeat purchase intention and word of mouth.The repeat purchase intention measure asked: “If needed, would you select the samecompany again?” (yes/no). The word-of-mouth question was: “If asked, would yourecommend this company to others?”, using a five-point scale anchored by “no” and“extremely likely”, with “somewhat likely” as a midpoint.

ResultsLike most measures of satisfaction, most of the data were slightly negatively skewed(Peterson and Wilson, 1992). Also as expected, satisfaction with damage waspositively skewed, since all 410 subjects had contact with the claims personnelregarding damage. Means are not presented in order to preserve confidentialityregarding the amount of satisfaction/dissatisfaction.

Path analysis was conducted using LISREL. LISREL is a structural equationsmodeling program which estimates the path coefficients that show the relationshipsamong variables. The coefficients can be interpreted in the same way as standardizedcoefficients in regression analysis, that is, larger coefficients indicate strongerrelationships between variables. Parameter estimates and model fit indices (LISREL8) are reported in Table AI.

Indirect effects of one variable on another (discussed in the text) are calculated bymultiplying the standardized coefficients. For example, the indirect effect ofsatisfaction with the damage on WoM is 0.25 × 0.87 = 0.22, while the indirect effectof satisfaction with claims personnel is 0.37 × 0.87 = 0.32. The indirect effects arealso available in the LISREL output.


■


Estimate t-Value

Antecedent relationships

Initial service attributes:

Proper packing –> overall satisfaction 0.21 6.75

Driver –> overall satisfaction 0.20 6.96

Pick-up time –> overall satisfaction 0.22 7.76

Damage –> overall satisfaction 0.25 7.35

Service recovery attribute:

Claims personnel –> overall satisfactiona 0.34 11.18

Consequent relationships

Effects of overall satisfaction:

Overall satisfaction –> word of mouth 0.87 24.88

Overall satisfaction –> intentions 1.00 35.46

a Claims personnel –> overall satisfaction path is significantly larger than the damage –>

overall satisfaction path at p < 0.08; it is significantly larger than the paths associated with

the other three initial service attribute paths at p < 0.01

Notes:

Model fit indices are as follows: χ2 = 66.53; degrees of freedom = 17; p-value = < 0.001;

goodness-of-fit index = 0.97; and root mean square residual = 0.025

Table AI. Parameter estimates and model fit indices (completely standardizedresults)

Richard A. Spreng is Assistant Professor of Marketing and Gilbert D. Harrell isProfessor of Marketing, both at the Eli Broad Graduate School of Management,Michigan State University, East Lansing, Michigan, USA. Robert D. Mackoy isAssistant Professor of Marketing, College of Business Administration, ButlerUniversity, Indianapolis, Indiana, USA.

service recovery: impact on satisfaction and intentions

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