The effects of second service failure and recovery on satisfaction and repurchase intention

Authors: Stacy Huey-Pyng Shyu

Journal: Chiao Da Management Review. Jun. 2012, 32(1): 29-59.

Keywords: Compensation strategy; Service recovery; Satisfaction, Coupon

Abstract:
Many studies have examined the effects of compensation in single service recovery, but few works have examined the consequences of second failure and recovery. Many services are provided on an ongoing base. Customers are likely to experience multiple service failures. This study examines the effects of first and second service failure and compensation on satisfaction and purchase intention. This work used a single-factor completely randomized design. Three levels of compensation were employed: no compensation, 50% discount, and 150% discount. A total of 288 subjects participated in the study, which utilizes scenarios in a restaurant setting. Findings indicate that compensation level has a significant influence on satisfaction and repatronage intention for the frrst and second failure. However, compared with a moderate level of compensation, a high level of compensation increased repurchase intentions only marginally for the first failure. A high level of compensation increased both satisfaction and repurchase intention only marginally for the second failure. Customers who experience second service failure and recovery reported a significantly lower satisfaction and revisit intention than those at the first time. Managerial implications and directions for future research also are discussed.