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.