This research examines the extent to which proactivity in handling flight overbooking reduces negative electronic word-of-mouth (NeWOM) and the required costs of compensation, thus increasing firm profitability. It answers recent calls to use a multimethod approach (i.e., we include archival data, qualitative interviews, seven experiments, and a Monte Carlo simulation for a total of 10 studies) and to adapt recovery to specific contexts (i.e., airlines) and heterogeneous customers (i.e., voluntary/involuntary bumping or offloading). The preliminary studies indicate that overbooking and offloading are pervasive and that a proactive approach is both feasible and desirable. The experiments show that, compared to the default reactive approach (informing passengers at the gate), a proactive approach (informing them before they leave for the airport) substantially reduces NeWOM and the sought compensation. Further, a very reactive approach (informing them in the plane) significantly increases NeWOM and the sought compensation, especially when offloading occurs involuntarily. We also unveil the mechanism explaining the effects of proactivity on NeWOM, through the serial mediation of justice and betrayal. Finally, the results of a Monte Carlo simulation show that offering reduced compensation through a proactive approach allows more aggressive overbooking, higher capacity utilization, and increased net revenue of up to 1.3%.

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Purpose This study aims to examine the effects of organizational tactics (e.g. explanation and monetary compensation) on customers’ reactions to service termination. The mediating role of anger and the moderating role of termination strategy on the effectiveness of organizational tactics are examined to enhance the understanding of customers’ reactions to service termination. Design/methodology/approach Three experimental studies are conducted with different contexts (telecom and banking) and samples (students and consumers). Findings Study 1 results show that explanation and high monetary compensation reduce negative word-of-mouth and enhance corporate image and anger mediates these effects. Study 2a results show that high monetary compensation becomes ineffective when firms use a soft termination approach. Study 2b results show that an explanation is equally effective in soft and hard termination approaches. Importantly, unlike high monetary compensation, the explanation can fully eliminate the negative consequences of service termination. Practical implications Managers can mitigate negative customers’ reactions to service termination by offering a truthful explanation. Further, they should provide high monetary compensation only if they do not help dismissed customers find an alternative provider. Originality/value This paper contributes to the service termination literature by shedding more light on the effectiveness of different organizational tactics following different termination strategies. The findings challenge existing wisdom on the overrated role of monetary compensation showing that in service termination, the explanation is the most effective remedy. Further, unlike justice, anger better explains customers’ reactions to service termination.

Intentional service failures (e.g., overbooking or overcharging) have received little scholarly attention, despite their regular occurrence and immense costs. Using a multi-method approach combining experimental and field data from online reviews, it was found that intentional (vs. unintentional) failures lead to greater negative word of mouth (nWOM) and patronage reduction. This research extends these findings by demonstrating that intentional failures are less harmful when the failure is reversible (vs. irreversible) and occurs at an employee (vs. firm) level. Further, while either psychological (e.g., apology) or monetary compensation is effective in mitigating the consequences of intentional failures at an employee level, a combined service recovery (psychological and monetary) is the best solution when the failure is at a firm level. Drawing on attribution theory, the article unveils the key role of trust (as opposed to justice) as the mechanism to explain the effects of intentionality on customers’ nWOM and patronage reduction.