We examine the crucial role of helplessness in explaining idiosyncratic coping responses to anger and frustration after service failure (a). Moreover, we examine the mitigating effect of informational support (i.e., explanations) on these emotions (b). With respect to (a), it is argued that the coincidence of anger (frustration) and high levels of helplessness enhances vindictive nWOM (support-seeking nWOM), whereas the coincidence of anger (frustration) and low levels of helplessness enhances vindictive complaining (problem-solving complaining). With respect to (b), it is argued that a retrospective explanation mitigates anger, whereas a prospective explanation mitigates helplessness. Using partial least squares modeling, these assumptions are tested and supported in an experiment and in a field survey with hotel guests. Finally, we delineate implications for theory and practice.

Service recovery is a crucial success factor for organizations. Thus, many studies have addressed the issue of post-complaint behavior. Conducting a meta-analysis, the authors test the following path model: ‘‘organizational responses (compensation, favorable employee behavior, and organizational procedures) → justice perceptions (distributive, interactional, and procedural justice) → post-complaint satisfaction (transaction-specific and cumulative satisfaction) → customer behavioral intentions (loyalty and positive word of mouth [WOM]).’’ The results confirm this model as well as the mediating role of justice perceptions and post-complaint satisfaction. Surprisingly, the results also show that the common contention of distributive justice as the salient driver of service recovery is only true for transaction-specific satisfaction, which in turn reinforces positive WOM. Cumulative satisfaction, however, which is the primary antecedent of customer loyalty, even slightly more depends on interactional justice than on distributive justice. Further, the results show that the relationships between justice perceptions and satisfaction constructs depend on several moderators such as target group, industry, and complaint type. A major managerial implication is the fact that organizations should pay particular attention to distributive justice when complainants are students and to interactional justice when failure is nonmonetary or occurs in service industries. The authors discuss theoretical implications and provide suggestions for future research.

This article examines how compensation type and failure type explain the recovery effect of compensation, using a meta-analysis (Study 1) and an experiment (Study 2). Drawing on resource exchange theory, we propose new classifications for both compensation and failure type and find three major results. First, consistent with our matching hypothesis, the strongest recovery effect is generally observed when compensation represents a resource similar to the failure it is supposed to offset, that is, immediate monetary compensation for a monetary failure, exchange for a flawed product, reperformance for a failed service, and psychological compensation for lack of attention. Surprisingly, lack of attention may also be rectified by the other compensation types. Second, consistent with our intertemporal choice hypothesis, immediate monetary compensation is generally more effective than delayed monetary compensation. Yet, this effect also varies with failure type. Third, resource-based classifications explain the recovery effect of compensation better than current classifications of compensation and failure type. As a theoretical contribution, the resource-based classifications help to explain the fluctuating effect sizes of compensation reported in prior research. From a managerial point of view, practitioners can choose the appropriate compensation type for a failure, one that repays in kind what customers have lost. As a result, companies achieve stronger recovery effects without additional costs.

This research examines the nonlinear effects of compensation on customer satisfaction in order to determine the optimal compensation after a flawed service. As our core contribution, we argue that the nature of this nonlinear effect depends on the way customers handle a flawed service. Building on the Service-Dominant (S-D) logic, this research introduces two specific failure handling tactics-when customers reject versus accept a flawed value proposition-that affect the shape of the nonlinear function of compensation on satisfaction. Our key hypotheses are tested with two experiments that manipulate 11 compensation levels (0-200%) and the two failure handling tactics (rejection vs. acceptance). Consistent with our logic, both studies reveal an S-shaped curve progression for service rejection and a concave shape for service acceptance. For service rejection, the highest incremental effect of compensation on satisfaction lies in between 60% and 120%. For service acceptance, the highest return in satisfaction is obtained with the first dollars invested in partial compensation. As a major managerial takeaway, firms can use these findings to determine the compensation level that provides the best satisfaction return.

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