Customers’ reactions to different organizational tactics in a service termination context

Abstract

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.

“Actions speak louder than words”: an impact of service recovery antecedents on customer delight in quick-service restaurants

“…Liu et al (2020) have defined monetary compensation as a service recovery strategy to control customers' retaliation. The preceding studies have established a significant association between customer satisfaction and monetary compensation (Nazifi et al, 2019;Jeong and Lee, 2017). Guchait et al (2019) have suggested that monetary compensation may transform customer satisfaction beyond their expectations, which may lead to customer delight.…”

A Bit(coin) of happiness after a failure: An empirical examination of the effectiveness of cryptocurrencies as an innovative recovery tool

“…Specifically, from a cognitive point of view, a service failure might be seen as an economic loss since customers pay for a flawed service (Gelbrich & Roschk, 2011). From an emotional point of view, a service failure might result in a psychological loss, since it elicits negative feelings such as anger (Nazifi, El-Manstrly, & Gelbrich, 2019). To mitigate economic as well as psychological losses, customers seek compensation (Chebat et al, 2005) that can be seen as gain.…”

The bright and dark sides of humorous response to online customer complaint

“…The service recovery literature is replete with studies showing that responses provided to service failure can drive various positive customer outcomes including overall satisfaction, WOM and purchase intention (Maxham and Netemeyer, 2002). Although service recovery is vital in consumer evaluations of the service and the organization, corporate image as a direct consequence of service recovery efforts has not been widely investigated (de Matos et al , 2007; Mostafa et al , 2015; Nazifi et al , 2019). Corporate image is the mental associations formed or held by individuals about the organization (Brown et al , 2006).…”