Proactive Handling of Flight Overbooking: How to Reduce Negative eWOM and the Costs of Bumping Customers

Abstract

<jats:p> 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%. </jats:p>

Service Failure and Recovery at the Crossroads: Recommendations to Revitalize the Field and its Influence

“…It should be noted that the standards for behavioral-subjective SFR research have rapidly increased in recent years, with growing pressure for a large number of studies, a multimethods approach, and elaborated process testing. For example, a recently accepted JSR article has 10 studies, combining archival data, experiments, and a Monte Carlo simulation (Nazifi et al 2020). Although scenario-based experiments are unlikely to disappear, a strict reliance on this method seems insufficient for articles to be published in leading journals.…”

Bad Intentions: Customers’ Negative Reactions to Intentional Failures and Mitigating Conditions

“…Further, the recovery strategy by failure level interaction was marginally significant for nWOM (F[3, 372] = 2.04, p = .10, η² = .02) and trust (F[3, 372] = 2.39, p = 07, η² = .02) but not for patronage reduction (F[3, 372] = 0.90, p = .44, η² = .01). Next, akin to Nazifi, Gelbrich, et al (2021), each failure level (firm and employee) was examined separately, and nWOM, patronage reduction, and trust levels were compared at T2 versus T1 for the four recovery groups using repeated ANCOVAs (see Figure 4). At employee level, all four recovery strategies significantly reduced nWOM at T2 compared to nWOM at T1 (see Supplementary Material S3 for cell means).…”

“…This study provides three contributions that deepen the understanding of intentional failures, their processes and consequences, and buffering conditions, contributing to tourism literature and services research. First, the results show that perceived intentionality leads to increased negative reactions, thus providing a rationale for studying failures in tourism contexts where intention is expected to be ascribed by travelers (e.g., overbooking) as particular harmful events (e.g., Bejou, Edvardsson, and Rakowski 1996;Nazifi, Gelbrich, et al 2021;Perdue 2002). By looking at tourism contexts that are more hedonic in nature and including nWOM, the present research complements utilitarian banking contexts of prior work, thus expanding the scope and generalizability of the effects of intentional failures.…”

“…This can also be showcased using overbooking in air travel. After past crises (e.g., MERS and SARS), it has been observed that carriers recommenced overbooking more intensely than before as a response to damaged balance sheets (Nazifi, Gelbrich, et al 2021).…”

“…At a firm level, overbooking of flights (Bejou, Edvardsson, and Rakowski 1996), hotels (Perdue 2002), and restaurants (Tse and Poon 2017) is an everyday practice that customers perceive as an intentional attempt of the firm to maximize revenue (Nazifi, Gelbrich, et al 2021). Overbooking is just one example of a broader phenomenon that is considered as an intentional failure, in which consumers might attribute a certain degree of intentionality to a failure (Howlett 2012).…”