The demand-what-you-want strategy to service recovery: achieving high customer satisfaction with low service failure compensation using anchoring and precision effects

Abstract

PurposePrevious research suggests that the compensation offered to customers after a service failure has to be substantial to make customer satisfaction surpass that of an error-free service. However, with the right service recovery strategy, it might be possible to reduce compensation size while maintaining happy customers. The aim of the current study is to test whether an anchoring technique can be used to achieve this goal.Design/methodology/approachAfter experiencing a service failure, participants were told that there is a standard size of the compensation for service failures. The size of this standard was different depending on condition. Thereafter, participants were asked how much they would demand to be satisfied with their customer experience.FindingsThe compensation demand was relatively high on average (1,000–1,400 SEK, ≈ $120). However, telling the participants that customers typically receive 200 SEK as compensation reduced their demand to about 800 SEK (Experiment 1)—an anchoring effect. Moreover, a precise anchoring point (a typical compensation of 247 SEK) generated a lower demand than rounded anchoring points, even when the rounded anchoring point was lower (200 SEK) than the precise counterpart (Experiment 2)—a precision effect.Implications/valueSetting a low compensation standard—yet allowing customers to actually receive compensations above the standard—can make customers more satisfied while also saving resources in demand-what-you-want service recovery situations, in particular when the compensation standard is a precise value.

The effect of service recovery on socially distant third-party customers: an experimental research on emotions, forgiveness, repatronage intention and WoM

“…Service encounters are frequently occupied by the simultaneous presence of many customers (Grove and Fisk, 1997), and service failures are simply unavoidable in the servicescape (Harrison-Walker, 2019a), as long as human factors and circumstantial complexities play a role (Kron et al ., 2023). Since a customer shares the same environment with many people, third-party customers as observers are an inseparable part of the service experience (Miao and Mattila, 2013).…”

Can Efficacious Service Recovery Enable Retention of Complaint-Averse Savvy Customers?

“…Against this background, effective service recovery is pivotal in most service industries (Van Vaerenbergh et al, 2019), and despite much research, how to manage recovery after service failure remains a central question in service research (Kron et al, 2023). Understanding customer loyalty remains one of the most important and intangible competitive advantages a service provider can have (Petzer & Roberts-Lombard, 2021;Roberts-Lombard & Petzer, 2018).…”

“…Increasingly, firms shift towards a co-created process involving the customer and with the ability to adapt recovery to heterogeneous needs (Kron et al, 2023).…”