IDEAS home Printed from https://ideas.repec.org/a/kap/mktlet/v34y2023i1d10.1007_s11002-021-09611-6.html
   My bibliography  Save this article

Money for Nothing: The Impact of Compensation on Customers’ Bad-Mouthing in Service Recovery Encounters

Author

Listed:
  • Jasenko Arsenovic

    (SDA Bocconi)

  • Bo Edvardsson

    (Karlstad University
    Inland Norway University of Applied Science)

  • Tobias Otterbring

    (University of Agder
    Institute of Retail Economics)

  • Bård Tronvoll

    (Karlstad University
    Inland Norway University of Applied Science)

Abstract

As one of the retailer’s most potent recovery tactics to offset disgruntled customers, firms invest heavily in compensation to increase customer satisfaction and improve loyalty. However, the effectiveness of this tactic remains unclear. This study examines whether firm-offered compensation affects customers’ emotional responses and bad-mouthing behavior (i.e., telling others about a particular problem). Importantly, the study investigates whether the level of collaboration during the recovery encounter moderates the link between compensation and customers’ emotional responses, and whether collaborative efforts influence the effectiveness of compensation. The findings indicate that collaboration during the recovery encounter is necessary if compensation is to mitigate negative emotional responses, with downstream effects on bad-mouthing behavior. In confirming the importance of collaboration during recovery encounters, the findings have critical managerial and financial implications.

Suggested Citation

  • Jasenko Arsenovic & Bo Edvardsson & Tobias Otterbring & Bård Tronvoll, 2023. "Money for Nothing: The Impact of Compensation on Customers’ Bad-Mouthing in Service Recovery Encounters," Marketing Letters, Springer, vol. 34(1), pages 69-82, March.
    • Handle: RePEc:kap:mktlet:v:34:y:2023:i:1:d:10.1007_s11002-021-09611-6
    DOI: 10.1007/s11002-021-09611-6
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s11002-021-09611-6
    File Function: Abstract
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1007/s11002-021-09611-6?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Jasenko Arsenovic & Bo Edvardsson & Bård Tronvoll, 2019. "Moving Toward Collaborative Service Recovery: A Multiactor Orientation," Service Science, INFORMS, vol. 11(3), pages 201-212, October.
    2. Yves Van Vaerenbergh & Simon Hazée & Annelies Costers, 2018. "Customer participation in service recovery: a meta-analysis," Marketing Letters, Springer, vol. 29(4), pages 465-483, December.
    3. Grewal, Dhruv & Roggeveen, Anne L. & Tsiros, Michael, 2008. "The Effect of Compensation on Repurchase Intentions in Service Recovery," Journal of Retailing, Elsevier, vol. 84(4), pages 424-434.
    4. Jung, Na Young & Seock, Yoo-Kyoung, 2017. "Effect of service recovery on customers’ perceived justice, satisfaction, and word-of-mouth intentions on online shopping websites," Journal of Retailing and Consumer Services, Elsevier, vol. 37(C), pages 23-30.
    5. Park, Joohyung & Ha, Sejin, 2016. "Co-creation of service recovery: Utilitarian and hedonic value and post-recovery responses," Journal of Retailing and Consumer Services, Elsevier, vol. 28(C), pages 310-316.
    6. Katja Gelbrich & Holger Roschk, 2011. "Do complainants appreciate overcompensation? A meta-analysis on the effect of simple compensation vs. overcompensation on post-complaint satisfaction," Marketing Letters, Springer, vol. 22(1), pages 31-47, March.
    7. Sara Valentini & Chiara Orsingher & Alexandra Polyakova, 2020. "Customers’ emotions in service failure and recovery: a meta-analysis," Marketing Letters, Springer, vol. 31(2), pages 199-216, September.
    8. Jens Hogreve & Nicola Bilstein & Leonhard Mandl, 2017. "Unveiling the recovery time zone of tolerance: when time matters in service recovery," Journal of the Academy of Marketing Science, Springer, vol. 45(6), pages 866-883, November.
    9. Gohary, Ali & Hamzelu, Bahman & Pourazizi, Lida & Hanzaee, Kambiz Heidarzadeh, 2016. "Understanding effects of co-creation on cognitive, affective and behavioral evaluations in service recovery: An ethnocultural analysis," Journal of Retailing and Consumer Services, Elsevier, vol. 31(C), pages 182-198.
    10. Hazée, Simon & Van Vaerenbergh, Yves & Armirotto, Vincent, 2017. "Co-creating service recovery after service failure: The role of brand equity," Journal of Business Research, Elsevier, vol. 74(C), pages 101-109.
    11. Casidy, Riza & Shin, Hyunju, 2015. "The effects of harm directions and service recovery strategies on customer forgiveness and negative word-of-mouth intentions," Journal of Retailing and Consumer Services, Elsevier, vol. 27(C), pages 103-112.
    12. Sparks, Beverley A. & McColl-Kennedy, Janet R., 2001. "Justice strategy options for increased customer satisfaction in a services recovery setting," Journal of Business Research, Elsevier, vol. 54(3), pages 209-218, December.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Otterbring, Tobias & Folwarczny, Michał, 2024. "Social validation, reciprocation, and sustainable orientation: Cultivating “clean†codes of conduct through social influence," Journal of Retailing and Consumer Services, Elsevier, vol. 76(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Yang, Yan & Hu, Jing, 2021. "Self-diminishing effects of awe on consumer forgiveness in service encounters," Journal of Retailing and Consumer Services, Elsevier, vol. 60(C).
    2. Harun, Ahasan & Rokonuzzaman, Md, 2021. "Pursuit of loyalty in service recovery: The roles of brand equity and cognitive reappraisal as moderators," Journal of Retailing and Consumer Services, Elsevier, vol. 62(C).
    3. Bagherzadeh, Ramin & Rawal, Monika & Wei, Shuqin & Saavedra Torres, Jose Luis, 2020. "The journey from customer participation in service failure to co-creation in service recovery," Journal of Retailing and Consumer Services, Elsevier, vol. 54(C).
    4. Phimai Nuansi & Piya Ngamcharoenmongkol, 2021. "Proactive Complaint Management: Effects of Customer Voice Initiation on Perceived Justices, Satisfaction, and Negative Word-of-Mouth," SAGE Open, , vol. 11(3), pages 21582440211, September.
    5. Zhang, Yu & Yuan, Yafen & Su, Jiafu & Xiao, Yan, 2021. "The effect of employees' politeness strategy and customer membership on customers' perception of co-recovery and online post-recovery satisfaction," Journal of Retailing and Consumer Services, Elsevier, vol. 63(C).
    6. Baliga, Ashwin J. & Chawla, Vaibhav & Sunder M, Vijaya & Ganesh, L.S. & Sivakumaran, Bharadhwaj, 2021. "Service Failure and Recovery in B2B Markets – A Morphological Analysis," Journal of Business Research, Elsevier, vol. 131(C), pages 763-781.
    7. Gelbrich, Katja & Gäthke, Jana & Grégoire, Yany, 2016. "How a firm's best versus normal customers react to compensation after a service failure," Journal of Business Research, Elsevier, vol. 69(10), pages 4331-4339.
    8. Yu Zhang & Bingjia Shao, 2019. "The Effectiveness of Customer Participation and Affective Misforecasting in Online Post-Recovery Satisfaction," Sustainability, MDPI, vol. 11(24), pages 1-22, December.
    9. Gohary, Ali & Hamzelu, Bahman & Alizadeh, Hamid, 2016. "Please explain why it happened! How perceived justice and customer involvement affect post co-recovery evaluations: A study of Iranian online shoppers," Journal of Retailing and Consumer Services, Elsevier, vol. 31(C), pages 127-142.
    10. Nazifi, Amin & Murdy, Samantha & Marder, Ben & Gäthke, Jana & Shabani, Bardia, 2021. "A Bit(coin) of happiness after a failure: An empirical examination of the effectiveness of cryptocurrencies as an innovative recovery tool," Journal of Business Research, Elsevier, vol. 124(C), pages 494-505.
    11. Kaur, Puneet & Talwar, Shalini & Islam, Nazrul & Salo, Jari & Dhir, Amandeep, 2022. "The effect of the valence of forgiveness to service recovery strategies and service outcomes in food delivery apps," Journal of Business Research, Elsevier, vol. 147(C), pages 142-157.
    12. Yu Zhang & Bingjia Shao, 2018. "The Effect of Customer Participation Types on Online Recovery Satisfaction: A Mental Accounting Perspective," Future Internet, MDPI, vol. 10(10), pages 1-20, October.
    13. Joseph Lok-Man Lee & Calvin Wah-On Cheng & Vanessa Shun-Wah Liu, 2022. "Core Chinese cultural values: Perceived justice and post-recovery satisfaction in higher education services," Service Business, Springer;Pan-Pacific Business Association, vol. 16(3), pages 743-770, September.
    14. Honora, Andreawan & Chih, Wen-Hai & Wang, Kai-Yu, 2022. "Managing social media recovery: The important role of service recovery transparency in retaining customers," Journal of Retailing and Consumer Services, Elsevier, vol. 64(C).
    15. Arsenovic, Jasenko & De Keyser, Arne & Edvardsson, Bo & Tronvoll, Bård & Gruber, Thorsten, 2021. "Justice (is not the same) for all: The role of relationship activity for post-recovery outcomes," Journal of Business Research, Elsevier, vol. 134(C), pages 342-351.
    16. Jones, Michael A. & Taylor, Valerie A., 2018. "Marketer requests for positive post-purchase satisfaction evaluations: Consumer depth interview findings," Journal of Retailing and Consumer Services, Elsevier, vol. 41(C), pages 218-226.
    17. Bougoure, Ursula Sigrid & Russell-Bennett, Rebekah & Fazal-E-Hasan, Syed & Mortimer, Gary, 2016. "The impact of service failure on brand credibility," Journal of Retailing and Consumer Services, Elsevier, vol. 31(C), pages 62-71.
    18. Bambauer-Sachse, Silke & Rabeson, Landisoa, 2015. "Determining adequate tangible compensation in service recovery processes for developed and developing countries: The role of severity and responsibility," Journal of Retailing and Consumer Services, Elsevier, vol. 22(C), pages 117-127.
    19. Sharifi, Seyed Shahin & Aghazadeh, Hashem, 2016. "Discount reference moderates customers' reactions to discount frames after online service failure," Journal of Business Research, Elsevier, vol. 69(10), pages 4074-4080.
    20. White, Allyn & Breazeale, Michael & Collier, Joel E., 2012. "The Effects of Perceived Fairness on Customer Responses to Retailer SST Push Policies," Journal of Retailing, Elsevier, vol. 88(2), pages 250-261.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:kap:mktlet:v:34:y:2023:i:1:d:10.1007_s11002-021-09611-6. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.