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Service Recovery: Impact on Satisfaction and


Intentions

Article in Journal of Services Marketing March 1995


DOI: 10.1108/08876049510079853

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Journal of Services Marketing
Service recovery: Impact on satisfaction and intentions
Richard A. Spreng Gilbert D. Harrell Robert D. Mackoy
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Richard A. Spreng Gilbert D. Harrell Robert D. Mackoy, (1995),"Service recovery: Impact on satisfaction and intentions",
Journal of Services Marketing, Vol. 9 Iss 1 pp. 15 - 23
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K. Douglas Hoffman, Scott W. Kelley, Holly M. Rotalsky, (1995),"Tracking service failures and employee recovery efforts",
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Anna S. Mattila, (2001),"The effectiveness of service recovery in a multi-industry setting", Journal of Services Marketing, Vol.
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Service recovery: impact on
satisfaction and intentions
Richard A. Spreng, Gilbert D. Harrell and Robert D. Mackoy

Empirical evidence, observed across a variety of service industries, indicates


that customers who have experienced problems with service suppliers are
often dissatisfied with the ways in which problems are resolved. For
example, an early study revealed that only 30-53% of customers who
experienced problems with one of seven services they purchased were
satisfied with the resolution (Andreasen and Best, 1977). In more recent
research, only 50-67% of customers who experienced difficulties with one of
five service companies were satisfied with the outcome (Berry and
Parasuraman, 1991). Furthermore, it appears that, while marketing of
products and services differs in many ways, customer satisfaction with
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services is particularly tied to the resolution of problems. Since word-of-


mouth (WoM) regarding problem resolution can be a major positive or
negative force in building a firms reputation and retaining customers
(Reichheld and Sasser, 1990), the reward to companies which resolve
problems to the customers satisfaction appears to be very high (Hart et al.,
1990).
Service recovery Given the acknowledged importance of service recovery, it is surprising that
so few large-scale field studies have focussed on this topic; as Kelley and
Davis (1994) succinctly state: A dearth of empirical research confines
any theoretical discussion to anecdotal reports (p. 52). This study examines
the relative importance of service recovery activities in determining overall
satisfaction and consequent behavioral intentions. Data from a large field
study are analyzed to address the research questions.
Background and research questions
To some degree, overall satisfaction in a service failure situation is
determined by two factors: the outcome of the original service encounter
based on specific service attributes (Singh, 1991), and attributes associated
with the service recovery process (Parasuraman et al., 1991). Service
recovery processes are those activities in which a company engages to
address a customer complaint regarding a perceived service failure
(Grnroos, 1988). For example, a service failure could be a core-service
problem such as unavailability of the service (no service personnel with the
appropriate skills are available), exceptionally slow service, mistakes in the
service (e.g. bank statement errors), etc. In addition, as suggested by Kelley
and Davis (1994), service failures can vary in seriousness from something
trivial (e.g. a mover being a few minutes late in arriving to pick up ones
household goods) to being very serious (e.g. the mover damaging a priceless
family heirloom).
Dimension types Parasuraman et al. (1988) identify two primary types of dimensions
operating when consumers evaluate a service encounter: outcome
dimensions and process dimensions. Though both dimension types occur in
both the original service encounter and the service recovery, the research of
Berry and Parasuraman (1991) indicates that outcome is the primary driver
of consumer evaluations of service during the initial service encounter, while
process is the primary driver during service recovery: A service failure is

JOURNAL OF SERVICES MARKETING VOL. 9 NO. 1 1995 15


essentially a flawed outcome that reflects a breakdown in reliabilityEven
though reliability is of foremost concern to customers during initial
performance of a service, the process dimensions assume prominence during
recovery service (Berry and Parasuraman, 1991, p. 46). Thus, whereas the
original service outcome attributes have a strong effect on consumers during
their initial experience, the service recovery process dimensions may assume
great importance when consumers have a complaint. Original service and
service recovery may play different roles in determining overall satisfaction,
yet it is unknown how these two aspects of customer satisfaction influence
overall satisfaction and behavioral intentions regarding future purchases of
the service.
Service recovery One might expect that satisfaction with the process of problem resolution
effort will be more important than initial service attributes in influencing overall
satisfaction and those intentions (Bitner et al., 1990; Hart et al., 1990).
Specifically, the role of customer-contact personnel during service recovery
is expected to be a key factor in determining overall satisfaction (Martin,
1993). Past research has found evidence that complainers who were satisfied
with the recovery response have higher repurchase intentions than those who
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were satisfied and did not complain (Gilly, 1987). Service recovery efforts
are likely to be very salient to consumers, due to heightened attention and
evaluation as a result of the service failure. In addition, the recovery process
is likely to be the last experience the consumer has had with the company,
resulting in a recency effect. Thus, when the consumer contemplates a
service provider for the next transaction, the effectiveness of the service
recovery effort may have a greater effect on intentions than the original
service failure.
Further, ineffective service recovery efforts have the potential of increasing
dissatisfaction. Hart et al. (1990, p. 150) found that More than half of all
efforts to respond to customer complaints actually reinforce negative
reactions to service (emphasis in original).
Within the Berry and Parasuraman (1991) framework, then, the question of
relative influence of original versus recovery activities on satisfaction arises.
Thus, the first key research question addressed in this study is: given that a
service problem has occurred, how important are service recovery processes
relative to the initial service outcomes in contributing to overall satisfaction?
Repeat purchase behavior is an important issue for most marketers. While
many marketing activities are designed to gain new customers, concern for
repeat purchasing by current customers is designed to maintain existing
customers by decreasing customer exit. Since the cost of gaining a new
customer usually greatly exceeds the cost of retaining a customer, managers
are increasingly concerned with minimizing customer defections. Research
has consistently found a relationship between satisfaction and repurchase
intentions (see Yi, 1990, p. 104 for a review). Therefore, one of the
important consequences of satisfaction is increased repurchase intentions.
Halstead and Page (1992) found that satisfaction with the complaint
response led to higher repurchase intentions for dissatisfied consumers, i.e.
satisfaction with the service recovery process influenced intentions.
Word of mouth Similarly, WoM has been identified in past research as an important
postpurchase behavior for several reasons (Day, 1980). WoM
communication provides face-to-face, often vivid information that is highly
credible. This information can influence others beliefs about a particular
firm, and their intentions to purchase from the firm. There is also evidence

16 JOURNAL OF SERVICES MARKETING VOL. 9 NO. 1 1995


that consumers give negative information and non-marketer controlled
sources of information greater weight in their purchase decisions (Lutz,
1975). Finally, satisfaction/dissatisfaction has been found to an antecedent to
WoM behavior (Yi, 1990).
Because the effect of service recovery versus the initial service failure on
repurchase intentions and WoM has not been well researched, the second
key research question addressed in this study is: among consumers who have
experienced a service problem, how is satisfaction related to intentions to
repurchase and to engage in positive word-of-mouth behaviors?
To address these two research questions, we studied consumers experiencing
problems in a highly involving service: interstate movement of household
belongings. This business is characterized by wide variance in customer
satisfaction and uneven repeat purchase. The service failure examined was
perceived damage of the consumers personal household goods by a moving
company; the service recovery opportunity occurred when consumers
submitted claims for the damage.
Overall satisfaction Overall satisfaction was modeled as depending on customer satisfaction with
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specific attributes of the moving experience. Overall satisfaction then


influences repeat purchase and word-of-mouth intentions. (It should be
noted that, given the long repurchase cycles in this industry, firms are
generally more concerned with word-of-mouth.)
Attributes of satisfaction and hypothesized relationships
The household moving arena is complex, and there are many points at which
damage to goods can occur. First, the companys packing crew packs
household goods in the consumers home. Next, the driver comes and
supervises the same or often a different crew in moving the items into the
truck. The driver then supervises another team in unloading and unpacking
at the destination. Finally, in the case of damaged or lost goods, customers
interact on the telephone and in person with company claims agents.
Unfortunately, although structural frameworks exist to analyze some service
situations (for example, Garland and Westbrook, 1989; Singh, 1991), they
are not applicable here. Prior exploratory research indicated, however, that
salient attributes of the move might include:
packing of goods;
the timeliness of packing and pick-up;
the driver;
the amount of damage to the household belongings; and
the service after delivery (claims handling).
We have classified the first four items as original service outcome attributes
and the last item as a service recovery process dimension. From both the
consumers and the firms perspective, the most important service failure is
damaged goods, and the biggest opportunity for service recovery is after-
service claims handling.
It was hypothesized that behavioral intentions for WoM and repurchase
intentions are influenced by overall satisfaction, which in turn depends on
specific attributes, including satisfaction regarding packing, the driver,
timing and damage, as well as the process attribute of service after delivery.
The five dimensions expected to influence behavioral intentions are
indicated in Figure 1.

JOURNAL OF SERVICES MARKETING VOL. 9 NO. 1 1995 17


Satisfaction
with proper
packing

0.21 Repurchase
Satisfaction intention
with driver
0.20
1.0

Satisfaction 0.22 Overall


with pick-up satisfaction
time
0.25 0.87

Satisfaction
with damage 0.34 Word of
mouth

Satisfaction
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with claims
personnel

Figure 1. Service recovery model service attributes, satisfaction, and


behavioral intentions (standardized path estimates)

Summary of study methods and findings


Key research Key research questions were addressed using data from 410 customers who
questions reported damage following a move of their household goods. Path
coefficients were estimated for the conceptual model shown in Figure 1, and
form the basis of the discussion which follows. The Appendix contains
additional details regarding the study methodology and results.
The first four variables indicated in Figure 1 all relate to customer
satisfaction with specific attributes of the original service, while the fifth
(claims personnel) is associated with the service recovery process. All five
were measured on five-point extremely dissatisfied to extremely
satisfied scales. Each of the five variables is hypothesized to affect overall
satisfaction, which in turn influences repurchase intentions and positive
word-of-mouth intentions. All paths indicated were found to be significant
and positive. The model fits well and 74% of the variance in overall
satisfaction is explained by the four original service and one service
recovery variables.
The largest determinant of overall satisfaction is satisfaction with claims
personnel, the service recovery variable; its effect even exceeds the effect of
the damage variable, the original cause of the service failure. The service
recovery variable also has the largest indirect effect on both intentions to
repurchase and intention to recommend the service provider to friends and
relatives, i.e. positive word of mouth (see Appendix). Thus, the study results
support the hypothesis that service recovery dominates overall satisfaction
formation and positive intentions.
Post-delivery claims According to this research, for people with service problems related to
personnel moving, satisfaction with post-delivery claims personnel during service
recovery is more influential on overall satisfaction and behavioral intentions
than is satisfaction with initial service outcome attributes. In fact, these data

18 JOURNAL OF SERVICES MARKETING VOL. 9 NO. 1 1995


show that service after delivery has a stronger effect on intentions than does
satisfaction with packing, timeliness, driver, and damage. Damage does
directly affect overall satisfaction; however, although damage is the initial
cause of the dissatisfaction here, it appears that, once customers are in a
service recovery situation, their post-delivery treatment by customer-contact
personnel is a very important factor. The degree to which the customer
service staff are successful in satisfying the customer has a strong direct
effect on overall satisfaction and a strong indirect effect on repurchase
intentions and word of mouth. In other words, once a customer experiences a
problem and seeks resolution, the performance of recovery process elements
significantly influences behavioral intentions. The magnitude of this effect
demonstrates the key role of this type of complaint handling.
Managerial implications and recommendations
The finding that service recovery process variables have a relatively greater
effect on overall satisfaction and behavioral intentions than do original
service outcome variables is congruent with results obtained from similar
recovery situations in a product-marketing context (Fornell and Wernerfelt,
1987). In other words, the manner in which post-delivery service is handled
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can have a larger influence on overall satisfaction and behavioral intentions


than does the customers satisfaction with original service outcomes.
Specifically, these results support the conceptual claims made by Berry and
Parasuraman (1991) that service recovery process variables are more
important than original service outcome variables during service recovery.
Positive results in Service recovery processes may have this relatively large impact regardless
recovery of whether the recovery process had negative or positive results. It is
possible that a negative result in recovery is magnified by virtue of it being
the second time that the firm has failed (i.e. once in the original failure and
now in the recovery attempt); Bitner et al. (1990) describe this as double
deviation from expectations. Positive results in recovery may diminish the
effect of the original failure for several reasons:
Through effective recovery communications, the consumer is led to
believe the service provider is fair (e.g. admits its mistakes, makes
restitution, etc.).
The recovery effort takes away all the negative consequences of the
service failure.
The service provider influences the consumer to make attributions
which cause the consumer to place blame elsewhere.
Thus, in both positive and negative recovery outcomes, the recovery can
take on greater importance than the original service failure.
Importance of These results have implications for a wide range of service providers, and
recovery process indicate the importance of the recovery process by which service failures are
handled. Once a problem occurs, the way in which the firm deals with the
customer can both influence the consumers satisfaction with the aspect of
the service failure (in this case damage) and affect overall satisfaction,
repurchase intentions and word of mouth.
Several specific recommendations follow from these findings. Though some
of these recommendations have been articulated previously, this is the first
time the recommendations are supported by such strong empirical evidence.
First, companies should develop an excellent service recovery program. The
emphasis of such a program should be on training customer-contact and

JOURNAL OF SERVICES MARKETING VOL. 9 NO. 1 1995 19


claims personnel. Service personnel who deal with dissatisfied customers
must understand their critical role. They should be trained not only to deal
with the actual service failure, but also to do so in such a way that the
consumer is satisfied with the way in which the problem is resolved. These
service recovery personnel also should be given the power necessary to
address the service failure adequately. Unsolicited comments provided by
respondents indicated that token responses by a company resulted in the
most vehemently negative responses. As an example of a company which
avoids this problem, Firnstahl (1989) describes a customer satisfaction
program in which front-line employees were given responsibility and
authority to correct problems, without having to get approval from
managers. When there is a service failure, any employee can do anything to
make the customer happy.
Encouraging Second, once a service recovery program is in place, companies should
complaints actively encourage complaining behavior (see Halstead et al., 1993). Some
firms provide guarantees that offer substantial benefits for those who
complain. For example, Embassy Suites provides a free stay if the customer
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is not 100% satisfied, and this guarantee is likely to elicit complaints that
would not normally be made. Too often customers choose not to complain,
and instead just take their business to a competitor. The company has a
better chance of retaining a customer by encouraging that customer to
complain, and then addressing the complaint, than it does by assuming that
non-complaining customers are satisfied. Identifying and contacting
consumers who have experienced service failure is a necessary first step in
trying to rectify problems.
Reevaluating budget Third, because it is more cost effective to retain a customer than it is to
allocations attract a new customer (see Fornell and Wernerfelt, 1987), companies should
reevaluate their relative budget allocations to these two activities. Are
service recovery programs adequately funded? As Firnstahl (1989) points
out, although service recovery programs can be expensive, they can be
viewed as opportunities to make service system improvements that will
ultimately result in more customers who are satisfied with the firm, as well
as reductions in costs through the improvements on the service delivery
system. Since each complaint often represents many other customers who
were dissatisfied, but did not complain, actively encouraging customer
complaints for the purpose of improving the service delivery system is an
excellent way to collect information about the firms performance. Further,
service recovery programs can provide benefits by viewing it as positive
word-of-mouth advertising.
The current study does raise additional questions. For example, why did
service recovery activities play such a large role in forming overall
satisfaction? Future research can address the specific reasons why this is
true. A second question concerns the accuracy of measuring customer
evaluations only after the problem occurred. In this study, it is possible that
by collecting data only after the recovery process (and therefore, after the
damage occurred), consumer responses to other original service attributes
are biased. Given how data were collected in this study and in virtually all
other studies of service recovery, it is impossible to analyze the effects of
measurement timing. Future longitudinal studies can address the question of
whether measurement bias is introduced by collecting data only at the
conclusion of service recovery efforts.

20 JOURNAL OF SERVICES MARKETING VOL. 9 NO. 1 1995


Increasing loyalty The present study provides evidence of the importance of service recovery in
producing satisfied customers who intend to use the firms services in the
future, and would provide positive word of mouth. Service recovery was
found to be even more important than the original service failure that led to
the service recovery interaction. Firms can and should use service failures to
identify service system problems, reduce customer defections, and increase
loyalty and positive word of mouth.

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American Marketing Association, Chicago, IL, pp. 211-5.


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Appendix
Method
The study population consisted of households completing interstate moves within the
continental USA during a three-month period. A random sample of 5,520
households was selected and received a mail questionnaire from a major university.
An introductory note addressed the questionnaire to the person most responsible for
decisions regarding the move.
A total of 1,447 questionnaires were completed, and although the 26% response rate
compares favorably with research using the mail-out methodology, potential
nonresponse bias was still a concern. Therefore, a telephone validation survey with a
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sample of respondents (143) and nonrespondents (72) was completed. The telephone
survey used wording identical to that used here. Results were similar between
respondents and nonrespondents, although the former tended to be slightly more
satisfied on some measures. Since there was no evidence of differences in the
relationships between specific attributes and overall behavioral intentions, it was
deemed appropriate to proceed with detailed analysis of the mail-out results.
Subjects were instructed to rate only those aspects of the move with which they had
contact. Respondents who had damage to their belongings and who completed all
relevant measures were retained for this analysis. This produced a final sample size
of 410.

Measures of constructs
Five-point scales anchored by extremely dissatisfied (1) and extremely satisfied
(5) were used for all measures except repeat purchase intention and word of mouth.
The repeat purchase intention measure asked: If needed, would you select the same
company again? (yes/no). The word-of-mouth question was: If asked, would you
recommend this company to others?, using a five-point scale anchored by no and
extremely likely, with somewhat likely as a midpoint.

Results
Like most measures of satisfaction, most of the data were slightly negatively skewed
(Peterson and Wilson, 1992). Also as expected, satisfaction with damage was
positively skewed, since all 410 subjects had contact with the claims personnel
regarding damage. Means are not presented in order to preserve confidentiality
regarding the amount of satisfaction/dissatisfaction.
Path analysis was conducted using LISREL. LISREL is a structural equations
modeling program which estimates the path coefficients that show the relationships
among variables. The coefficients can be interpreted in the same way as standardized
coefficients in regression analysis, that is, larger coefficients indicate stronger
relationships between variables. Parameter estimates and model fit indices (LISREL
8) are reported in Table AI.
Indirect effects of one variable on another (discussed in the text) are calculated by
multiplying the standardized coefficients. For example, the indirect effect of
satisfaction with the damage on WoM is 0.25 0.87 = 0.22, while the indirect effect
of satisfaction with claims personnel is 0.37 0.87 = 0.32. The indirect effects are
also available in the LISREL output.

22 JOURNAL OF SERVICES MARKETING VOL. 9 NO. 1 1995


Estimate t-Value

Antecedent relationships
Initial service attributes:
Proper packing > overall satisfaction 0.21 6.75
Driver > overall satisfaction 0.20 6.96
Pick-up time > overall satisfaction 0.22 7.76
Damage > overall satisfaction 0.25 7.35

Service recovery attribute:


Claims personnel > overall satisfactiona 0.34 11.18

Consequent relationships
Effects of overall satisfaction:
Overall satisfaction > word of mouth 0.87 24.88
Overall satisfaction > intentions 1.00 35.46
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a Claims
personnel > overall satisfaction path is significantly larger than the damage >
overall satisfaction path at p < 0.08; it is significantly larger than the paths associated with
the other three initial service attribute paths at p < 0.01

Notes:
Model fit indices are as follows: 2 = 66.53; degrees of freedom = 17; p-value = < 0.001;
goodness-of-fit index = 0.97; and root mean square residual = 0.025

Table AI. Parameter estimates and model fit indices (completely standardized
results)

Richard A. Spreng is Assistant Professor of Marketing and Gilbert D. Harrell is


Professor of Marketing, both at the Eli Broad Graduate School of Management,
Michigan State University, East Lansing, Michigan, USA. Robert D. Mackoy is
Assistant Professor of Marketing, College of Business Administration, Butler
University, Indianapolis, Indiana, USA.

JOURNAL OF SERVICES MARKETING VOL. 9 NO. 1 1995 23


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