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Institute of Business & Computer Studies

Siksha O Anusandhan University

International Seminar on Sustaining Competitive Advantage in Service Sector
1516 May 2015

Linking consumer trust, repatronization and advocacy with

intervention of perceived service recovery and zone-of-tolerance

Dr. Arup Kumar Baksi

Assistant Professor, Dept. of Business Administration, Bengal Institute of Technology
& Management, Santiniketan
Bolpur, West Bengal, India

Prof. (Dr.) Sitikantha Mishra

Former Director, Indian Institute of Travel & Tourism Management, Gwalior
Gwalior, India


The purpose of this study was to investigate the moderating effects of perceived service
recovery process and zone-of-tolerance on consumer trust and its subsequent impact on
consumer advocacy and initiation of repatronization. The study was carried out in the
banking sector in India with State Bank of India (SBI); the largest nationalized bank
was taken as a case. Results indicated that moderate to high perceived service recovery,
initiated by SBI in response to perceived first-time service failures, is associated with
elevated level of consumer satisfaction at the post service-failure phase, positive
customer advocacy and intent to repatronize. Zone-of-tolerance was also found to have
mediating effects on the relationship between perceived service recovery, customer
trust and repatronization.

Key words: customer trust, advocacy, repatronization, service, recovery, bank,


Service failures are inevitable and are considered to be damaging for service providers
as it may trigger customer defection (Maxham III, 2001). Failure in service delivery
may also increase the cost of acquiring new customers (Hart et al., 1990) which may
Sustaining Competitive Advantage in Service Sector, 1516 May 2015

subsequently influence in drooping profits (Smith et al, 1998). Empirical evidence was
found by Zemke, 1999 that dissatisfied customers encountering service failures may
engage in negative word-of-mouth, thereby, inhibiting prospects from patronization.
Researchers found empirical support to the fact that satisfactory service recovery may
reinforce customer satisfaction in the post-recovery phase, which, in certain cases, may
surpass the degree of satisfaction in the pre-service failure phase a phenomenon
coined as recovery-paradox (McCollough et al., 2000). Considering the failure-prone
nature in service delivery, it is absolutely imperative for a service firm to ensure quick
response in the face of adversity namely customer dissatisfaction as dissatisfaction
leads to negative advocacy. Research evidences are insufficient to significantly
correlate customer advocacy with the marketing initiatives taken up by firms. However,
zone-of-tolerance (ZOT), serving as a cognitive boundary of acceptable service
standards, may, alongwith perceived service recovery efforts, affect the overall
behavioural patterns of customers.
The objectives of this paper are two-fold. It desires to understand the relationship that
customer trust, repatronization and advocacy shares in a service-failure-service
recovery ecosystem. In addition it also aims to assess the intervening effects of
perceived service recovery and zone-of-tolerance on the aforesaid relationship.

Service delivery has been considered to be error-prone (Grnroos 2006). Service failures would
result in both tangible (physical stress) and intangible (emotional and cognitive stress) losses
for the customers (Grnroos, 2006) which can lead to severe customer defection (Maxham III,
2001). To arrest this attrition rate the service firms must ensure service recovery encompassing
the physical and cognitive dimensions of the customers, thereby, helping them recover from
physical stresses and regaining trust and confidence (Schweikhart et al 1993; Kenney, 1995;
Miller et al 2000). Customers often fall back to register complain owing to a perceived service
failure. The sustainability of customer-firm relationship is determined by the promptness and
effectiveness of the complaint-redressal system launched by the service provider Morgan and
Hunt (1994). According to DeWitt (2008), on one hand, complaints provide the service firms
with an opportunity to reinforce the relationship with the aggrieved customers by assuring
effective recovery mechanisms and on the other allow the service provider to refabricate the
service offer to avoid further failures. Empirical evidence was found to understand the nature of
service-recovery as a pool of dynamic and robust marketing initiatives to regain the trust of
Sustaining Competitive Advantage in Service Sector, 1516 May 2015

customers who have encountered a service failure, or, in other words, have failed to accept the
service offer as per their acceptable cognitive limits i.e. zone-of-tolerance (ZOT) (Baksi &
Parida, 2013) . ZOT may be considered to be an effective signalling mechanism to understand
the time to initiate a service-recovery. Researchers also found ZOT to be effective in
identifying changes in the relationship between perceived service quality and its consequences
in terms of behavioural manifestations by the customers (Teas & DeCarlo, 2004; Zeithaml,
1996; Liljander & Strandvik, 1993). However, literature did not reveal substantially the
changes in the relationship between perceived service quality and behavioural intentions of the
customers across the layers and limits of ZOT i.e below, over and within ZOT (Zeithaml et al,
1996, Teas & DeCarlo, 2004). But researchers did recognise the ability of the ZOT concept in
understanding the variable degree of perceived service quality and its vis-a-vis consequences
(Teas & DeCarlo, 2004; Walker and Baker, 2000; Zeithaml, 2000; Voss et al, 1998). To ensure
that customer trust is regained the service provider may decide upon a viable service-recovery
mix to gain cognitive-control over the dissatisfied customers. The major recovery strategies
may range from addressing core-service failures to terminal failures and can focus on
compensation, physical replacements, future assurance, maintaining communication etc.
(Johnston and Michel, 2008; Luo and Homberg, 2007, 2008; Rust and Chung, 2006, Yousafzai
et al 2005; Hess et al 2003; Maxham and Netemeyer, 2002 Davidow, 2000). Since service
transactions incorporate a critical and complex mix of social, psychological, and
consumer behaviours, it is expected that the cultural alignment of the customer will
have an impact on the perception of service failures and its corresponding evaluations
of the service recovery attempted. (Baksi and Parida, 2012). Studies have correlated
satisfactory service recoveries with regaining and reinforcement of customer trust; repurchase
intention and long-term loyalty intentions (Maxham and Netemeyer, 2000, 2003; Smith et al,
1999; Blodgett et al 1997). Maxham (2001) observed that effective service recoveries can
rejuvenate customer satisfaction, repurchase intention and engaging in positive word-of-mouth.

Service recovery being a relatively new management focus, there is dearth of adequate
research addressing the pros & cons of the recovery concept (Baksi and Parida, 2013).
Literatures remained absolutely inconclusive with regard to ZOT as a moderating tool
to relate customer trust-advocacy-repatronization link. Further to this, no research work
has been carried out to conceptualize ZOT for service recovery too where alike service
quality, there can be an existence of adequate and desired level of service quality which
may share relationship with customer trust, repatronization and advocacy.
Sustaining Competitive Advantage in Service Sector, 1516 May 2015

2.1 Formulation of hypotheses and research model framework

The review of literature allowed the researchers to frame the following hypotheses
keeping in mind the focal objectives of the study:
H1: Customer trust, repatronization and customer advocacy are dependent on
perceived service recovery.
H2: Customer trust, repatronization and customer advocacy are influenced by zone-of-
H3: Customer trust, repatronization and customer advocacy vary across the layers of
H4: Higher perceived service recovery shall have a stronger effect of zone-of-tolerance
on the relationship between customer trust, repatronization and customer advocacy.
H5: Broader band of ZOT shall have stronger effect of perceived service recovery on
the relationship between customer trust, repatronization and customer advocacy.

The researchers proposed the following conceptual (default) model for empirical
testing (Fig.1):

tolerance (ZOT)
H2/ H3
H2/ H3 H2/ H3

H1 H3 H3

Service Customer Repatronization Customer

Recovery (SR) Trust (CT) (REP advocacy (CA)

H1 H1

H4 H4

Fig.1: Proposed research mod

State Bank of India (SBI) was chosen as the premise of the study. Twenty five branches
of SBI were selected that spread across ten prominent locations in southern part of West
Sustaining Competitive Advantage in Service Sector, 1516 May 2015

Bengal namely Asansol, Durgapur, Burdwan, Bankura, Bolpur, Siuri, Ranigunj,

Hooghly, Chandannagar and Memari. The structured questionnaire was obtained after
refinement by a pilot study. The researchers used systematic random sampling based on
the database of customers accessed with permission from the bank branches. Service
recovery was measured with a scale consisting of 29 items used by Kau and Loh
(2006). The study adopted a 3-item scale as a measurement of customer trust (Baksi
and Parida, 2013; DeWitt et al 2008). The measurement of repatronization was done by
using a 4 item scale (Baksi and Parida, 2013; Maxham-III, 2001) while customer
advocacy was measured also by a 4 item scale (Maxham-III, 2001). ZOT was measured
by modifying Zeithaml et als (1996) usage of generating perception of services. The
questionnaire used a 7 point Likert scale (Alkibisi and Lind, 2011) to generate
response. 2000 questionnaires were used for the study. A total number of 1589 usable
responses were generated with a response rate of 79.45% (approximately).
3.1 Reliability and validity test
The internal reliability and validity of the measurement constructs were assessed by
deploying exploratory factor analysis (EFA) by using the principal axis factoring
process. It embarked on orthogonal rotation using VARIMAX. The discriminant
validity, dimensionality and convergence of each factor construct were examined by
applying confirmatory factor analysis (CFA). Structural Equation Modeling (SEM)
with Maximum Likelihood Estimation (MLE) was applied to estimate the CFA models.
IBM-SPSS 21 and LISREL 8.8 were used for the analytical part.


The results of the EFA were displayed in Table-1. Cronbach's alpha was found to be
significant i.e. >.7, (Nunnally and Bernstein, 1994) for all constructs allowing the
researchers to conclude that the internal consistency of the measuring instruments used
were adequate. The construct reliability (CR) measured consistently well over .6 (Hair
et al., 1998). The average variance extracted (AVE) surpassed minimum requirement of
.5 (Haier et al., 1998). The KMO measured 0.907 confirming that sample size is
adequate to perform EFA Hutcheson and Sofroniou, 1999). Barletts sphericity test
(Chi-square=1532.209, df=289, p<0.001) indicated absence of homoscedasticity and fit
for data reduction (Cooper and Schindler, 1998). Perceived service recovery scale was
Sustaining Competitive Advantage in Service Sector, 1516 May 2015

reduced to 12 items. EFA revealed significant factor loading for customer trust (3
items), repatronization (2 items) and customer advocacy (3 items).
Table-1: Measurement of reliability and validity of the variables
Items FL t CR AVE
Perceived Service Recovery (PSR)
SBI employees explain the reason/s for service failure (PSR1) 0.698 - 917 0.917 0.833
SBI employees listen to my problems in accessing services etc. 0.694 25.009 917 0.917 0.833
SBI employees seem to be very much concerned about my 0.659 6
20.873 917 0.917 0.833
SBI was prompt to offer an apology for the service failure
0.674 23.653 917 0.917 0.833
encountered (PSR4)
SBI assures of a quick remedy to the service failure encountered 0.701 25.775 917 0.917 0.833
SBI offers zero-cost transaction while fixing the service failure 0.721 30.816 917 0.917 0.833
SBI offers future incentives for the customers encountering service
0.644 19.731 917 0.917 0.833
failure (PSR7)
SBI has installed system to recover from service failure (PSR8) 0.629 18.421 917 0.917 0.833
SBI employees are knowledgeable enough to ensure service 0.652 20.104 917 0.917 0.833
SBI ensures recovery of service at the committed time (PSR10) 0.709 27.321 917 0.917 0.833
SBI communicates with me at every stage of service failure, service
0.661 22.099 917 0.917 0.833
recovery and post recovery (PSR11)
SBI strictly monitors the post-recovery phase of service failure 0.663 22.101 917 0.917 0.833
(PSR12) trust (CT)
SBI can be banked upon to initiate recovery (CT1) 0.769 - 0.909 0.909 0.801
SBI can be relied to keep its commitment to recover service (CT2) 0.731 25.327 0.909 0.909 0.801
SBI puts customers interest first (CT3) 0.774 28.405 0.909 0.909 0.801
Repatronization (REP)
I shall avail SBI services at post service recovery phase (REP1) 0.785 - 0.911 0.911 0.823
I shall continue to avail SBI services at post service recovery phase
0.801 32.576 0.911 0.911 0.823
Customer advocacy (CA)
I shall volunteer positive word-of-mouth about SBIs services (CA1) 0.799 17.095 0.936 0.936 0.809
I shall recommend the services of SBI to anyone seeking guidance o
banking services (CA2)
I shall advocate for trial-run of SBI services for customers of other
0.854 29.084 0.936 0.936 0.809
banks (CA3)
KMO 0.907
Barletts sphericity df= 289

The researchers opted for bivariate correlation analysis to understand the relationship
between the variables under study. The composite means were obtained across the
constructs for each variable. The results of bivariate correlation analysis (Table-2)
partially supported H1, and H2.
Table: 2 Results of bivariate correlation analysis between the major variables
Sustaining Competitive Advantage in Service Sector, 1516 May 2015

Perceived Zone-of- Customer Customer

Variables service tolerance trust advocacy
recovery(PSR) (ZOT) (CT) (CA)
Perceived service recovery (PSR) 1
Zone-of-tolerance (ZOT) 0.201** 1
Customer trust (CT) 0.297** 0.109* 1
Repatronization (REP) 0.331** 0.061 0.185** 1
Customer advocacy (CA) 0.154** 0.098* 0.205** 0.266** 1
**Correlation significant at 0.01 level (2 tailed), *Correlation significant at 0.05 level (2-tailed)

Multiple regression analysis with dummy variables was deployed. The usage of dummy
variable was justified as a mix of scales, both interval and attitudinal, were used to
understand the probable impact of perceived service recovery on customer trust,
repatronization & advocacy across the three stages of ZOT. The following regression
equation was obtained:
X1/ X2/ X3 = 0 + 1 (PSR) + 2(d1*PSR) + 3(d2*PSR) + 1
where, X1 = CT, X2 = REP, X3 = CA, PSR = PSR, d1 = 1, when PSR<adequate level, 0
otherwise, d2 = 1, when PSR>desired level, 0 otherwise, 1, 2, 3 = unstandardized
regression coefficients., 0 = constant in the equation, = error term
The slope inside, below and above the ZOT are represented by 1, 1+ 2 and 1+ 3
respectively. The results (Table-3) displayed a significant rise in CT, REP and CA
above the ZOT level while the customers remain relatively insensitive within the ZOT
Table:3 Regression results across ZOT levels
Dependent Independent variable-PSR
variables Slope within the ZOT (1) Slope below ZOT (1+2) Slope above ZOT (1+3)
Customer trust 0.02 -0.28** 0.22**
Repatronization 0.04 -0.10* 0.29**
Customer advocacy 0.09* -0.07 0.41**
** indicates p<0.01, * indicates p<0.05
The results of the regression analysis (Table-3) supported H3.
To have an understanding about the intervening effects of PSR and ZOT on customer
trust, repatronization and customer advocacy, hierarchical regression analysis was used.
Three regression models were obtained and the major focus was given on the binary
(a) CT = 0 + 1*PSR + 2*ZOT + 3*PSR*ZOT + i
Sustaining Competitive Advantage in Service Sector, 1516 May 2015

(b) REP = 0 + 1*CT + 2*PSR + 3*ZOT + 4*CT*PSR + 5*CT*ZOT +

(c) CA = 0 + 1*CT +2*REP + 3*PSR + 4*ZOT + 5*CT*PSR + 6*CT*ZOT +

The results of hierarchical regression analysis were displayed in Table-4. Model-1

depicted direct effects which confirmed acceptance of H1 and H2 as PSR and ZOT were
found to have a significant and direct impact on CT, REP and CA. Model-2 and 3
represented the binary interaction effects and lend support to H 4. Results indicated that
with the increase in customers PSR the impact of ZOT on CT ( = .138**, p<0.01),
REP ( = .188**, p<0.01) and CA ( = .097**, p<0.01) increases. Model 4 revealed
only one significant ternary interaction between variables. It showed that customers
decision to repatronize service provider will be strengthened under influence of ZOT if
PSR imparts a direct and positive impact on CT ( = .099**, p<0.01). It was also
revealed that CA remained unaffected under the influence of ZOT and PSR with
repurchase intention. Model 5 represented the only quaternary interaction suggesting
that customer advocacy will significantly increase under the combined effects of PSR
and ZOT with increased customer trust and intention to repatronize ( = .116**,
p<0.01). The results of binary, ternary and quaternary interaction between the variables
confirmed H4 and H5.
Table-4: Regression models testing the interaction effects (equation-1)
Dependent variable: Customer Trust
Indep. Variables Model-1 Model-2 Model-3 Model-4 Model-5
(t value) (t value) (t value) (t value) (t value)
PSR .198** 2.466
ZOT .093* 1.699
Binary interaction effects
PSR*ZOT .138** 2.444
Adjusted R2 .544 .489
F-value 89.46 106.83
Indep. Variables Dependent variable: Repatronization
CT .218** 2.344
PSR .163** 1.945
ZOT .017 1.805
Binary interaction effects
CT*PSR .298** 2.721
CT*ZOT .210** 2.812
PSR*ZOT .188** 1.993
Ternary interaction effects
Sustaining Competitive Advantage in Service Sector, 1516 May 2015

CT*PSR*ZOT .099** 2.001

Adjusted R .492 .499 .516 .519.
F-value 98.32** 89.41** 76.31** 73.62**
Indep. Variables Dependent variable: Customer advocacy
CT .176** 1.889
REP .101** 2.119
PSR .081* 2.005
ZOT .018 1.912
Binary interaction effects
REP*PSR .100* 1.699
REP*ZOT .027 1.599
PSR*ZOT .097** 2.385
Ternary interaction effects
REP*PSR*ZOT .020 1.603
Quaternary interaction effect
CT*REP*PSR*ZOT .116** 2.431
a. Dependent variable: CT, REP, CA, b. Independent variable: PSR, ZOT, CT (for 1st eqn.)

Structural equation modeling was applied to estimate the CFA models. A number of
goodness-of-fit statistics were obtained. The GFI (0.987) and AGFI (0.981) scores
(Table-5) for all the constructs were found to be >.900 indicating a good fit has been
achieved (Hair et al, 1998). The CFI (0.973) and RMSEA (0.059) confirmed adequate
model fit as per Bentler, 1992. The Chi-square (2=865.16, df=199, p=0.000) is
significant at p<0.001 . The structural model was shown in Fig.2.

Table-5: Goodness-of-fit indices

Fit indices 2 df P GFI AGFI CFI RMR RMSEA
Values 865.16 199 0.000 0.987 0.981 0.973 0.045 0.059


= .138**, p<0.01 = .210**, p<0.01

= .027**, p<0.01

Service recovery Customer trust Repatronization Customer advocacy

= .298**, p<0.01 = .100*, p<0.05

Sustaining Competitive Advantage in Service Sector, 1516 May 2015

Fig.2: The final structural model showing the moderating effects


The study portrayed a significant and direct impact of perceived service recovery on
behavioural intentions of customers namely customer trust, repatronization and
customer advocacy. In addition to recovery initiatives, zone-of-tolerance also proved to
be a significant predictor of the variables representing behavioural intentions. Perceived
service recovery was found to have intervening effects on the relationship between
customer trust, repatronization and advocacy. Trust, repurchase intention and advocacy
as behavioural expressions were found to be significantly increased under the
mediating effects of perceived service recovery. The study further revealed that
customers remain relatively insensitive across their ZOT, while their behavioural
intentions significantly vary both above and below the levels of their ZOT. ZOT was
also found to have mediating effects on the behavioural triangulation under study.
The managerial implications of the study centred on the technology driven complex
banking services and the increased rate of failures in service delivery. Personalized
services have created assorted ZOTs for individual customers which are critical
determinant of positive behavioural intentions. Therefore for a banker it has become
imperative to track down the recovery action to ensure customer satisfaction.
The study can have future extrapolations by including other variables that may impact
zone-of-tolerance level namely relationship inertia, switching cost, loyalty etc. and can
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