You break it, you fix it? : costumer participation in service recovery

Abstract

Customer participation represents numerous positive effects for companies in terms of productivity gains and profitability. It has in recent years emerged as a powerful tool for companies to customize their service offerings and engage the customers in marketing activities. Still, the increased demand for customization also requires a great deal of flexibility and adaptations, making the risk of service defections higher as well. The question is whether companies should encourage customers to participate in the service recovery process? This thesis examines the effects of customer participation in service production and –recovery in terms of how they respond to and attribute the outcome of a recovery situation. We also explore whether the type of customer-company relationship moderate the customers responses to participation. We investigate how the varying levels of customer participation throughout the process affect customers´ Satisfaction with the company, Perceived Justice, Loyalty and Satisfaction with the service recovery. These measures serve as the dependent variables in this study. We aim to illustrate customers’ attribution by contrasting respondents’ scores on Satisfaction with the company and Satisfaction with the recovery. The proposition is that participating customers may be satisfied with the recovery they contributed to, but not necessarily with the company’s effort. This thesis provides a thorough review of the state of research in customer participation, service recovery, perceived justice, attribution, relationship, and loyalty. Based on the review we develop seven hypotheses, and test these using 2(true relationship vs. no pseudorelationship) x 2(low participation in service production vs. high participation in service production) x 2(low participation in service recovery vs. high participation in service recovery), experimental design. The empirical testing was carried out using scenarios, with business students as respondents. The main findings of this study were that customer participation in service production has a positive effect on customers’ post-recovery scores of Satisfaction with the company, Perceived Justice and Loyalty. Customer participation in service recovery, on the other hand, showed negative tendencies on the same measures. In addition, we found that higher type of customer-company relationship has a positive effect on customer loyalty. We did not find support for this effect on the satisfaction measures, indicating that relationship influences’ loyalty on aspects beyond mere satisfaction.