The Role of Co-creation in Service Recovery

Date

2023-08

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Abstract

The hotel and tourism industries are particularly susceptible to service failures due to the high interaction between customers and employees. Service failures can have serious consequences for the business, including customer dissatisfaction, negative word of mouth and customer switching behavior. As such studies have shown that a high participation of customers in the service design or process leads to strong familiarity with the service offers and low uncertainty of service expectations. Additionally, co-creating with the consumer improves the quality of the service, which in turn increases customer satisfaction. Cocreation shifts responsibility from the organization as the sole producer of value to a more participative process between the firm and its customers to create something meaningful (referred to as co-created service value). While these may be the intended consequences for businesses, co-creation may put the firm at risk in the event of a service failure. This is because of the effort, time and money required for customers to co-create a service. As a result, there is high expectation on the service outcome and experience. Although companies cannot guarantee a service will be delivered without error, they can make sure the service recovery meets customer expectations. Studies have shown co-created service recovery has a positive influence on customer’s satisfaction and repurchase intention. Despite these positive outcomes, studies on service failure and recovery have been mostly focused on analyzing processes with negative connotations; yet not all customers react negatively to unpleasant events (especially after a recovery). Thus, the purpose of this research is twofold. First, the present study 1) investigates how perceived service failure severity in co-created service value impacts customer’s WOM, brand fidelity and repatronage intention (Model 1). 2) examines the recovery strategy (customer, company, and co-created recovery) that has the most impact on customer’s The role of co-creation Texas Tech University, Mawufemor Amuzu, August 2023 vi perceived service recovery justice (i.e., distributive, interactional and procedural justice), brand equity and repatronage intention (Model 2). Data was collected using Prolific and 604 responses were analyzed after data cleaning. Exploratory factor analysis (EFA), confirmatory factor analysis (CFA), structural equation modeling (SEM) and multi-group analysis were performed. The results in Model 1 suggest that perceived co-created service value leads to higher brand fidelity. However, during service failure, perceived co-created service value leads to higher perception of service failure severity. This is due to the intense feeling of anger, frustration and disappointment and the high customer resource (i.e., time and effort) required in co creation. The direct negative effect of service failure severity on brand fidelity also suggests that as customers experience a more serious service failure, they are less likely to maintain fidelity toward the brand. The negative indirect effect of co-creation on brand fidelity through perceived service failure severity demonstrates that the relationship between these two is delicate and service failure can be damaging to relationship. In addition, the results indicated that perceived service failure severity increased negative WOM which in turn negatively influenced repatronage intention. Conversely, customers with high brand fidelity are more willing to give the service provider another chance even after service failure. The MANOVA result in Model 2 suggests that co-created service recovery had the highest impact on customer responses (i.e., perceived justice, brand equity and repatronage intention), followed by company service recovery. Second, the multiple-group analysis revealed that of the three justice dimensions (i.e., distributive, interactional and procedural justice), only distributive and procedural justice had a significantly positive effect on brand equity for both co-created and company service recovery respectively but not customer service recovery. This indicates that while procedural justice impacts brand equity in company service recovery, distributive justice influences brand equity in co-created service recovery which leads to repatronage intention. In conclusion, the result of the current study empirically demonstrates that brand fidelity plays a crucial role in customer behavior and relationship maintenance following a service failure by mitigating the negative effects of service failure. Managers should focus on building lifelong commitments with customers through co-creation to buffet the negative effect of service failure. The results also show that customers who hold a company accountable for a service failure expect a company-initiated service recovery and perceive participation in service recovery as unfair. Contrarily, involving customers in service recovery as active participants boosts their sense of control and their satisfaction with the outcome of the service.


Embargo status: Restricted until 09/2028. To request the author grant access, click on the PDF link to the left.

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Keywords

Service Failure, Service recovery, Co-creation, customer relationship maintenance

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