One firm’s loss is another’s gain: capitalizing on other firms’ service failures

Abstract

Whereas past research has focused on negative outcomes that can transfer from one firm to another, this paper examines conditions under which a service failure by one firm creates an opportunity to enhance customer evaluations of a different firm in a contiguous service experience. Thus, a new external service recovery phenomenon is demonstrated in which consumers have more favorable perceptions of a firm when there was a previous failure with a different firm compared with no previous service failure. Study 1 tests hypotheses related to consumers’ perceptions of a hotel’s external service recovery after an airline’s service failure. Study 2 examines an external recovery effort in the hotel industry that follows a service failure from an unrelated hotel, an affiliated hotel, and the same hotel. Study 3 utilizes a laboratory experiment to assess the effects of external recovery in a restaurant setting. Results from all three studies suggest external recovery leads to appreciable gains for the recovering firm but only when it is not affiliated with the failing firm. Implications for service managers suggest several simple and relatively low cost tactics can be implemented to capitalize on other firms’ failures. In particular, this research highlights strategies that encourage frontline employees to listen to customers and, if a prior failure is detected, make simple gestures of goodwill.

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Notes

  1. 1.

    These analyses were completed in Studies 2 and 3 as well. All assumptions regarding independence, normality, and homogeneity of variance were analyzed and met.

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Correspondence to Alexis M. Allen.

Appendices

Appendix 1: Study 1 scenario manipulation summaries

Base scenario

Imagine that you and two of your close friends are on a much-anticipated winter break trip. On the day of the trip, you arrive at the airport, check into your flight, and board the plane.

Failure manipulation

(No failure) After one layover (plane change), you arrive at your final destination. After getting your bags, you take a taxi to your hotel. Upon arrival at your hotel and while checking in, you strike up a conversation with the hotel desk clerk.

(Failure) While in-between flights (you had one layover/plane change) the airline gate agent informs you that the flight was oversold and that you and your friends are being bumped, and you will not have seats on the flight as scheduled. She informs you that you will be booked on a later flight. As a result, you experience a 6 hour delay. Upon arrival at your hotel and while checking in, you strike up a conversation with the hotel desk clerk and complain to the clerk about your airline service issue and unfortunate 6 hour delay.

Recovery manipulation

(No recovery) The desk clerk completes the check-in process and gives you the keys to the room that you reserved.

(Recovery) The desk clerk completes the check-in process and, to your surprise, gives you the keys to an upgraded room: a 2-bedroom Jr. suite with a premium view.

Appendix 2: Scale items

All items were measured on 7-point, Likert scales anchored by strongly disagree/strongly agree unless otherwise noted.

Satisfaction (adapted from Oliver 1997)

  • I am satisfied with this hotel/restaurant.

  • I think that I did the right thing when I selected this hotel/restaurant.

  • I am happy with this hotel/restaurant.

Positive Word of Mouth Intentions (adapted from Maxham and Netemeyer 2002)

  • I would likely say positive things about this hotel/restaurant.

  • I would recommend this hotel/restaurant to my friends.

  • If my friends were looking for a hotel/restaurant, I would tell them to try this one.

Repatronage Intentions (adapted from Zeithaml et al. 1996)

  • I would stay/eat at this hotel/restaurant again.

  • I would stay/eat at this hotel/restaurant more often.

Equity (adapted from Oliver and Swan 1989)

  • The treatment given to me by the hotel was:

    • Unfair to me/Fair to me

    • Less than I deserved/More than I deserved

    • Unequitable to me/Equitable to me

Disconfirmation (measured on a 7-point bipolar scale, adapted from Oliver and Bearden 1985)

  • Overall, my experience with the hotel was:

    • Much worse than expected/ much better than expected

    • Much poorer than I thought/ much better than I thought

    • An unpleasant surprise/ a pleasant surprise

    • Fell short of expectations/ exceeded expectations

    • More problematic than expected/ less problematic than expected

Realism (adapted from Dabholkar and Bagozzi 2002)

  • The situation described was realistic

  • I had no difficulty imagining myself in the situation

Manipulation Checks

  1. Study 1
    • I had a bad experience with the airline.

    • The hotel compensated me for my previous airline experience.

  2. Study 2
    • I had a bad experience with the hotel.

    • To what extent are the two hotels/restaurants related or affiliated with each other? (Not related at all/Strongly related)

    • To what extent is the second hotel responsible for the service failure at the first hotel? (Not responsible at all/Completely responsible)

  3. Study 3
    • I had a bad experience with the restaurant.

    • The restaurant compensated me for my previous restaurant experience.

Appendix 3: Study 2 scenario manipulation summaries

Baseline Scenario

Imagine that you and two of your closest friends are headed to the beach for a weekend getaway. You made plans several weeks in advance and everyone is very excited about the trip. Finally, the weekend arrives and you head to the beach. You arrive at the Seabreeze Hotel, a Coastal Hotel Group property, and go to the front desk to check in.

Failure manipulation

(No failure) When you get to the desk, the hotel clerk gives you key cards to a room with two queen beds (exactly what you booked).

(Failure) When you get to the desk, the hotel clerk informs you that your reservation has been lost. After waiting 10 minutes, you are given key cards to a room with one king bed (although you booked a room with two queen beds). There are no other rooms available, so you and your friends take the room with one king bed (hopefully, you′re not the one sleeping on the sofa).

Three months later, you and your friends decide to go back to the beach.

Recovery affiliation manipulation

(Internal) You make reservations at the same hotel, the Seabreeze (again, for a double queen room). As you check in, you talk about your last experience when you stayed at this hotel and ask if a room with two queen beds is available. After you explained your prior experience, the front desk clerk tells you that not only do they have a queen room reserved for you, but he is going to move you to a queen suite at no additional charge. The queen suite is larger than a regular room it has a separate living room, two bathrooms and two queen beds. The queen suite is larger than a regular room it has a separate living room, two bathrooms and two queen beds.

(Affiliated) You make reservations at a different hotel, The Oceanside Hotel (again, for a double queen room). This hotel is affiliated with the same hotel group as the first hotel you stayed at, the Coastal Hotel Group. As you check in, you talk about your last experience when you stayed at another hotel owned by the same Hotel Group (The Seabreeze) and ask if a room with two queen beds is available. After you explained your prior experience, the front desk clerk tells you that not only do they have a queen room reserved for you, but he is going to move you to a queen suite at no additional charge. The queen suite is larger than a regular room – it has a separate living room, two bathrooms and two queen beds.

(Non-affiliated) You make reservations at a different hotel, The Oceanside Hotel (again, for a double queen room). As you check in, you talk about your last experience when you stayed at a competitive hotel (The Seabreeze) and ask if a room with two queen beds is available. After you explained your prior experience, the front desk clerk tells you that not only do they have a queen room reserved for you, but he is going to move you to a queen suite at no additional charge. The queen suite is larger than a regular room – it has a separate living room, two bathrooms and two queen beds.

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Allen, A.M., Brady, M.K., Robinson, S.G. et al. One firm’s loss is another’s gain: capitalizing on other firms’ service failures. J. of the Acad. Mark. Sci. 43, 648–662 (2015). https://doi.org/10.1007/s11747-014-0413-6

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Keywords

  • External service recovery
  • Service failure
  • Spillover
  • Satisfaction
  • Service recovery paradox