The Impact of Service Failures on Brand Perceptions: The Context of Sharing Economy: An Abstract

Abstract

The sharing economy, also known as the collaborative consumption or the technology-facilitated peer-to-peer business model (such as Uber and Airbnb services), is on the rise (Hamari et al. 2016). As more and more consumers participate in sharing economy, service failures are inevitable. Despite the prevalence of service failures in the context of sharing economy, scant academic research exists on what companies should do to recover the failures. Some interesting yet under-explored research questions include: First, in the context of sharing economy, how do different types of service failures affect consumers’ perceptions and behaviors toward the brand? Second, what companies can do as a method of recourse when a service failure occurs?

This research is designed to examine the ramification posed by sharing economy businesses when one of their independent contractors commits a service failure and uses different methods of recovery. By manipulating both the type of service failure and the method of recovery using scenarios, we hoped to unveil the factors most important to customer loyalty and trust in the context of a sharing economy. Specifically, a 2 × 2 experimental design scenario-based survey was conducted to determine what methods of recovery generated the best response for each type of service failure. A total of 210 participants were recruited through Amazon Mechanical Turk for the study. The participants were randomly assigned a scenario in which either an outcome-based or process-based service failure occurs and then presented with either a recovery performed by the independent service provider or a recovery performed by the company. We then asked the participants how satisfied they were and how this recovery made them view the brand in terms of trustworthiness, forgiveness, ethicality, and justice.

The results showed that if there is an outcome-based failure customers prefer a recovery performed by the service provider, but if there is a process-based failure customers prefer a recovery performed by the company. Our findings contribute to the service failure and recovery literature by showing that independent service provider’s failures can affect customers’ perception and action toward the company/brand and that different recovery methods are preferred depending on the type of failure. Implications of this study show that different types of failures that occur in the context of the sharing economy require different forms of recovery to maintain a positive brand image in the minds of consumers.