RESEARCH ARTICLE
When customers like preferential recovery (and when not)?

https://doi.org/10.1016/j.annals.2020.103135Get rights and content

Highlights

  • Low status customers respond more favorably to non-preferential (vs. preferential) recovery

  • High status customers tend to be indifferent to recovery type

  • Fairness underlies the joint effects of recovery type and status

  • Such joint effects are moderated by interpersonal similarity and failure similarity moderated

Abstract

Tourism managers have a long-held belief that preferential recovery helps mitigate customers' negative reactions following a service failure. This research investigates the joint effects of recovery type (preferential vs. non-preferential) and status (high vs. low) on customer responses. Five experiments provide converging evidence to demonstrate that low status customers are more satisfied with non-preferential (vs. preferential) recovery and show higher patronage intention, whereas their high-status counterparts tend to be indifferent. Moreover, such joint effects are moderated by interpersonal similarity and failure similarity. The mediation analyses reveal that fairness perceptions are the psychological mechanism underlying these effects. Together, these findings provide important implications for tourism firms' service recovery practices.

Introduction

“The guest complained to the front desk about some issue with her water before heading off to dinner. When she got back to the room, not only was the plumbing problem fixed, but, there was a note from Scott in engineering apologizing for the problem, giving his direct phone number in case he could do anything further for them, and including, along with the note, a chocolate wrench”.

–Micah Solomon (Forbes, 2017)

Imagine you were a guest with the water issue at the hotel and received the preferential recovery (e.g., a chocolate wrench and a personal note) from Scott. Would you become more likely to patronize the hotel in the future? Would you respond differently if you were a high (or low) status customer? Preferential recovery is a common strategy that tourism and hospitality managers employ in the marketplace when there is a failed service encounter (e.g., Ritz-Carlton, Southwest airline, and Panera Bread). Tourism managers put in place various preferential recoveries including special perks, speedy service, hotel room or airline upgrades and generally assume that such efforts could create “wow” experiences and turn frustrated, disgruntled customers into loyal ones (Ding & Keh, 2016; Hess et al., 2003; Roschk & Gelbrich, 2017). Indeed, prior literature has attested that preferential treatment may lead to higher levels of customer satisfaction, engagement in positive word-of-mouth about the firm, and increased loyalty over time (Henderson et al., 2011; Jiang et al., 2013; Stakhovych & Tamaddoni, 2020). While there has been considerable interest in investigating different service recovery strategies, systematic research efforts in examining preferential (vs. non-preferential) recovery and how customers perceive, respond, and value it is still sporadic with a few exceptions (Van Vaerenbergh et al., 2019; Varela-Neira et al., 2010; You et al., 2020).

In today's tourism landscape, companies have been widely employing various customer loyalty programs to provide loyal customers perks and rewards for their continued patronage, for instance, major hotel chain loyalty programs like Marriott Bonvoy, Hilton Honors, and major airlines programs including United MileagePlus, Delta SkyMiles, among others. Assuming customers have a universal quest for status and the functionality of status hierarchy, these loyalty programs usually set up various status tiers (e.g. Platinum, Gold, and Silver tier levels) and provide service corresponding to the customer's status (Dreze & Nunes, 2009; Liu & Mattila, 2016; Steinhoff & Palmatier, 2016). In the same vein, companies may provide preferential recovery to customers with varied status. Extant research has examined how customer status affects employee response to customer complaints (Jerger & Wirtz, 2017). However, it remains unclear how customer status affects their own response toward preferential versus non-preferential recovery.

To address this gap, we build on previous research on preferential recovery and investigate the joint effect of recovery type (preferential and non-preferential) and customer status (high and low) on customer patronage intention and satisfaction. Given that preferential recovery typically involves conspicuously serving customers with special perks according to their status differential, which naturally entails social comparisons between benefited and non-benefited consumers (Antonetti et al., 2018; Henderson et al., 2011; Jiang et al., 2013) and it leads to an activation of fairness concerns (Van Prooijen et al., 2002). Drawing on prior research on social comparison and fairness (Maxham & Netemeyer, 2003; Tax & Brown, 2000), we theorize that customers' fairness perceptions will vary contingent upon their loyalty status, such that low status customers will regard non-preferential recovery as fairer than preferential recovery (because they think the former aligns better with their status than the latter does). In contrast, this difference in fairness declines for high status consumers. This differential perception of fairness drives customers' response to recovery strategies. More specifically, low status customers are more satisfied with non-preferential (vs. preferential) recovery and have higher patronage intention to the company, but high status customers tend to be indifferent. We further reason and demonstrate that the joint effect of recovery type and customer status is attenuated when customers compare themselves to others in a relatively similar status (i.e., high interpersonal similarity) and when the failures are different (i.e., low failure similarity). With five experimental studies, we reveal intriguing consequences of preferential recovery, illuminate fairness perceptions as the underlying processes, and provide managerially relevant implications for tourism managers in recovering failed service encounters and establishing strong bonds with their customers.

This research brings several important contributions to tourism and marketing literature. First, we found a novel and robust phenomenon that has not been documented in the service recovery literature – how customer status affects their responses to preferential vs. non-preferential recovery. To the best of our knowledge, this research is the first to examine the joint effects of recovery type and customer status on customer response. We provide converging evidence that low status customers favor non-preferential recovery and forgo preferential recovery, albeit high status individuals are indifferent. This counter-intuitive consequence of preferential recovery and status is intriguing given managers generally assume that people favor preferential to non-preferential recovery. Therefore, this research contributes to the burgeoning stream of tourism research on understanding how consumers respond to the tourism business's preferential recovery (Jiang et al., 2013; Van Vaerenbergh et al., 2019; Varela-Neira et al., 2010). Second, we extend the understanding of the role of status in firm-customer relationships by revealing that status affects customers' responses to a firm's recovery measure (Henderson et al., 2011; Jerger & Wirtz, 2017). We further demonstrate the nuanced effect of interpersonal similarity, i.e., the moderating effect of status is attenuated when customers compare to others that are similar to them. This granular understanding of customer status not only contributes to the status literature that predominantly focuses on people's desire for status, but also provides pertinent boundary conditions in the tourism settings wherein stratified loyalty status programs are widely established (Cheng, 2020; Doyle et al., 2016). Third, building on prior work on social comparison and fairness, this work enriches the tourism literature by disclosing that fairness is the underlying mechanism explaining the joint effects of recovery type and status on customer responses to service recovery efforts, including their choice preference, satisfaction, and behavioral intention. Doing so not only provides a fairness account of the effect but also deepens our understanding of fairness in the stream of social comparison, such that customers' fairness judgment takes into account of their status, recovery type, and failure similarity.

Section snippets

Preferential recovery

Prior research highlights multiple benefits for those customers who received preferential treatment and implies positive returns for the firm (Gwinner et al., 1998; Stakhovych & Tamaddoni, 2020). The extra compensation customers receive brings them economic benefits (Roggeveen et al., 2012). In addition, previous research suggests that the provision of preferential treatment may enhance the feelings of elevated status and superiority (Han et al., 2010; Heffetz & Frank, 2011; Jiang et al., 2013

Empirical overview

Across five studies,1 we investigate how recovery type (preferential vs. non-preferential) and customer status (high, low) interactively influence customer responses to service recovery in tourism settings (see Fig. 1). Study 1 examines the joint effects of recovery type and

Study 1: customer recovery option preferences

The primary objective of study 1 is to examine how recovery type and customer status interactively affect customers' recovery option preferences. To that end, this study employs a mixed study design wherein we manipulate customers' status level and then offer each participant three types of service recovery options, namely, non-preferential, preferential recovery for high status, and preferential recovery for low status.

Study 2A: a cross-customer context

Study 1 presented service recovery options to customers and asked them their relative preference. Customers preferred non-preferential recovery but shifted toward preferential-for-high-status recovery as their status increased. Study 2A and 2B intended to examine customer patronage intention to recovery options in a cross-customer context. That is, how will customers respond when comparing their own recovery to another customer who receives either non-preferential or preferential recovery? And

Participants and design

This study had a 2 (status priming: high vs. low) × 2 (recovery type: non-preferential vs. preferential) between-subjects design. A total of 227 adult consumers (54% female), drawn from a commercial panel, participated in the study in exchange for financial compensation.

Materials and procedure

We used the same hotel failure and recovery scenarios as in Study 2A. To prime status, participants were told they would be participating in a series of ostensibly unrelated tasks. In the first task, participants were asked to

Study 3: the moderating role of interpersonal similarity

The primary objectives of study 3 are i) to explore the moderating effect of interpersonal similarity on customers' responses to service recovery; and ii) to demonstrate the mediating effect of fairness perceptions. We predict that H2, H3 will hold when low status customers compared their recovery to those in a much higher status from them (i.e., low interpersonal similarity), but not when compared to those in a similar status (i.e., high interpersonal similarity) (H4).

Study 4: the moderating role of failure similarity

The objective of study 4 is to build upon the evidence for H2, H3 while establishing a theoretically and pragmatically relevant boundary condition. Specifically, we manipulate customers' fairness perceptions via preceding failure similarity. Consistent with our theorizing, we predict that H2, H3 will hold when the failure that precedes service recovery is similar (so that customers can compare the failure they encounter, their status, and the recovery they received, which all contribute to

General discussion

The present research identifies a hitherto unexamined interaction of recovery type and customer status on their responses to a firm's recovery efforts. We believe we are the first to investigate and find that the joint effects of status (high vs. low) and recovery type (preferential vs. non-preferential) on customer responses in tourism settings. More specifically, we find that low status customers have a higher patronage intention and are more satisfied with non-preferential (vs. preferential)

CRediT authorship contribution statement

  • 1.

    Tourism companies nowadays widely employ various customer loyalty programs with stratified status to provide loyal customers perks and rewards for their continued patronage. They also provide preferential recovery in the case of service failure corresponding to the customer's status. This research investigates how customer status affects their patronage intention and satisfaction after receiving preferential (vs. non-preferential) service recovery. With five experimental studies, we disclose

Declaration of competing interest

The authors declare that they have no known competing financial interests or personal relationships that could have appeared to influence the work reported in this paper.

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