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Optimizing service failure and damage control

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  • Halbheer, Daniel
  • Gärtner, Dennis L.
  • Gerstner, Eitan
  • Koenigsberg, Oded

Abstract

Should a provider deliver a reliable service or should it allow for occasional service failures? This paper derives conditions under which randomizing service quality can benefit the provider and society. In addition to cost considerations, heterogeneity in customer damages from service failures allows the provider to generate profit from selling damage prevention services or offering compensation to high-damage customers. This strategy is viable even when reputation counts and markets are competitive.

Suggested Citation

  • Halbheer, Daniel & Gärtner, Dennis L. & Gerstner, Eitan & Koenigsberg, Oded, 2018. "Optimizing service failure and damage control," International Journal of Research in Marketing, Elsevier, vol. 35(1), pages 100-115.
    • Handle: RePEc:eee:ijrema:v:35:y:2018:i:1:p:100-115
    DOI: 10.1016/j.ijresmar.2017.11.001
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    Cited by:

    1. Khai Loon Lee & Afiq Muqri Bin Shaharud-din, 2022. "Procurement 4.0 and Organizational Performance in the Malaysian Construction Industry," International Journal of Service Science, Management, Engineering, and Technology (IJSSMET), IGI Global, vol. 13(1), pages 1-22, January.
    2. Chen, Rachel R. & Gerstner, Eitan & Halbheer, Daniel & Roma, Paolo, 2023. "Managing service shutdowns: Cash refunds or vouchers?," International Journal of Research in Marketing, Elsevier, vol. 40(2), pages 294-315.
    3. Khenfer, Jamel & Cuny, Caroline, 2020. "Brand preference in the face of control loss and service failure: The role of the sound of brands," Journal of Retailing and Consumer Services, Elsevier, vol. 55(C).
    4. Appel, Gil & Libai, Barak & Muller, Eitan & Shachar, Ron, 2020. "On the monetization of mobile apps," International Journal of Research in Marketing, Elsevier, vol. 37(1), pages 93-107.

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