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The Effect of Compensation on Repurchase Intentions in Service Recovery

Author

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  • Grewal, Dhruv
  • Roggeveen, Anne L.
  • Tsiros, Michael

Abstract

To explore when the presence of compensation enhances repurchase intentions after a service failure, the authors use an experimental procedure and evaluate the impact of compensation in different stability and locus of responsibility conditions. Findings from three studies using scenarios from different service industries indicate that compensation is necessary only when the company is responsible for the failure and the failure occurs frequently. If the failure occurs infrequently or the company is not responsible, compensation does not affect repurchase intentions. The results further demonstrate that stability and locus of responsibility attributions influence the perceived equity of the exchange, which mediates the effectiveness of compensation as a recovery effort. The authors discuss the theoretical and managerial implications.

Suggested Citation

  • Grewal, Dhruv & Roggeveen, Anne L. & Tsiros, Michael, 2008. "The Effect of Compensation on Repurchase Intentions in Service Recovery," Journal of Retailing, Elsevier, vol. 84(4), pages 424-434.
    • Handle: RePEc:eee:jouret:v:84:y:2008:i:4:p:424-434
    DOI: 10.1016/j.jretai.2008.06.002
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    References listed on IDEAS

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    1. Folkes, Valerie S, 1984. "Consumer Reactions to Product Failure: An Attributional Approach," Journal of Consumer Research, Journal of Consumer Research Inc., vol. 10(4), pages 398-409, March.
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    3. Harris, Katherine E. & Grewal, Dhruv & Mohr, Lois A. & Bernhardt, Kenneth L., 2006. "Consumer responses to service recovery strategies: The moderating role of online versus offline environment," Journal of Business Research, Elsevier, vol. 59(4), pages 425-431, April.
    4. Goodwin, Cathy & Ross, Ivan, 1992. "Consumer responses to service failures: Influence of procedural and interactional fairness perceptions," Journal of Business Research, Elsevier, vol. 25(2), pages 149-163, September.
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