Recovery Strategies for Service Failures: The Case of Restaurants

Journal of Hospitality Marketing & Management ISSN: 1936-8623 (Print) 1936-8631 (Online) Journal homepage: http://www.tandfonline.com/loi/whmm20 Recovery Strategies for Service Failures: The Case of Restaurants Ilan Silber, Aviad Israeli, Adi Bustin & Ofir Ben Zvi To cite this article: Ilan Silber, Aviad Israeli, Adi Bustin & Ofir Ben Zvi (2009) Recovery Strategies for Service Failures: The Case of Restaurants, Journal of Hospitality Marketing & Management, 18:7, 730-740, DOI: 10.1080/19368620903170273 To link to this article: http://dx.doi.org/10.1080/19368620903170273 Published online: 03 Sep 2009. Submit your article to this journal Article views: 6142 View related articles Citing articles: 13 View citing articles Full Terms & Conditions of access and use can be found at http://www.tandfonline.com/action/journalinformation?journalcode=whmm20 Download by: [148.251.235.206] Date: 04 January 2016, At: 11:11

Journal of Hospitality Marketing & Management, 18:730 740, 2009 Copyright Taylor & Francis Group, LLC ISSN: 1936-8623 print/1936-8631 online DOI: 10.1080/19368620903170273 Recovery Strategies for Service Failures: The Case of Restaurants WHMM 1936-8623 1936-8631 Journal of Hospitality Marketing & Management, Vol. 18, No. 7, Aug 2009: pp. 0 0 Recovery I. Silber et Strategies al. for Service Failures ILAN SILBER, AVIAD ISRAELI, ADI BUSTIN, and OFIR BEN ZVI Department of Hotel and Tourism Management, The Guilford Glazer School of Business and Management, Ben Gurion University of the Negev, Beer Sheva, Israel The study objective was to determine the efficiency of recovery strategies for various service failures in the restaurant industry. Efficiency was determined by the customers willingness to return (WTR) and visit the restaurant. The main findings suggest that recovery strategies that include service interaction with customers were dominant over strategies which include monetary compensation. Furthermore, it has been found that the most problematic service failures are the ones involving inappropriate servers behavior, slow service, and food/beverage spillage. The study concludes with implications and recommendations for matching each service failure with a recovery strategy which will improve customers WTR to the restaurant. KEYWORDS Service failure, service recovery, restaurant management INTRODUCTION Service management is becoming increasingly important, as many organizations recognize that it is crucial to manage service elements in their environment in order to be competitive (Grönroos, 1994). Service management focuses on two different dimensions: the production-related dimension is termed technical or outcome dimension, and the service-related dimension is termed functional or process-related dimension. A restaurant is a setting in which the service encounter is characterized with a combination Address correspondence to Aviad Israeli, Department of Hotel and Tourism Management, The Guilford Glazer School of Business and Management, Ben Gurion University of the Negev, Beer Sheva, Israel. E-mail: aviad@som.bgu.ac.il 730

Recovery Strategies for Service Failures 731 between production and service elements. The guest receives a meal which is primarily a part of the technical or outcome dimension. He also interacts with the waiter in the restaurant and this interaction is included as a part of the functional or process-related dimension. These service encounters may be successful and generate positive outcomes such as tipping, repeat purchase, and overall customer satisfaction (Israeli & Barkan, 2004). However, the may also include a failure which may or may not be recovered. Recovery of failure events is important for firm performance. Studies have shown that a firms ability to produce repeat purchase has a critical monetary significance. The cost of preserving a customer is about 20% of the cost of bringing a new customer and an increase of 5% in returning customers will produce an increase of 25% 125% in the firm s profits (Kotler, Bowen, & Makens, 2006). Customers willingness to return (WTR) was found to be correlated with satisfaction (Brady, Cronin, & Brand, 2002) which is often explained by the gap between expectation and experience (Kotler et al., 2006). Zero gap (experience = expectation) will result in customers satisfaction, positive gap (experience > expectation) will generate increased satisfaction, and negative gap (experience < expectation) will lead to dissatisfaction. One way of creating experience which exceeds expectations is by an appropriate recovery from service failures (Bitner, Booms, & Tetreault, 1990). In a study of the hotel, restaurant, and aviation industries, Bitner et al. reported that about a quarter of service encounters resulted in increased satisfaction as a result of an appropriate recovery from service failure. Hart, Heskett, and Sasser (1990) coined the phrase service recovery paradox suggesting that customers who experienced service failure which was followed by a satisfactory recovery were more satisfied and more likely to produce loyalty and favorable word of mouth than customers who have not experienced service failure at all. Moreover, in the same research it was found that 43% of the customers who were identified as dissatisfied reported that it was due to inappropriate response to a service failure and not due to the failure itself. Keaveney (1995) showed that in 60% of events in which customers switched a service provider, it was in response to service failure, and in 45% of these events the inappropriate response was the sole reason for the switch. Bitner et al. (1990) divided the strategies to three categories: monetary compensation strategies, service interaction strategies, and no action strategies. Another research that analyzed 342 participants who reported about 684 service failure events identified eight specific recovery actions for restaurants which included free food, discount, coupon, management intervention, dish replacement, correction, apology, and no action (Warden, Huang, & Wu, 2008). Table 1 lists the eight recovery actions

732 I. Silber et al. TABLE 1 Recovery Actions and Service Recovery Strategies Recovery actions (Warden et al., 2008) Free food Discount Coupon Management intervention Replacement Correction Service provider s apology No action Service recovery strategies (Bitner et al., 1990) Compensation strategies Assistance strategies No action strategy according to Bitner et al. s (1990) general categories of service recovery strategies. The current study explores the variables which influence customers expectation for a recovery strategy in case of different service failure events in restaurants. The assumption is that there will be a preferred strategy (compensation, assistance, no action) for each specific failure event. The next section describes the data collection stage. Section three presents that findings and the last section offers interpretations, conclusions and suggestions for academics and practitioners. DATA COLLECTION Exploratory Research: Service Failure Nonstructured interviews were conducted with 11 Israeli managers of large, well-known restaurants in order to map service failure events in the industry. The information was processed into a list which included the nine most common service failures in restaurants as listed in Table 2. The list of the common service failures was used in the primary research for evaluating the use and effectiveness of the recovery strategies which was constructed from the literature (Table 1). Primary Research: Service Failure and Service Recovery The primary research employed an anonymous questionnaire constructed around two main questions. Question 1 asked the participants to match each of the nine failures found in the exploratory research with recovery action that the respondent expected a restaurant to use. The question was constructed as a table in which the failures were listed in the row headings and the recovery actions in the column headings. The participants were asked to mark an X in the cell which represents the best action response

Recovery Strategies for Service Failures 733 TABLE 2 Common Service Failures Failure Failure details 1 Dish defect Any defect in the core product (food) such as foreign object, esthetic failure etc. 2 Slow service Any contact between the customer and a service provider which takes more time than the time expected by the customer. 3 Out of stock Unavailability of a dish/food/beverage/product which was ordered by the customer. 4 Incorrect temperature Food/beverage temperature which is either higher or lower than expected by the customer. 5 Wrong cooking degree Meat which was cooked to a different degree than the degree that was ordered or specified by the customer. 6 Inappropriate servers behavior Service provider s behavior which does not comply with the industry standards for proper behavior. 7 Wrong order The serving of a food/beverage other than was ordered by the customer. 8 Billing error Any error occurred in the customers billing process (initial bill or final invoice). 9 Food/Beverage spillage Spillage of either food or beverage on or near the customer. TABLE 3 Sample Demographic Information Age group Gender Group Frequency Gender Frequency 18 20 0 (0.00%) Male 93 (46.50%) 21 23 52 (26.00%) 24 26 117 (58.50%) 27 29 31 (15.50%) Female 107 (53.50%) 30 32 0 (0.00%) 33+ 0 (0.00%) Total 200 (100.00%) Total 200 (100.00%) to the service failure. Question 2 asked the participant to assume that for each failure event the restaurant action matched the choice made in the previous question. Based on this, the respondent was asked to rate his WTR to the restaurant on an interval scale of 1 5 (1 = negative influence, 3 = no influence, 5 = positive influence). The questionnaire concluded with demographic questions for age group and gender. A total of 228 questionnaires were distributed among students of a large university in Israel, out of which 217 were completed (response rate of 95.18%). An additional 17 questionnaires were disqualified due to incomplete responses, resulting in a total of 200 usable questionnaires (Table 3).

734 I. Silber et al. Results Frequency tests were constructed for Question 1 matching each of the nine service failures to the recovery actions and the findings are listed in Table 4 12. Table 13 summarizes the data and presents the action which most respondents mentioned as the best recovery for every service failure event. TABLE 4 Frequency of Recovery Actions to Dish Defect Service Failure Compensation Free food 25 (12.50%) 40 (20.00%) Discount 14 (7.00%) Coupon 1 (0.50%) Assistance Management intervention 13 (6.50%) 158 (79.00%) Replacement 133 (66.50%) Correction 8 (4.00%) Apology 4 (2.00%) No action No action 0 (0.00%) 0 (0.00%) Missing 2 (1.00%) 2 (1.00%) TABLE 5 Frequency of Recovery Actions to Slow Service Failure Compensation Free food 4 (2.00%) 32 (16.00%) Discount 24 (12.00) Coupon 4 (2.00%) Assistance Management intervention 47 (23.50%) 159 (79.50%) Replacement 3 (1.50%) Correction 0 (0.00%) Apology 109 (54.50%) No action No action 8 (4.00%) 8 (4.00%) Missing 1 (0.50%) 1 (0.50%) TABLE 6 Frequency of Recovery Actions to Out of Stock Service Failure Compensation Free food 5 (2.50%) 35 (17.50%) Discount 17 (8.50%) Coupon 13 (6.50%) Assistance Management intervention 10 (5.00%) 119 (59.50%) Replacement 17 (8.50%) Correction 5 (2.50%) Apology 87 (43.50%) No action No action 43 (21.50%) 43 (21.50%) Missing 3 (1.50%) 3 (1.50%)

Recovery Strategies for Service Failures 735 TABLE 7 Frequency of Recovery Actions to Incorrect Temperature Service Failure Compensation Free food 4 (2.00%) 14 (7.00%) Discount 5 (2.50%) Coupon 5 (2.50%) Assistance Management intervention 4 (2.00%) 182 (91.00%) Replacement 86 (43.00%) Correction 84 (42.00% Apology 8 (4.00%) No action No action 3 (1.50%) 3 (1.50%) Missing 1 (0.50%) 1 (0.50%) TABLE 8 Frequency of Recovery Actions to Wrong Cooking Degree Service Failure Compensation Free food 14 (7.00%) 29 (14.50%) Discount 13 (6.50%) Coupon 2 (1.00%) Assistance Management intervention 15 (7.50%) 164 (82.00%) Replacement 90 (45.00%) Correction 53 (26.50%) Apology 6 (3.00%) No action No action 2 (1.00%) 2 (1.00%) Missing 5 (2.50%) 5 (2.50%) TABLE 9 Frequency of Recovery Actions to Inappropriate Servers Behavior Service Failure Compensation Free food 7 (3.50%) 19 (9.50%) Discount 9 (4.50%) Coupon 3 (1.50%) Assistance Management intervention 155 (77.50%) 177 (88.50%) Replacement 2 (1.00%) Correction 0 (0.00%) Apology 20 (10.00%) No action No action 2 (1.00%) 2 (1.00%) Missing 2 (1.00%) 2 (1.00%) Primary Research: Willingness to Return Proxy When a service failure occurs and when the failure is addressed through a recovery action, it is important to evaluate the effectiveness of the recovery. As mentioned earlier, this research posits that the recovery s effectiveness can be approximated by the customer s WTR. WTR may lead to repeat

736 I. Silber et al. TABLE 10 Frequency of Recovery Actions to Wrong Order Service Failure Compensation Free food 24 (12.00%) 52 (26.00%) Discount 24 (12.00%) Coupon 4 (2.00%) Assistance Management intervention 12 (6.00%) 143 (71.50%) Replacement 77 (38.50%) Correction 27 (13.50%) Apology 27 (13.50%) No action No action 1 (0.50%) 1 (0.50%) Missing 4 (2.00% 4 (2.00% TABLE 11 Frequency of Recovery Actions to Billing Error Service Failure Compensation Free food 4 (2.00%) 56 (28.00%) Discount 34 (17.00%) Coupon 18 (9.00%) Assistance Management intervention 43 (21.50%) 137 (68.50%) Replacement 2 (1.00%) Correction 13 (6.50%) Apology 79 (39.50%) No action No action 4 (2.00%) 4 (2.00%) Missing 3 (1.50%) 3 (1.50%) TABLE 12 Frequency of Recovery Actions to Food/Beverage Spillage Service Failure Compensation Free food 38 (19.00%) 79 (39.50%) Discount 29 (14.50%) Coupon 12 (6.00%) Assistance Management intervention 17 (8.50%) 111 (55.50%) Replacement 6 (3.00%) Correction 3 (1.50%) Apology 85 (42.50%) No action No action 6 (3.00%) 6 (3.00%) Missing 4 (2.00%) 4 (2.00%) purchase which is one of the most significant factors of business success. In order to approximate WTR, this study constructs a proxy for the recovery s effectiveness. The proxy was constructed by transforming the scale used in Question 2. Question 2 asked participant to assume that for each failure event the

Recovery Strategies for Service Failures 737 TABLE 13 The Frequency of Recovery Strategies: Summary Recovery strategy Service failure Category Action Frequency (%) Dish defect Assistance Replacement 66.50 Slow service Assistance Apology 54.50 Out of stock Assistance Apology 43.50 Incorrect temperature Assistance Replacement 43.00 Assistance Correction 42.00 Wrong cooking degree Assistance Replacement 45.00 Inappropriate servers behavior Assistance Management intervention 77.50 Wrong order Assistance Replacement 38.50 Billing error Assistance Apology 39.50 Food/Beverage spillage Assistance Apology 42.50 restaurant action matched the action he most preferred. Based on this match between failure and recovery action, the respondent was asked to rate his WTR to the restaurant on an interval scale of 1 5 when 1 = negative influence, 3 = no influence, 5 = positive influence. The v n values reported by the participants on the scale v min = 1, v max = 5 were transformed to w n using the formula: w n v = v n The WTR proxy was constructed by using f n,s which is the frequency of a service failure s (from the nine listed in Table 2) which is recovered using action n from the available eight actions (listed in Table 1). WTR s for each service failure s was calculated as follows: WTR s = v n w n + v 2 max min, f w ns, max 100 For each service failure s the WTR proxy ranged between 100 and +100 with 0 as median. A negative result implies a negative influence on the WTR and a positive result implies a positive influence on the WTR. Since WTR is a proxy measure, it can be interpreted as the customer s probability to return for repeat purchase (from a 100% chance of returning to a +100% chance of returning) given that he experienced a service failure s which was recovered by action n he most prefer. Table 14 presents WTR proxy values for each service failure which was recovered according to the customer s expectation.

738 I. Silber et al. TABLE 14 WTR Proxy for Each Service Failure v n 1 2 3 4 5 Service failure w n 2(%) 1(%) 0(%) 1(%) 2(%) WTR s Inappropriate servers 39.70 27.60 12.10 9.50 11.10 37.65 behavior Slow service 13.00 41.50 20.50 16.00 9.00 16.75 Food/Beverage spillage 16.50 23.00 34.50 13.50 12.50 8.75 Wrong cooking degree 5.60 30.30 35.40 16.90 11.80 0.50 Out of stock 6.10 19.80 51.80 12.70 9.60 0.05 Incorrect temperature 5.50 26.10 38.70 22.10 7.50 0.00 Billing error 7.00 19.60 48.70 14.60 10.10 0.60 Wrong order 1.50 16.50 50.00 21.50 10.50 11.50 Dish defect 8.50 23.60 17.10 28.10 22.60 16.35 DATA ANALYSIS Service Failure and Service Recovery The findings of this study clearly show that actions from the assistance category of recovery strategies were the dominant resolution for all service recoveries. This finding contradicts other findings that point to compensation strategies as the most significant tool for service recovery (Warden et al., 2001). Unsurprisingly, it was been found that no action strategies are dominated strategies. With respect to the assistance strategies, dish defect, incorrect temperature, wrong cooking degree, and wrong order service failures, the majority of participants expected dish replacement. For slow service, out of stock, billing error, and food/beverage slippage service failures majority of participants expected a service provider s apology. For inappropriate server s behavior, the majority of participants expected managerial intervention. Participants demonstrated consistent responses with respect to service failures, and they expected an action that was most directly related to the failure and to its immediate resolution. Generally, there are two important findings about service failure and recovery in restaurants. First, it is clear that customers demand a correction of the current problem using actions from the assistance strategy category and not a future solution from the compensation strategy category. This finding contradicts some common practitioners practices who believe that a coupon for future purchase will ease the customer who faced a service failure. Second, the findings demonstrate that within the assistance category, customers are consistent in finding the direct recovery action which is most applicable to their case. For example, when the failure was related to the dish, the recovery was replacement or correction. When the problem was service-related but was not necessarily the service provider s fault, an apology was sufficient. However, when the failure was caused by the

Recovery Strategies for Service Failures 739 service provider and was apparently his fault too, managerial intervention was needed. Willingness to Return So far, information about expected recovery action dealt with the immediate resolution for known failures. However, as stated before, the research was interested with a longer term perspective and an effort was made to approximate customers WTR to the restaurant given that a service failure occurred and recovered in the manner that they expected. The WTR proxy suggests that in cases of inappropriate servers behavior and food/beverage spillage, even the customer s preferred recovery was not effective and customers demonstrated a negative WTR. In the case of failure events including wrong cooking degree, out of order, incorrect temperature, and billing error, recovery had little or no effect on the participants WTR. When the failure events wrong order and dish defect were recovered they had a positive effect on the participants WTR. The WTR proxy provides some interesting insights. Customers, who experienced different service failures which were recovered, differ in their future behavior. They will tend not to return to the restaurant if the failure was nontechnical (i.e. functional). Specifically, if the service was inappropriate, slow, or was causing damage (such as spillage) they were not forgiving and reported that will tend not to return to the restaurant. However, if the service failure which was recovered was technical such as wrong order or problem with the dish, after the recovery, their behavior was more forgiving and they reported a positive tendency to repurchase. CONCLUSIONS, RECOMMENDATIONS AND SUGGESTION FOR FUTURE RESEARCH First, it should be noted that the results are based on data collected from students which do not necessarily represent the entire population. Future research should validate the results among other consumer groups. In addition, this study focused on a limited set of failure events and a limited set of recovery actions. This set should also be elaborated in future studies. Service failures should not occur. However, due to uncontrolled variability, service failures will occur. When they occur, they must be recovered. In this context the findings provide some important insights. The most significant is the relationship between service failure, service recovery and repeat purchase (WTR). First, the finding show that for all service failures, majority of customers stated that the expected (or preferred) recovery includes actions from the assistance category. This finding is consistent with prior studies which emphasize the potential of the functional element in

740 I. Silber et al. service encounters (Storbacka, Strandvik, & Grönroos 1994). However, the findings also reveal that recoveries which aim at securing future repeat purchase such as coupon are not considered to be effective by customers. These findings suggest that customers want to recover the failure as it happens and then make a determination about future consumption. Therefore, managers should know that recoveries that offer a solution in the future (such as coupon) will be less effective than actions that offer immediate recovery. Obviously, restaurant management should invest resources in preventing service failures. It should be noted that inappropriate servers behavior, slow service, and food/beverage spillage should be a top priority because this study showed that these failures, even when recovered, had a negative effect on the customers WTR. Restaurant management should consider leveraging the service failures of wrong order and dish defect, followed by replacement strategy. The findings show that those failures, followed by this recovery, had a positive effect on the participants WTR. REFERENCES Bitner, M. J., Booms, B. H., & Tetreault, M. S. (1990). The service encounter: Diagnosing favorable and unfavorable incidents. Journal of Marketing, 54 (January), 71 84. Brady, M. K., Cronin, J. J., & Brand, R. R. (2002). Performance-only measurement of service quality: A replication and extension. Journal of Business Research, 55 (January), 17 31. Grönroos, C. (1994). From scientific management to service management: A management perspective for the age of service competition. International Journal of Service Industry Management, 5(1), 5 20. Hart, C. W. L., Heskett, J. L., & Sasser, W. E., Jr. (1990). The profitable art of service recovery. Harvard Business Review, 68 (July-August), 148 156. Israeli, A., & Barkan, R. (2004). Developing a framework for rewards in combined production/service businesses: The case of tipping in the restaurant industry. International Journal of Service Industry Management, 15(5), 444 459. Keaveney, S. M. (1995). Customer switching behavior in service industries: An exploratory study. Journal of Marketing, 59(2), 71 82. Kotler, P., Bowen, J., & Makens, J. C. (2006). Marketing for hospitality and tourism (4th ed.). Upper Saddle River, NJ: Pearson Education. Storbacka, K., Strandvik, T., & Grönroos, C. (1994). Managing customer relationships for profit: The dynamics of relationship quality. International Journal of Service Industry Management, 5(5), 21 38. Warden, A., Huang C., & Wu, W. (2008). Restaurant service failure recoveries: Role expectations of customers. Journal of Hospitality Marketing & Management, 16(1), 159 180.