Customer Reactions to Service Provider ... - SAGE Journals

Customer Reactions to Service Provider Overgenerosity Hooman Estelami Fordham University

Peter De Maeyer The Monitor Company

Existing research in services marketing has mostly focused on service encounters in which the service provider fails to meet customer expectations. Service encounters in which customer expectations are exceeded have not been as thoroughly examined. This article focuses on service encounters characterized by service provider generosity: the act of giving customers value beyond their expectations. Utilizing an experimental research design, the authors demonstrate that consumer reactions to such behavior are moderated by the organizational level of the service provider as well as the existence of a past purchase history. Counter to conventional belief, under certain conditions, overgenerosity may hinder customer assessments of a service. The article concludes with a discussion of the implications for services marketing strategy and research.

Generosity has been defined as a “willingness to share” and “giving freely, free from meanness or prejudice” beyond expected levels (Dalgish 1997; Machan 1998). Although generous service provider behavior seems to be a fundamental component of the marketing strategy of many large and small businesses, existing academic research in services marketing has had little coverage of the impact of such behavior on the customer. A significant amount of the current literature has instead focused on customer reac-

tions to instances in which firms fall short of one’s expectations. However, emerging evidence suggests that outperforming consumer expectations through generous actions may potentially help in bringing about consumer delight, with subsequent positive effects on constructs such as attitude, word of mouth, and repurchase intentions (e.g., Estelami 2000; Oliver, Rust, and Varki 1997; Singh 1990; Taylor 1997). Numerous examples of service provider generosity can be found in the business press. These include a customer service employee at Nordstrom who gladly accepts a pair of returned tires from a customer, although Nordstrom never carries tires (Heskett, Sasser, and Schlesinger 1997). Other examples include a cashier who accepts a transaction although the customer is a few pennies short of cash and customer service protocols that compensate consumers for incremental losses incurred due to product failures (Estelami 2000; Reichheld and Sasser 1990). Although from an economic perspective, such actions may not necessarily represent substantial costs to the firm (e.g., Fornell and Wernerfelt 1987), they are typically considered to be beyond the norms of most service protocols. Nevertheless, service provider generosity may provide the firm with unique opportunities to gain the attention, trust, and potentially the long-term loyalty of customers. This article therefore explores the impact of service provider generosity on customer responses. The impact of

JOURNAL OF SERVICE Estelami, RESEARCH De Maeyer / February / SERVICE 2002 PROVIDER OVERGENEROSITY

This research was supported by a grant from Fordham University’s Graduate School of Business and the Fordham University Pricing Center. Please address correspondence to the first author at the Graduate School of Business, Fordham University, 113 West 60th Street, New York, NY 10023; phone: (212) 636-6296; fax: (212) 765-5573; e-mail: [email protected]. Journal of Service Research, Volume 4, No. 3, February 2002 205-216 © 2002 Sage Publications

206

JOURNAL OF SERVICE RESEARCH / February 2002

factors such as the existence of a past purchase history, the service provider’s organizational level, and the magnitude of generosity on consumer judgments is examined through an experimental research design. The article concludes with a discussion of the managerial and research implications of the findings.

CONSUMER EXPECTATIONS AND SERVICE PROVIDER GENEROSITY Expectations are the basis of consumer judgments for most service encounters (Oliver 1980; Parasuraman, Zeithaml, and Berry 1988; Rust et al. 1999) and are often the means by which the actual performance of a business is gauged. Customers enter service encounters with certain expectations about the various aspects of a service, such as speed of service, politeness of employees, and cleanliness of the service outlet. Research has shown that multiple expectations are used to gauge the quality of an aspect of a service encounter. These expectations may relate to what consumers would ideally desire, what they predict to experience, or what they consider to be adequate service (Zeithaml, Berry, and Parasuraman 1993). Although desired and predicted service expectations are found to be largely influenced by promises communicated to customers by service providers, expectations of adequate service levels are affected by factors such as the number of competing services, situational factors, and consumers’ involvement in the service process. The magnitude of the discrepancy between consumer expectations and the actual experienced service determines customer satisfaction with the offering (Oliver 1980), and the management of the discrepancy between customer expectations and service provider performance has therefore become a focus for developing effective service marketing strategies (Oliver 1997). This focus is driven by the recognition of a “zone of tolerance” surrounding customer expectations (Johnston 1995; Liljander and Strandvik 1993; Woodruff, Cadotte, and Jenkins 1983). This zone represents consumers’ tolerance for differences between desired and adequate levels of service performance (Zeithaml, Berry, and Parasuraman 1993) and is a range of firm performances in which expectations are considered by customers to have been met. Service provider performance within the lower and upper limits of this zone will likely result in mere satisfaction. However, performance below the lower limit of the zone is likely to result in customer dissatisfaction, and performance above the upper limit of the zone may result in customer delight (Oliver, Rust, and Varki 1997; Pieters, Koelmeijer, and Roest 1995; Singh and Widing 1991).

It is the latter form of exceeding customer expectations that interests us in this article. The business press provides numerous examples of situations in which firms such as Chubb Insurance, Xerox, Southwest Airlines, and Home Depot seek to exceed the upper limit of the zone of indifference. For example, Xerox provides its customers with unconditional product returns at the customer’s request (“Why Your Copier Isn’t Working,” 1992), Home Depot entertains product returns for items purchased from its competitors (“Cheerleading,” 1992), and in a highly competitive property and casualty market Chubb Insurance has found a profitable path by providing outstanding service to customers (Fefer 1996). Other examples include a cashier who chooses to complete a transaction although the customer is short by a few pennies (Reichheld and Sasser 1990) and a Southwest Airlines pilot who provides a late passenger a flight on his own personal aircraft (Weinstein 1997). Such generous behaviors create unique customer experiences in which one’s expectations about the service encounter are significantly exceeded. Research in both service quality management and pricing has documented the positive impact of exceeding customer expectations on customer satisfaction and delight, with subsequent effects on customer choice and loyalty (Estelami 2000; Rust et al. 2000). For example, evidence in the customer service literature suggests that liberal customer compensation policies have an overwhelmingly positive effect on customer evaluations of the company, beyond any other aspect of the service encounter (Goodwin and Ross 1989; Tax, Brown, and Chandrashekaran 1998). Oliver, Rust, and Varki (1997) have also shown that unexpected high levels of firm performance may result in a state of emotional arousal and delight in consumers. The result is an increase in consumer behavioral measures such as purchase intentions and satisfaction self-reports. Similar evidence in the pricing literature (e.g., Barnes 1975; Berkowitz and Walton 1981; Estelami 1997; Keiser and Krum 1976) suggests systematic consumer preference for price presentation tactics that imply seller generosity (e.g., “buy one, get one free”) rather than traditional presentations of price information (e.g., “50% off”). Service provider generosity may therefore help develop outstanding levels of customer satisfaction, which may subsequently have positive effects on repurchase behavior (Anderson and Sullivan 1993; Bitner, Booms, and Tetreault 1990; Bolton 1998; Oliva, Oliver, and MacMillan 1992; Oliver, Rust, and Varki 1997). Literature on the empowerment of service employees also supports the fact that enabling service providers to take extra initiatives for ensuring positive service encounters will result in high customer satisfaction levels. Empowering implies giving employees the decision-making power to take additional steps beyond organizational

Estelami, De Maeyer / SERVICE PROVIDER OVERGENEROSITY

norms for serving customers (Lawler, Mohrman, and Ledford 1995). Research has established that this organizational characteristic not only helps increase customer satisfaction levels but also produces positive results on profitability (Bowen and Lawler 1995). Empowerment also results in higher levels of employee satisfaction (Kopelman 1986), improves work output quality, and lowers costs (Beekun 1989). Needless to say, the resulting employee satisfaction has been found to also indirectly influence customer satisfaction levels (Loveman 1998). However, although low and moderate levels of generosity may produce customer delight and positively influence subsequent customer behavior, overgenerosity may be considered as beyond the norms of operating a business profitably and may trigger additional cognitive processes that question the nature of the transaction. As a result, overgenerous behavior may be perceived as unusual, atypical, and suspicious by customers. This is a result of information asymmetry surrounding buyer-seller transactions, in which sellers typically have an information advantage over the buyer on the value of the product being sold (Mishra, Heide, and Sort 1998). In service encounters, the magnitude of this asymmetry makes customer judgments highly influenced by the contextual elements of the transaction (Singh and Sirdeshmukh 2000). As a result, outcome variables such as customer satisfaction and judgments regarding the ethical standards of the service provider may be negatively affected by unusual events, which may compromise the customer’s trust in the service provider (Bigley and Pearce 1998; Doney and Cannon 1997; Garbarino and Johnson 1999). Research in social psychology has also found evidence for a persistent effect not only of the economic outcome of negotiations but also the perceptions surrounding them. For example, Thompson (1990) found that in dyadic negotiations, perceptions of the other party’s outcomes significantly affects one’s evaluation of the negotiation. He attributed this to the lack of sufficient objective outcome information in many negotiations, resulting in increased reliance on subjective cues and outcome perceptions. Lowenstein, Thompson, and Bazerman (1989) have also shown that in evaluating transactions, customers prefer a fair distribution of outcomes between the parties, and Corfman and Lehmann (1993) suggested that customers’ concern for the welfare of the other party significantly influences the satisfaction gained in buyer-seller transactions. As a result, overgenerosity in service transactions can trigger cognitive processes that may also put into question the ethical values of the service provider and question whether or not these values and the resulting actions are consistent with the policies and welfare of the business

207

(Levy and Dubinsky 1983; McIntyre, Thomas, and Gilbert 1999). Moderating Role of Service Provider Organizational Level Customer reactions to service provider generosity may be further affected by contextual elements of the service encounter, which primarily relate to the setting in which the behavior takes place, rather than the amount of generosity (Goodwin and Ross 1992). One potential moderating factor is the organizational level of the service provider. The organizational level of the service provider may influence customers’ interpretation of generous acts. Because generosity is not a standard component of service encounter protocols, and because it may also imply sacrifices by the business, its practice by an employee at lower organizational levels may be perceived as risky behavior, which may not be compliant with organizational policies and norms. Overly generous action by lower level employees may therefore be considered as a compromise to their commitment to the organization and potentially perceived as unfavorable behavior (Cohen 1993; Hunt and Morgan 1994). Therefore, lower level employees (e.g., cashiers, clerks, etc.) who engage in overgenerous behavior may help create uncomfortable customer experiences. On the other hand, service providers at higher organizational levels (e.g., owners, managers, assistant managers, etc.) may be more appropriate vehicles for such behavior. The generous behavior of higher level employees may be more acceptable to customers, as they may be perceived as being aware and compliant with organizational policies and unlikely to compromise their business’s well-being (Meyer and Allen 1991). The Effects of Past Purchase History A second contextual factor that may influence customer reactions to overgenerous service provider behavior is the presence or absence of a past purchase history with the service provider. Research has shown that the existence of a purchase history between buyers and sellers helps customers become more responsive toward positive actions taken by a business. For example, Tax, Brown, and Chandrashekaran (1998) have shown that customers who have a transaction history with the seller perceive the seller’s actions more positively than those with no purchase history. Similar results have been reported by Oliva, Oliver, and MacMillan (1992), who suggested that past purchase history reduces the chances of customer switch-

208


ing behavior and improves the bond between buyer and sellers. The existence of a purchase history may therefore make it more acceptable for customers to be recipients of generous offers from a service provider. This is especially true in certain service sectors such as the gaming and hospitality industries in which the act of generously rewarding loyal customers is considered to be an expected part of doing business (Chipkin 1997; Pinney, Thompson, and Strate 1995). As such, in these markets, service provider generosity is a well-received and expected practice for loyal customers (Bull and Alcock 1993; Yu 1999). Similar responses are evident in other service industries in which customer loyalty rewards are expected. In such light, generosity may be perceived as the means for establishing and strengthening a long-term relationship between the business and the customer. Overview of Research Questions In the following section, the results of a study will be presented to explore consumer reactions to service provider generosity under the various conditions described above. In particular, the experimental research design used will attempt to examine the following three questions: 1. What cognitive responses do consumers exhibit in reaction to service provider generosity, and how do these responses vary as a function of the magnitude of generosity? 2. Are consumer reactions to generous service provider behavior influenced by their past purchase history with the service provider? 3. Are consumer reactions to generous service provider behavior influenced by the organizational level of the service provider?

METHOD To explore the effects of service provider generosity, an experimental design associated with qualitative data was utilized. The between-subject experiment manipulated the monetary amount of generosity, the service provider organizational level, and past purchase history in written descriptions of a service encounter. Participants were then asked qualitative open-ended questions as well as structured questions to gauge their cognitive reactions to variations in the described scenarios. Examining customer reactions to service encounters through combined use of qualitative open-ended questions and quantitative structured responses is similar to previous works in services marketing research (e.g., Bitner, Booms, and Tetreault

1990; Estelami 2000; Goodwin and Ross 1989; Keaveney 1995). This approach, which enables both exploratory analysis of customer responses and quantitative study of their cognitive responses to service scenarios, is detailed below. Independent Variables Participants were given a brief written description of a retail encounter, following which a series of open-ended and structured questions was asked. The written description outlined a scenario in which the participant is making a road trip to a nearby town and on the way there stops at a convenience store to buy snacks, drinks, and food items. Having presented the selected items to the cashier, the cash register rings the total amount. Participants were told that they have only $10 in cash and no credit card on hand. Generosity was manipulated by changing the total bill and informing the participant that despite the lack of sufficient funds, the cashier was willing to complete the transaction, with no obligation to repay the forgone amount in the future. The various levels of generosity were established through a pretest exercise. Eighteen graduate business students were given descriptions of the service encounter described above, without specifying the purchase history, organizational level, or dollar amount forgone by the service provider. They were then asked to express what amount of forgone payment they would consider to be associated with low, moderate, or high levels of generosity exhibited by the service provider. Each respondent therefore provided three measures associated with the three levels of generosity. The average response across all pretest respondents for each of the three generosity levels was then computed and used as the basis for the manipulation of service provider generosity. The resulting levels of generosity were $10.04 (low), $10.50 (moderate), and $16.87 (high), expressed as the total bill associated with the transaction. This approach for determining factor levels in an experimental design is consistent with the common practice used in pricing research for eliciting expected monetary terms in a business transaction (e.g., Monroe 1990; Park and Lessig 1981; Rao and Monroe 1988). The organizational level of the service provider was manipulated by either stating that the cashier is an employee of the store (low organizational level) or stating that the cashier is the owner (high organizational level). Purchase history was manipulated by stating either that the participant has never shopped there before or that the participant frequently shops at that location. This resulted in a between-subject design with a total of 12 cells: 3 (generosity level) × 2 (organizational level) × 2 (purchase history).


Dependent Variables The obtained measures include open-ended written descriptions of participants’reactions to the service scenario, as well as structured questions. Following each service scenario description, participants were asked three openended questions. The first question asked them to state any positive aspects of the transaction that come to their mind. The second question asked them to state any negative aspects that come to their mind. The objective of asking these two questions was to capture cognitive responses associated with the transaction and to tabulate positive and negative thoughts arising from different scenarios. The last open-ended question asked participants to state what they thought about the service provider by asking them, “What words would you use to describe the cashier?” These written responses were used to facilitate exploratory analysis by categorizing customer responses to service provider generosity using subsequent content analysis procedures. On the page following the open-ended questions, participants were asked a series of structured questions to gauge their reactions to the described service scenario. This helped quantify and validate observations made through the analysis of the open-ended questions. Customer satisfaction was measured through three statements: “I am satisfied with the transaction that took place,” “I am happy that I made my purchase at this store,” and “I appreciate what the cashier did for me.” A customer satisfaction multi-item scale was constructed by averaging each participant’s response on these three statements, resulting in a coefficient alpha of .77. Customer assessment of the seller’s ethical standards was measured through three statements: “The cashier’s action was ethically correct,” “The cashier engaged in inappropriate behavior,” and “I think the cashier should be reported to authorities,” resulting in a coefficient alpha of .72. The utilized statements were based on past research in service marketing research (Chonko and Hunt 1985; Oliver 1980; Parasuraman, Zeithaml, and Berry 1988; Simonson 1991; Swan, Bowers, and Richardson 1999; Vitell and Muncy 1992) and were pretested with graduate business students and refined prior to the administration of the experiment. The combined use of qualitative and quantitative customer responses to service scenarios is consistent with previous measurement approaches in this area of research (e.g., Goodwin and Ross 1989; Tax, Brown, and Chandrashekaran 1998).

209

ticipants were then recruited through mall intercepts in two shopping malls in southern New York State and randomly assigned to each of the 12 between-subject cells. Of these, 31 provided unusable responses. The resulting sample consisted of 327 adults, 55% of which were female. The mean age was 34 years, and 62% were living with a spouse. Participants were given monetary compensation ($2 and a souvenir key chain) for their participation, and the completion of the task typically took about 5 minutes. The cell sizes ranged from 24 to 31, and the average cell size was 27 participants. Analysis of Open-Ended Questions CONTENT ANALYSIS PROCEDURE

The first part of the analysis consists of content analysis of participants’ written responses to open-ended questions relating to each service encounter, after which responses to the structured questions will be analyzed. Following the description of each scenario, participants were asked to list (a) positive thoughts about the transaction, (b) negative thoughts about the transaction, and (c) their perceptions of the service provider. These written descriptions were then content analyzed using a procedure established by Weber (1985) and used by others in service quality research (e.g., Keaveney 1995; Tax, Brown, and Chandrashekaran 1998). In this approach, a subset of the completed descriptions is independently examined by two judges. Each judge develops his or her own category of responses, and then the two judges converge to a common categorization scheme, with disagreements involving a third judge. The final categorization scheme is then used by each judge to independently categorize the entire set of responses. Disagreements in categorization are resolved by a third judge. Following the above approach, a subset of 110 responses were first used to develop the categories for each of the three open-ended questions. The finalized categorization scheme was then used on the entire set of 327 responses. The agreement rates between the judges were generally high: 84% for positive thoughts, 78% for negative thoughts, and 86% for perceptions of the service provider. This approach to analyzing the open-ended responses facilitates an exploratory examination of customer responses while enabling the tabulation of results for quantitative analysis.

Participants

Participants’ Descriptions of the Service Encounter

Prior to administration, the experimental stimuli were pretested on 84 graduate business students, refined, and modified for wording and clarification. A total of 358 par-

Table 1 outlines the identified categories, the associated descriptions, and related overall frequencies for positive and negative thought listing. It is important to note that the

210


TABLE 1 Categorization of Participants’ Open-Ended Thought Descriptions Open-Ended Question Negative thoughts

Positive thoughts

Category

Sample Thought Descriptions

Store loses

“The store goes short of cash”; “If repeated, the store loses money”; “The employee may lose her job”; “It’s bad for business”; and so on Ethically “I would not accept this,” “I would feel ashamed of the situation,” “I would be indebted to incorrect someone,” “I accepted something dishonest,” and so on May set wrong “May increase buyer expectations in the future,” “Other customers may expect same precedence treatment,” “Prices may go up as a result of this,” and so on Question mo“I question the motives of the seller,” “The cashier cheated his business,” “Maybe the goods tives of seller were overpriced in the first place,” and so on None None Personal gain “Received more than what I should have gotten,” “I was recognized and rewarded as a customer,” “You are saved from the hassle of a second trip,” and so on Gracious “Did something he/she didn’t have to do,” “I am happy/thankful,” “Someone did a nice thing behavior for me,” “Good service,” “Good customer relations,” and so on Transaction “Keeps the line moving,” “Brings repeat customers,” “The store still manages to make a facilitation sale,” “I will refer the store to others,” and so on for the seller None None

percentages in Table 1 may add to more than 100% because participants expressed multiple thoughts for a given described scenario. The top portion of the table lists categories related to the open-ended question about negative thoughts that may come to the participant’s mind. The most frequent negative thought category is the recognition of the fact that the business may be making a sacrifice and therefore losing money in the process of forgoing the payments. Related risks are that the business could go bankrupt if this behavior continues and that the employee’s job may be placed at risk by engaging in such extraordinary behavior. The relatively high frequency of this negative thought category is consistent with the observations made by Corfman and Lehmann (1993) and Lowenstein, Thompson, and Bazerman (1989) in the context of negotiations, in which a concern for the welfare of the other party is found to influence one’s own satisfaction with a transaction. The second most frequent category of negative thoughts is concerned with the ethical appropriateness of the action taken by the service provider. These respondents consider the act to be potentially dishonest, and some express guilt in having accepted the offer. The third most mentioned category of negative thoughts relates to the fact that such service provider behavior may help set unreasonable customer expectations of similar behaviors in the future. The last category of negative thoughts relates to respondents’suspicions about the motives of the service provider in extending such an offer. These respondents question whether the offer is generous altogether and if other motives such as incorrect pricing, overpriced goods, or the employee’s desire to cheat the business may account for the exhibited behavior.

Percentage of Partcipants 55.0 32.4 14.7 11.6 8.9 61.8 58.4 7.0

1.2

The bottom portion of Table 1 lists all categories of thoughts expressed in response to the open-ended question probing the positive thoughts that the participant might have about the service encounter. As can be seen from the table, the majority of participants expressed positive thoughts. In general, these thoughts fall into three categories. The most frequent is recognition of some form of personal gain through the service provider’s generous behavior. These are reflected in participants’ expressions relating to having received more than what they normally would and having been saved the inconvenience of not getting the needed items. The next most frequent category of positive thoughts relates to participants’ appreciation for the service provider’s gracious behavior by carrying out unexpected acts of generosity. In such context, generous behavior is mentioned as a good mechanism for building customer satisfaction. The least frequently mentioned category of thoughts considered by respondents as positive relates to the fact that such behavior facilitates the completion of a business transaction with subsequent benefits to the business. This latter category was mentioned by less than 10% of respondents. Tabulation of Thought Listings Although the results in Table 1 provide an overall summary of participants’ responses across all experimental conditions, they do not report on the variations in these responses across the factors manipulated in the experiment. To enable such analysis, an index was constructed to tabulate the relationship between positive and negative thought listings. This is achieved by simply subtracting the latter


from the former. The resulting index would help quantify the direction and intensity of consumer thoughts (Grinnell 1997; Kendall, Butcher, and Holmbeck 1999; Miles and Huberman 1984):

211

FIGURE 1 Factorial Plots of the Thought Polarity Index (TPI)

TPI = number of positive thoughts – number of negative thoughts. This index, referred to here as the thought polarity index (TPI), ranges from negative to positive, depending on the number of negative and positive thoughts mentioned by the participant. A positive value of TPI indicates that the participant expressed more positive thoughts than negative thoughts. A TPI of zero indicates an equal number of negative and positive thoughts, and a negative value indicates that the participant expressed more negative thoughts than positive thoughts. This approach for quantifying respondents’ thought listings is consistent with previous research on the analysis of consumers’ cognitive responses (e.g., Maheswaran and Sternthal 1990; Sujan 1985) and prescriptions made by Judd, Smith, and Kidder (1991). Figure 1 provides a factorial plot of TPI across the various conditions manipulated. As can be seen in Figure 1A, there is a negative relationship between the amount of generosity and TPI. This indicates that the relative frequency of negative thoughts compared to positive thoughts increases with the magnitude of generosity. In addition, there is an effect of service provider organizational level. Low organizational levels are associated with less favorable TPI levels. To assess the significance of the observed pattern, an ANOVA was computed with TPI as the dependent variable and generosity amount and organizational level as the independent variables. The ANOVA is significant (F5, 281 = 6.92; p < .001) and so are the main effects of generosity (p < .01) and organizational level (p < .01). Figure 1B reports the TPI factorial plot for various levels of purchase history. As can be seen, similar to Figure 1A, TPI decreases with generosity. Moreover, the presence of past purchase history seems to result in higher TPI levels. This suggests that customers will evaluate generous service provider behavior more positively if a past history of purchases exists. The relationship between TPI and past purchase history and generosity amount is significant (F5, 281 = 7.13; p < .001) and so are the main effects of past purchase history and generosity (p < .001). The content analysis procedure described above was also used to categorize participants’ open-ended descriptions of their perceptions of the service provider. The resulting categories are listed in Table 2. The descriptions fall into three major groups. The first is negative descriptions. The largest category of negative statements deals with descriptions that question the soundness of the ser-

vice provider’s behavior from a business perspective. These respondents consider the act to be unprofessional, as evident by expressions such as “irresponsible” and “careless.” The second set of negative descriptions relates to suspicions about the motives behind the behavior. These participants express unease with why they were presented with the offer and question the employee’s agenda, as reflected in descriptions such as “suspicious” and “dishonest.” The third category of negative descriptions characterizes the service provider as a person engaging in

212


TABLE 2 Open-Ended Descriptions of the Service Provider Category Negative

Unwise

Neutral Positive

Questionable motives Risky Neutral Nice personality Smart business person

Sample Descriptions “Simple minded,” “not a good business person,” “irresponsible,” “unprofessional,” “carefree,” and so on “Suspicious,” “deceiving,” “dishonest,” “disloyal,” “thief,” “greedy,” and so on “Risk taker,” “independent,” “single minded,” and so on Nothing “Nice person,” “considerate,” “sympathetic,” “understanding,” “helpful,” “generous,” “kind,” “accommodating,” and so on “Good business person,” “ambitious,” “customer oriented,” “entrepreneur,” “reasonable,” and so on

risky behavior that may be harmful to himself or herself as well as to the business. Positive service provider descriptions fall into two major categories. The first includes positive mentions of the employee’s personality, such as their generosity, kindness, and helpfulness. The second category of positive descriptions categorizes the employee as a smart businessperson, forgoing payments to reward customers and to build the business. To quantify the open-ended responses, a similar index to the one mentioned earlier was constructed by subtracting the number of negative descriptions from the number of positive descriptions given to the service provider: PPI = number of positive descriptions of service provider – number of negative descriptions of service provider. This index, referred to here as the personality perception index (PPI), ranges from the negative to the positive, has positive values when the participant expresses more positive descriptions than negative descriptions, and visa versa. Figure 2 shows the factorial plot of this index across the various experimental conditions. The operationalization of PPI is consistent with that of TPI and prior approaches for quantifying respondents’cognitive responses (e.g., Maheswaran and Sternthal 1990; Sujan 1985). As can be seen in Figure 2A, higher organizational levels result in more favorable PPI values. This is consistent with the results reported in Figure 1A. Moreover, for high organizational level employees, increasing generosity from low to moderate levels does not result in any significant decline in the PPI. However, for the low organizational level employees, there is a significant decline. This suggests that there is an interaction between organizational level and generosity. For both high and low organizational level employees, moving from moderate to high generosity levels results in a decline in PPI. To statistically assess these observations, an ANOVA was estimated with

Percentage of Participants 17.4 16.2 4.6 0.9 74.9 33.2

PPI as the dependent variable and the generosity amount, service provider organizational level, and their interaction as the independent variables. The ANOVA is significant (F5, 281 = 18.9; p < .001). The main effects of organizational level and generosity amount are both significant (p < .001) and so is their interaction (p < .05). Figure 2B plots similar data, but with respect to past purchase history. The presence of past purchase history results in higher levels of PPI, consistent with the observations made in Figure 1B for TPI. Moreover, the main effects of generosity (p < .01) and purchase history (p < .05) are significant, consistent with results observed earlier. Analysis of Structured Questions The structured questions enable a reexamination of the results obtained using the open-ended questions, through further quantitative analysis. As described earlier, there were two multi-item scales used, the first measuring customer satisfaction and the second measuring participants’ perceptions of the ethical standards of the service provider. Figure 3 shows the resulting plots for the effects of generosity under various organizational level conditions on these two constructs. As can be seen in Figure 3A, scenarios in which the payments are forgone by a high organizational level service provider result in consistently higher customer satisfaction levels than when the behavior is exhibited by a lower level service provider. Moreover, as evident in Figure 3A, generosity level seems to have a negative effect for scenarios in which the service provider organizational level is low. Under this condition, ratings of satisfaction with the transaction drop from a level of 5.7 at the low generosity level to 5.2 at the high generosity level. These results are consistent with those observed in Figures 1 and 2. A similar pattern emerges in Figure 3B for the effects on customer perceptions of the service provider’s ethical standards. With changes in generosity amount, these per-


FIGURE 2 Factorial Plots of the Personality Perception Index (PPI)

ceptions are not dramatically affected for high organizational level service providers but significantly drop for low level service providers. The interaction between generosity and organizational level is significant at the p < .001 level, consistent with results observed in Figure 2 through the analysis of the participants’ open-ended responses. Separate ANOVAs with purchase history and generosity level as the independent variables also show significant effects of past purchase history on both customer satisfaction (p < .01) and customer evaluations of the service

213

FIGURE 3 Factorial Plots for Customer Satisfaction and Ethical Standards of Service Providers

provider’s ethical values (p < .10), consistent with earlier results. The observations made through the analysis of structured responses are consistent with the results obtained through the analysis of open-ended written descriptions. These observations also challenge the popular belief that increased generosity should create more positive customer evaluations of a business. Such a phenomenon is not observable for low organizational level service providers as satisfaction ratings and ethical evaluations drop with

214


overgenerosity in a retail transaction. However, for high organizational level service providers, customer responses are more stable and unaffected at low to moderate amounts of generosity. Overgenerosity, however, results in a drop in customer responses across all conditions. Moreover, the results suggest strong contextual effects on customer evaluation of generosity: In general, participants expressed more positive responses to scenarios in which generosity is displayed by a higher level service provider, and where a history of past purchases exists.

DISCUSSION Pragmatic thinking in marketing prescribes that exceeding customer expectations should have strong positive effects on the relationship between the customer and the service provider. Although a considerable amount of research in services marketing has focused on quality improvement processes that will enhance the perceived and actual value offered to customers in service encounters, research examining customer reactions to exceeded expectations is in the development stage. However, this line of research is not only conceptually interesting as it explores unexamined territories in the customer satisfaction spectrum but also useful as it helps provide managerial direction in corporate strategies aiming for high customer satisfaction levels. From a managerial perspective, this article flags caution to companies attempting to differentiate themselves by overextending the value offered to customers. Examples are Home Depot, Nordstrom, and Xerox, which have exceptional product return policies (“Why Your Copier Isn’t Working,” 1992), and Southwest Airlines and Alamo, which strongly urge their employees to take unconventional additional steps to serve customers (Santora 1991; Weinstein 1997). The results suggest that although low and moderate levels of generosity are acceptable to most customers, high levels may trigger cognitive processes, with potentially negative effects on customer satisfaction. Needless to say, high levels of service provider generosity can often be associated with incremental unplanned costs to the business and may therefore also prove to be unprofitable measures. For example, since the mid-1990s, personal computer manufacturers have found little corporate benefits from extending the free availability of their technical support telephone operations and have since had to reduce consumer access to these services (Miller 1996). The empirical results presented here therefore question the popular belief in marketing that more is better and that exceeding norms and expectations will always positively influence customers. The analysis of both open-ended and structured responses under various controlled conditions

shows that service provider overgenerosity may, under certain conditions, have a negative effect on customer evaluations. Although customers are likely to have more positive evaluations if generosity is extended by a high organizational level service provider, overgenerosity by service providers of a low organizational level is not equally appreciated. This result suggests that the notion of employee empowerment at all organizational levels as exhibited by firms such as Xerox, Federal Express, and Hampton Inn (Bowen and Lawler 1995) must be treated with caution, as service execution scripts allowing for generous actions by employees at low organizational levels may be misinterpreted by the customer. In addition, the results highlight the importance of measuring not only the lower threshold but also the upper threshold of the zone of indifference in customer expectations. Knowledge of the upper thresholds will enable marketers to determine when service executions are likely to be interpreted as extraordinary and overgenerous by customers. The results also indicate that the presence of a past purchase history with the service provider positively influences customer reactions to generous service provider behavior. Various limitations can be attributed to this work. Although the empirical study presented here focused on a specific example of generous service provider behavior, a larger variety of generous actions can be conceptualized and examined in future research. The multidimensional nature of consumer services suggests that consumer expectations can be exceeded in a variety of ways (e.g., speed of service, employee behavior, physical atmosphere, etc.), and exploring the relative value of exceeding expectations on one service dimension versus another across multiple industries can prove to be both academically and managerially useful. Moreover, consumer reactions to service provider generosity may be multidimensional. Although the study reported here was limited to examining the effects on consumer satisfaction and assessments of the ethical standards of the service provider, other responses such as purchase intentions and loyalty may provide new avenues for research. Moreover, the range of stimulus values used to manipulate service provider generosity was limiting, and future research can experiment with a finer grid of service provider performance when exceeding consumer expectations. Future work can extend the array of factors studied, to examine additional variables that may affect customer judgments of generous behavior by service providers. For example, it is possible that variables such as the brand equity of the service firm, the service provider’s gender, and the customer’s demographic and psychological profile may further affect reactions to service provider generosity. In addition, the frequency of the various types of generous


service provider behaviors experienced by customers in the marketplace has not been documented and may therefore prove to be an interesting area to be surveyed. It is therefore hoped that this work will inspire additional studies in this relatively unexplored area of services marketing.

REFERENCES Anderson, Eugene W., and Mary Sullivan (1993), “The Antecedents and Consequences of Customer Satisfaction for Firms,” Marketing Science, 12 (Spring), 125-43. Barnes, J. G. (1975), “Factors Influencing Consumer Reaction to Retail Newspaper ‘Sale’ Advertising,” in 1975 Combined Proceedings, Edward Mazze, ed. Chicago: American Marketing Association, 471-77. Beekun, R. I. (1989), “Assessing the Effectiveness of Socio-Technical Interventions: Antidote or Fad?” Human Relations, 42, 877-97. Berkowitz, E. and J. Walton (1981), “Contextual Influences on Consumer Price Responses: An Experimental Analysis,” Journal of Marketing Research, 17, 349-58. Bigley, Gregory and Jone Pearce (1998), “Straining for Shared Meanings in Organization Science: Problems of Trust and Distrust,” Academy of Management Review, 23, 405-21. Bitner, Mary Jo, Bernard H. Booms, and Mary Stanfield Tetreault (1990), “The Service Encounter: Diagnosing Favorable and Unfavorable Incidents,” Journal of Marketing, 54, 71-84. Bolton, Ruth N. (1998), “A Dynamic Model of the Customer’s Relationship with a Continuous Service Provider: The Role of Satisfaction,” Marketing Science, 17 (1), 45-65. Bowen, D. E. and E. E. Lawler (1995), “Empowering Service Employees,” Sloan Management Review, 36 (4), 73-89. Bull, A. O. and K. M. Alcock (1993), “Patron Preferences for Features Offered by Licensed Clubs,” International Journal of Contemporary Hospitality Management, 5 (1), 28-32. “Cheerleading, and Clerks Who Know Awls from Augers” (1992), Business Week, August 3, 51. Chipkin, H. (1997), “Complete Training Includes Gaming,” Hotel and Motel Management, 212 (20), 53-57. Chonko, L. B. and S. D. Hunt (1985), “Ethics and Marketing Management: An Empirical Examination,” Journal of Business Research, 13 (July), 339-59. Cohen, Aaron (1993), “Work Commitment in Relation to Withdrawal Intentions and Union Effectiveness,” Journal of Business Research, 26, 75-90. Corfman, Kim P. and Donald R. Lehmann (1993), “The Importance of Others’ Welfare in Evaluating Bargaining Outcomes,” Journal of Consumer Research, 20 (1), 124-37. Dalgish, Gerard M. (1997), Dictionary of American Language. New York: Random House. Doney, Patricia and Joseph P. Cannon (1997), “An Examination of the Nature of Trust in Buyer-Seller Relationships,” Journal of Marketing, 61 (April), 35-51. Estelami, Hooman (2000), “Competitive and Procedural Determinants of Delight and Disappointment in Consumer Complaint Outcomes,” Journal of Service Research, 2 (February), 285-300. ——— (1997), “Consumer Perceptions of Multi-Dimensional Prices”, in Advances in Consumer Research, Vol. 24, Merrie Brucks and Deborah J. MacInnis, eds. Provo, UT: Association for Consumer Research, 392-99. Fefer, M. D. (1996), “Chubb: How to Win in a Land of Losers,” Fortune, 128 (4), 80-87. Fornell, Claes and Birger Wernerfelt (1987), “Defensive Marketing Strategy by Customer Complaint Management: A Theoretical Analysis,” Journal of Marketing Research, 24 (November), 337-46.

215

Garbarino, Ellen and Mark Johnson (1999), “The Different Roles of Satisfaction, Trust and Commitment in Customer Relationships,” Journal of Marketing, 63 (April), 70-87. Goodwin, Cathy and Ivan Ross (1989), “Salient Dimensions of Perceived Fairness in Resolution of Service Complaints,” Journal of Consumer Satisfaction, Dissatisfaction, and Complaining Behavior, 2, 89-92. ——— and ——— (1992), “Consumer Response to Service Failures: Influence of Procedural and Interactional Fairness Perceptions,” Journal of Business Research, 25, 149-63. Grinnell, R. M. (1997), Social Work Research and Evaluation: Quantitative and Qualitative Approaches. Itasca, IL: F. E. Peacock. Heskett, James L., W. Earl Sasser, Jr., and Leonard A. Schlesinger (1997), The Service Profit Chain. New York: Free Press. Hunt, Shelby D. and Robert M. Morgan (1994), “Organizational Commitment: One of Many Commitments or Key Mediating Construct?” Academy of Management Journal, 37 (6), 1568-87. Johnston, Robert (1995), “The Zone of Tolerance: Exploring the Relationship between Service Transactions and Satisfaction with the Overall Service,” International Journal of Service Industry Management, 6 (2), 46-65. Judd, Charles M., Eliot R. Smith, and Louise H. Kidder (1991), Research Methods in Social Relations. Orlando, FL: Holt, Rinehart and Winston. Keaveney, Susan M. (1995), “Customer Switching Behavior in Service Industries: An Exploratory Study,” Journal of Marketing, 59 (April), 71-82. Keiser, S. K. and J. R. Krum (1976), “Consumer Perceptions of Retail Advertising with Overstated Price Savings,” Journal of Retailing, 52 (Fall), 27-35. Kendall, P. C., J. N. Butcher, and G. N. Holmbeck (1999), Handbook of Research Methods in Clinical Psychology. New York: John Wiley. Kopelman, R. E. (1986), Managing Productivity in Organizations. New York: McGraw-Hill. Lawler, E. E., S. A. Mohrman, and G. E. Ledford, Jr. (1995), Employee Involvement and Total Quality Management: Practices and Results in Fortune 1000 Companies. San Francisco: Jossey-Bass. Levy, Michael and Alan J. Dubinsky (1983), “Identifying and Addressing Retail Salespeople’s Ethical Problems: A Method and Application,” Journal of Retailing, 59 (1), 46-66. Liljander, Veronica and Tore Strandvik (1993), “Estimating Zones of Tolerance in Perceived Service Quality,” International Journal of Service Industry Management, 4 (2), 6-28. Loveman, Gary W. (1998), “Employee Satisfaction, Customer Loyalty, and Financial Performance: An Empirical Examination of the Service Profit Chain in Retail Banking,” Journal of Service Research, 1 (1), 18-31. Lowenstein, George F., Leigh Thompson, and Max H. Bazerman (1989), “Social Utility and Decision Making in Interpersonal Contexts,” Journal of Personality and Social Psychology, 57, 426-41. Machan, Tibor R. (1998), Generosity: Virtue in Civil Society. Washington, DC: Cato. Maheswaran, Durairaj and Brian Sternthal (1990), “The Effects of Knowledge, Motivation, and Type of Message on Ad Processing and Product Judgment,” Journal of Consumer Research, 17 (June), 6673. McIntyre, Faye S., James L. Thomas, Jr., and Faye W. Gilbert (1999), “Consumer Segments and Perceptions of Retail Ethics,” Journal of Marketing Theory and Practice, 7 (2), 43-53. Meyer, John P. and Natalie J. Allen (1991), “A Three-Component Conceptualization of Organizational Commitment,” Human Resource Management Review, 1, 61-98. Miles, M. B. and A. M. Huberman (1984), Qualitative Data Analysis: A Sourcebook of New Methods. Beverly Hills, CA: Sage. Miller, Greg (1996), “Don’t Call Us,” The Los Angeles Times, April 29, 1. Mishra, D. R., J. Heide, and S. Sort (1998), “Information Asymmetry and Levels of Agency Relationships,” Journal of Marketing Research, 35 (August), 277-95.

216


Monroe, K. B. (1990), Pricing: Making Profitable Decisions. New York: McGraw-Hill. Oliva, Terence A., Richard L. Oliver, and Ian C. MacMillan (1992), “A Catastrophe Model for Developing Service Satisfaction Strategies,” Journal of Marketing, 56 (July), 83-95. Oliver, Richard L. (1980), “A Cognitive Model of the Antecedents and Consequences of Satisfaction Decisions,” Journal of Marketing Research, November, 460-69. ——— (1997), Satisfaction: A Behavioral Perspective on the Consumer. New York: McGraw-Hill. ———, Roland T. Rust, and Sajeev Varki (1997), “Customer Delight: Foundations, Findings, and Managerial Insight,” Journal of Retailing, 73, 311-36. Parasuraman, A., Valerie A. Zeithaml, and Leonard L. Berry (1988), “SERVQUAL: A Multiple Item Scale for Measuring Consumer Perceptions of Service Quality,” Journal of Retailing, 64 (Spring), 1240. Park, C. Whan and V. Parker Lessing (1981), “Familiarity and Its Impact on Consumer Decision Biases and Heuristics,” Journal of Consumer Research, 19 (December), 277-91. Pieters, Rik, Kitty Koelmeijer, and Henk Roest (1995), “Assimilation Processes in Service Satisfaction Formation,” International Journal of Service Industry Management, 6 (3), 17-33. Pinney, J. K., W. N. Thompson, and L. A. Strate (1995), “Customer Satisfaction, Dissatisfaction, and Complaining Behavior in the Gaming Industry,” Journal of Consumer Satisfaction, Dissatisfaction, and Complaining Behavior, 8, 85-103. Rao, Akshay R. and Kent B. Monroe (1988), “The Moderating Effect of Prior Knowledge on Cue Utilization in Product Evaluations,” Journal of Consumer Research, 15 (September), 253-64. Reichheld, Fredrick F. and W. Earl Sasser (1990), “Zero Defections: Quality Comes to Services,” Harvard Business Review, 68 (September/October), 105-11. Rust, Roland T., Jeffrey J. Inman, Jianmin Jia, and Anthony Zahorik (2000), “What You Don’t Know About Customer-Perceived Quality: The Role of Customer Expectation Distributions,” Marketing Science, 18 (1), 77-92. Santora, Joyce (1991), “Alamo’s Drive for Customer Service,” Personnel Journal, 70, 42-51. Simonson, A. (1991), “Examining Consumer Losses and Dissatisfaction due to Broken Sales and Service Agreements,” Journal of Consumer Satisfaction, Dissatisfaction, and Complaining Behavior, 4, 50-61. Singh, Jagdip (1990), “Voice, Exit, and Negative Word-of-Mouth Behaviors: An Investigation across Three Service Categories,” Journal of the Academy of Marketing Science, 18 (1), 1-15. ——— and Deepak Sirdeshmukh (2000), “Agency and Trust Mechanisms in Consumer Satisfaction and Loyalty Judgments,” Journal of the Academy of Marketing Science, 28 (1), 150-67. ——— and Robert Widing, II (1991), “What Occurs Once Consumers Complain?” European Journal of Marketing, 25 (5), 30-46. Sujan, Mita (1985), “Consumer Knowledge: Effects on Evaluation Strategies Mediating Consumer Judgments,” Journal of Consumer Research, 12 (June), 31-46.

Swan, J. F., M. R. Bowers, and L. Richardson (1999), “Customer Trust in the Salesperson: An Integrative Review and Meta-Analysis of the Empirical Literature,” Journal of Business Research, 44 (2), 93-107. Tax, Stephen S., Stephen W. Brown, and Murali Chandrashekaran (1998), “Customer Evaluations of Service Complaint Experiences: Implications for Relationship Marketing,” Journal of Marketing, 62 (April), 60-76. Taylor, Steven A. (1997), “Assessing Regression-Based Importance Weights for Quality Perceptions and Satisfaction Judgments in the Presence of Higher Order and/or Interaction Effects,” Journal of Retailing, 73 (1), 135-59. Thompson, Leigh (1990), “Negotiation Behavior and Outcomes: Empirical Evidence and Theoretical Issues,” Psychological Bulletin, 108, 515-32. Vitell, S. J. and J. Muncy (1992), “Consumer Ethics: An Empirical Investigation of Factors Influencing Ethical Judgments of the Final Consumer,” Journal of Business Ethics, 11, 585-97. Weber, Robert P. (1985), Basic Content Analysis. London: Sage. Weinstein, S. (1997), “The Nichemakers,” Progressive Grocer, 76 (2), 87-90. “Why Your Copier Isn’t Working” (1992), Fortune, May 21, 114-16. Woodruff, Robert B., Ernest R. Cadotte, and Roger L. Jenkins (1983), “Modeling Consumer Satisfaction Processes Using Experience-Based Norms,” Journal of Marketing Research, 20 (August), 296-304. Yu, L. (1999), The International Hospitality Business: Management and Operations. New York: Haworth. Zeithaml, V. A., L. L. Berry, and A. Parasuraman (1993), “The Nature and Determinants of Customer Expectations of Service,” Journal of the Academy of Marketing Science, 21 (1), 1-11.

Hooman Estelami is an assistant professor of marketing and codirector of the Pricing Center at the Graduate School of Business, Fordham University. He received his M.B.A. from McGill University and his Ph.D. from Columbia University. His research has been published in the Journal of the Academy of Marketing Science, International Journal of Research in Marketing, Journal of Service Research, Journal of Business Research, Journal of Product and Brand Management, Journal of Marketing Theory and Practice, Journal of Consumer Satisfaction, Dissatisfaction, and Complaining Behavior, Journal of Professional Services Marketing, Journal of Business in Developing Nations, and elsewhere. Peter De Maeyer is a management consultant with Market2Customer, the marketing practice group of Monitor Company. He has an M.B.A. from the Helsinki School of Economics and Business Administration and a Ph.D. in marketing from Columbia University. His research has been published in the Journal of Consumer Satisfaction, Dissatisfaction, and Complaining Behavior.