J. of the Acad. Mark. Sci. (2012) 40:771–790 DOI 10.1007/s11747-011-0274-1
ORIGINAL EMPIRICAL RESEARCH
Understanding the co-creation effect: when does collaborating with customers provide a lift to service recovery? Anne L. Roggeveen & Michael Tsiros & Dhruv Grewal
Received: 26 May 2010 / Accepted: 14 July 2011 / Published online: 13 August 2011 # Academy of Marketing Science 2011
Abstract Because co-creation allows customers to help shape or personalize the content of their experience, it can affect customer satisfaction with recovery efforts, as well as offer a more cost-effective alternative to compensation. This article identifies specific situations in which cocreation is and is not useful. Study 1 tests the impact of co-creation in comparison with compensation for enhancing satisfaction with the recovery process and demonstrates that co-creation offers a cost-efficient strategy for companies when customers must deal with severe delays. Study 2 extends these results by showing that the impact extends to repurchase intentions. Study 3 details conditions in which co-creation harms evaluations. Finally, Study 4 explores whether it is necessary for the company to meet the customer’s requests when co-creating a recovery, as well as what happens when the company exceeds a customer’s requests. The article concludes with a discussion of the theoretical and managerial implications, limitations, and research directions that emerge from the studies. A. L. Roggeveen (*) : D. Grewal Babson College, Babson Park, MA 02457, USA e-mail:
[email protected] D. Grewal e-mail:
[email protected] M. Tsiros University of Miami, Miami, FL 33133, USA e-mail:
[email protected] M. Tsiros ALBA Graduate Business School, Athens, Greece
Keywords Service recovery . Co-creation . Co-production
The goal of any recovery response must be to fix the immediate problem and restore equity to a potentially damaged customer–company relationship (e.g., Smith et al. 1999). Typical service recovery strategies suggested by scholars include apologizing to and compensating customers (Bitner 1990; Bitner et al. 1990; Kelley et al. 1993). This article investigates whether involving customers in the recovery process offers another recovery strategy that companies can add to their arsenal when dealing with service delays. It also explores the conditions in which such involvement does not enhance post-recovery perceptions or even might harm them. Customer participation in service recovery was first explored in relation to a co-created service failure in the self-service technology (SST) context (Dong et al. 2008). The findings show that when customers participate in the recovery, they are more satisfied. We expand on this notion by exploring whether customer involvement also leads to improved post-recovery evaluations in non-SST settings or for failures that the customer has not co-created. We also broaden Dong and colleagues’ (2008) conceptualization of customer participation in a service recovery to encompass customer co-creation of the recovery. Co-creation of a recovery occurs if customers believe they have the ability to shape outcomes, which should result in greater satisfaction with the recovery process and higher repurchase intentions. We argue that such effects emerge because customers view the recovery as more fair, though there may be some limitations on when co-creation actually results in enhanced post-recovery evaluations. We explore the moderating impacts of the delay’s severity,
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customer perceptions of co-creation, and the company’s ability to fulfill the customer’s requests. We do so in the context of a delay where the locus of responsibility is external to the company (e.g., a weather-related delay where the company is not responsible for the failure). Past research has tended to focus more on service recoveries for situations where the firm was responsible for the service failure (e.g., Grewal et al. 2008). However, even when the firm is not responsible for the failure, if the end result is a severe service delay there is the potential for equity to be damaged in the customer–firm relationship. This research demonstrates that severe service delays do negatively impact equity even for failures caused by things outside of the company’s control. The research also offers two ways in which the company can improve post-recovery evaluations: co-creation and compensation. More specifically, Study 1 tests the impact of co-creation in comparison with compensation for enhancing recovery process satisfaction and demonstrates that both yield improved recovery process satisfaction for severe delays. However, co-creation offers a more cost-efficient strategy for companies. The remaining studies then focus in on co-creation. Study 2 extends the results from Study 1 by showing that the impact extends to repurchase intentions; equity is the underlying process. Study 3 details conditions in which co-creation harms evaluations. Finally, Study 4 explores whether it is necessary for the company to meet the customer’s requests when co-creating a recovery, as well as what happens when the company exceeds a customer’s requests.
Customer involvement in service failure and recovery Limited research addresses how customer involvement with service failures affects customer evaluations. Bendapudi and Leone (2003) find that when an outcome is worse than expected, people who choose to co-produce the outcome are more satisfied than are people who have not made that choice. Mattila and Cranage (2005) suggest that allowing customers to control how an initial service gets delivered affects their equity evaluations when there is a service failure. As we noted, Dong and colleagues (2008) consider customer involvement with recovery but limit their investigation to an SST context, such that the service failure itself was co-created (e.g., during an online course enrollment, the student “didn’t know exactly how to register with the new system and made mistakes with some of the function buttons,” p. 136). They find greater satisfaction with the recovery when people participate in fixing the problem they helped create. We extend this research by exploring whether customer involvement in the recovery improves post-recovery eval-
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uations in situations in which the failure is not co-created by the customer. More important, we extend the investigation to determine conditions in which such involvement will not enhance or even might hurt post-recovery perceptions. We focus on situations with an external locus of responsibility for a delay in the service provision, because prior research has shown that when this locus is internal to the organization, consumers express more anger (Folkes 1984) and recovery strategies seem less effective (Kelley et al. 1993). Dong and colleagues (2008, p. 126) define customer participation in a service recovery as “the degree to which the customer is involved in taking actions to respond to a service failure,” but we expand this conceptualization. Building on the service-dominant logic (e.g., Lusch and Vargo 2006; Vargo and Lusch 2004), we propose the term customer co-creation of the service recovery. Co-creation of value implies that value is created at “the intersection of the offerer, the customer, … and other value-creation partners” (Lusch et al. 2007, p. 11); similarly, when customers help shape or personalize the content of the service recovery through joint collaboration with the service provider, it should create value that helps reduce negative service experiences for the customer. In Fig. 1, we present the overall framework for this research. Co-creation of the recovery By helping shape the recovery, customers can influence the actual process and its outcome. The better able the company is to meet the customer’s request, the more likely it is that equity is restored to the relationship. Equity theory suggests that consumers evaluate their experiences by assessing the balance between what they have received and what they expected to receive (Adams 1965; Folkes 1984). If an imbalance is to the detriment of the consumer, disconfirmation is likely, because customer perceptions do not meet expectations, which lowers satisfaction (Oliver 1980; Oliver and DeSarbo 1988; Parasuraman et al. 1985). Previous service recovery research also suggests that equity underlies how customers respond to recoveries (e.g., Grewal et al. 2008; Smith et al. 1999; Tax et al. 1998). Equity comprises three dimensions of justice: distributive, procedural, and interactional. Distributive justice reflects whether consumers believe they have been treated fairly, considering the outcome (e.g., Adams 1965). Procedural justice pertains to the fairness and transparency of the decision-making process and the opportunity it provides to voice views and influence the actual outcome (Leventhal 1980; Lind and Tyler 1988; Thibault and Walker 1975). Interactional justice refers to the fairness of the interpersonal treatment (e.g., politeness, empathy) received
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Fig. 1 Guiding framework
during the procedural enactment (Bies and Moag 1986; Bies and Shapiro 1987). We posit that when customers co-create the recovery, they view the outcome as more equitable (distributive justice), believe the process of deciding on the outcome is more equitable because they influenced that outcome (procedural justice), and perceive that the service employee has treated them well (interactional justice). Because cocreation is likely to affect all these dimensions simultaneously, we predict that co-creation leads people to view the overall encounter as more fair and thus to believe that equity has been restored to the customer–company relationship. This belief then should cause more positive postrecovery evaluations (e.g., Smith et al. 1999; Tax et al. 1998), consistent with literature that suggests greater participation in decision making causes a person to perceive the procedures as more equitable (Greenberg 1990). Moderating effect of delay severity By allowing customers to provide input regarding the actual outcome of the recovery process, co-creation increases the likelihood that the company can restore equity to the relationship. However, the need to restore equity should vary as a function of the failure delay severity, which determines the loss the customer experiences. We operationalize failure delay severity as the sum of the original failure plus all losses incurred until the problem is resolved. For less (versus more) severe delays for example, a customer is less (more) likely to experience a loss, which affects the amount of equity needed to restore the relationship. The effectiveness of other service recovery strategies, such as compensation, also is moderated by failure severity (Smith et al. 1999).
Similarly, delay severity should moderate the impact of co-creation. Prior research suggests that as failure severity increases, consumers grow more interested in the solution. Roehm and Brady (2007) indicate that immediately following a failure, the number of coping thoughts people have increases with greater failure severity. For our case of severe delays, we therefore expect consumers to have a greater desire to provide suggestions and actually influence the outcome. This opportunity should result in a co-creation effect, that is, in enhanced evaluations as a result of their co-creation of the recovery. For less severe delays though, customers may be less likely to create coping thoughts (Roehm and Brady 2007) and thus less likely to value the opportunity to voice their suggestions or influence outcomes. Less severe delays should not damage equity, so the need to restore equity also diminishes. Therefore, we do not expect that allowing customers to co-create a recovery significantly affects their evaluations in this situation. More formally, we hypothesize a co-creation by severity interaction: H1a: When customers experience a severe service delay, co-creating the recovery improves post-recovery evaluations. H1b: When customers experience a less severe service delay, co-creation does not affect post-recovery evaluations. Study 1 tests this hypothesis, as well as the comparative impact of co-creation versus compensation on satisfaction with the recovery process. Prior research has cited compensation as an effective recovery strategy (Bitner et al. 1990; Hoffman et al. 2003; Kelley et al. 1993), so it provides a good benchmark for comparison and assessing the impact of co-creation as a recovery strategy. However,
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compensation does not always lead to enhanced evaluations: Grewal et al. (2008) reveal when compensation is likely to help and when it becomes a wasted resource by classifying the locus of responsibility and the stability of the failure. They find that these attributions influence the perceived equity of the exchange, which mediates the effectiveness of compensation as a recovery strategy. Similarly, we expect that the severity of a delay influences the perceived equity of the exchange, such that equity may not need to be restored for less severe delays. Therefore, compensation should influence evaluations only when it is necessary to restore equity. In support of this claim, prior research has shown that the impact of compensation as a service recovery strategy is moderated by the severity of the failure (Smith et al. 1999). We therefore hypothesize a compensation by severity interaction: H2a: When customers experience a severe service delay, compensation improves post-recovery evaluations. H2b: When customers experience a less severe service delay, compensation does not affect post-recovery evaluations. Another objective of this study is to compare the effect sizes of co-creation relative to compensation. If they are of similar magnitude, firms might want to use co-creation more actively as a recovery strategy, because it tends to be much more cost effective than compensation.
Study 1 We created a test scenario that manipulates the severity of the delay, co-creation of the recovery, and compensation. In this scenario, we expect to find support for our hypothesized co-creation by severity interaction (H1) and compensation will be an effective recovery strategy for severe service delays (H2). We do not a priori anticipate any interaction of co-creation, compensation, and severity. Method Design Seventy-nine students received class credit for their participation in this 2×2×2 between-subjects experiment. The independent variables manipulated were delay severity (less severe versus more severe), whether compensation is offered (offered versus not), and whether the participant cocreates the recovery (co-creation versus no co-creation). Participants were randomly assigned to one of the eight conditions. Procedure Similar to previous research on service failure and recovery efforts (e.g., Grewal et al. 2008; Smith et al. 1999), we used a survey-based experimental approach,
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which alleviates the difficulties associated with observing or enacting service failure and recovery incidents in the field, including ethical considerations and the managerial undesirability of intentionally imposing service failures on customers. Furthermore, scenarios (compared with retrospective self-reports) reduce biases from memory lapses, rationalization tendencies, and consistency factors. In the brief scenarios (see Appendix A), the participants arrived at the airport to leave for their vacation, only to find that their flight had been cancelled due to weather conditions at their destination. The agent acknowledged the inconvenience but assured customers that they would be rebooked on a new flight. In the co-creation condition, the scenario notes, “You stand with the agent who thinks of many alternatives for you. Both of you look at these alternatives together. After about 10 minutes, the agent is able to book you on a new flight that departs in X hours.” In the no co-creation condition, the scenario describes: “The agent asks you to wait in the lounge while he rebooks you. After 10 minutes, the agent calls you and explains that he was able to book you on a new flight that departs in X hours.” The number of hours (X) is either three or nine, depending on the severity condition. Finally, in the compensation condition, participants also read, “Due to the inconvenience that you experienced, the airline has decided to offer you a $105 coupon toward your next domestic flight. On average, you spend about $350 per ticket, so the $105 coupon would result in a savings of approximately 30% off your next ticket purchase.” In the other condition, no compensation offer appears. We pretested the co-creation and severity manipulations with a separate group of participants who considered a 2×2 between-subjects design that manipulated severity and cocreation and made no mention of compensation. After reading the scenario, participants rated their agreement (1 = strongly disagree, 5 = strongly agree) with the statement “I had to wait a very long time to the next flight” and indicated their involvement in finding a new flight (1 = not actively involved, 9 = actively involved). The 9-hour delay (4.34) was regarded as much longer than the 3-hour delay (3.27; F(1,61)= 14.32, p
