Service Recovery: A Status Perspective

Service recovery plays a strategic role in today’s competitive marketplace. To assure the effectiveness of service recovery, scholars have been debating whether companies should provide recovery efforts that are customized for the individual or standardized for the group (Austin, McGinn, and Susmilch 1980; Hoffman and Kelley 2000; Messé and Watts 1983; Smith, Bolton, and Wagner 1999). The present research builds upon this stream of work by examining the distinction between individualized and group service recovery. Prior research thus far has examined the impact of service recovery on firm-customer relationships—but the impact of firm-customer relationships on service recovery has received surprisingly little attention. Given the pervasiveness of status difference in human social systems and the popularity of stratified customer loyalty programs in the service industry (the number of loyalty memberships in the U.S. is 2.09 billion and the average U.S. household has enrolled in more than 18 customer loyalty programs, Colloquy 2011), customers may be expected to hold higher status than others, either inside the buyerseller relationship (e.g., elite loyalty members vs. ‘ordinary’ members) or outside of it (e.g., socio-economic status). Nonetheless, the effects of status on service recovery and firm-customer relationship has remained virtually unexplored. The present research examines how status—an important and under-investigated factor that may play an important role in firm-customer relationships—affects customers’ response to a firm’s recovery efforts.