The Journal of American Academy of Business, Cambridge * Vol. 18 * Num.

1 * September 2012 25
Failure and Recovery: An Opportunity to Reconnect and
Recommit to Customers After Service Failure in the Internet-Based
Service Encounters

Dr. Akins T. Ogungbure, Troy University, Atlanta Site, Atlanta, GA


ABSTRACT

This paper examines how customers attribution for service failures and expected recovery in online service
encounters are influenced by whether the recovery efforts are satisfying or dissatisfying to the customers; the
relationship between satisfaction and other behavioral outcomes such as intention to remain and word-of-mouth is
examined. The Internet retailing and service recovery warrants special attention because of its inherent
ramifications such as the ease of attributing failure to the service provider after a service failure, the lack of
interpersonal relationship, and the ease of leaving one service provider for another. The research explores some of
the importance of Internet service recovery mechanisms relative to customers attribution for failure, expected
service recovery, satisfaction, and intent to remain and how these mechanisms can be employed by the service
providers to improve customer satisfaction, minimize negative word-of-mouth, and improve the firms profitability.
This study employs a web-based sample, and data were collected by means of questionnaires on the Internet. The
collected data are analyzed using correlation and regression analysis to provide answers to the research questions.
The results of the analyzed data are discussed and presented.

INTRODUCTION

The new view about the Internet and e-tailing is Its All About Service (Lacy, 2005).
Internet-based service encounters especially Internet retailing or e-tailing has gone through a range of highs
and lows. Internet-based service encounters were initially thought as the future of commerce however, they lost
favor in the business community and with some consumers after poor operations execution that led to a catastrophic
1999 holiday season (Mollenkopf, Rabinovich, Laseter, & Boyer, 2007). The meltdown of the dot-com businesses a
few years later though created some challenges and setbacks for the service providers and Internet-based services,
but instead the phenomenon continues to grow, from 7 percent of total retail sales in 2004 to a projected 12 percent
of total retail sales by 2010, or $316 billion (Chain Store Age, 2004).

In recent years, a great number of consumers have enjoyed the various benefits offered by the Internet and
electronic commerce technologies. Selling products and services on the Internet is predicted to have huge potential,
and e-commerce has received enormous press, speculations, and criticisms. Academic researchers have suggested
that the traditional marketplace interaction would be replaced by marketspace transactions (Rayport & Sviokla,
1994). The marketspace is defined as a virtual realm where products and services exist as digital information and
can be delivered through information-based channels (Rayport & Sviokla, 1995). The Internet has not destroyed
brick-and-mortar retailing as many people once feared. However, it has tremendously changed consumer behavior.
The web provides shopping when you like, where you like, with access to a vast amount of research - from the
products attributes to where it is cheapest. There are no real-world or traditional stores that can replicate all that.
The traditional retailers are increasingly trying to give customers more control over their total shopping experience
by bringing web-based and web-enabled technologies into the store thereby creating more clicks at the bricks
(Byrnes, 2007).

With Internet technological advances, customers enjoy greater convenience such as web-based service
centers where they can ask questions regarding product information, payment issues, delivery, product returns, etc.
before and after making a purchase (Cho, Im, & Hiltz, 2003). Despite all the potential benefits of the Internet
retailing environment, there are some issues that are related to the environment that need to be explored and
resolved: One of these issues involves the management of online service failures and recoveries. Although service
recovery has recently received increasing attention in the literature, it is commonly acknowledged that we still have
a somewhat limited understanding of the topic (McCullough, Berry, &Yadav, 2000). For instance, issues such as
credit card security, privacy, on-time delivery, returns, and ease of navigating websites have surfaced as critical



The Journal of American Academy of Business, Cambridge * Vol. 18 * Num. 1 * September 2012 26
elements of e-service quality, and the online environment lacks most of the interactional human elements so vital to
the traditional service experience (Holloway & Beatty, 2003).

This research examines the service failures and recoveries in online service encounters by incorporating the
role that attribution for service failure plays in service recovery expectations. It is important that recovery
mechanisms should be matched with consumers expectations so that service providers can have a better opportunity
to reconnect, recommit and keep their customers, experience less customer defections, and thus, improve their
profitability.

The Internet is playing an increasing role in the economy. Internet retailing in particular remains a very
highly dynamic and challenging segment of the service economy due to the entrance of established retailers seeking
to supplement their traditional, in-store sales model, as well as to the emergence of new business models that have
transformed many industries (Mollenkopf, Rabinovich, Laseter, & Boyer, 2007). Internet service recovery requires
special attention because of its inherent repercussions such as negative word-of-mouth/mouse, and the ease of
service switching which is just a click away. It is therefore important that we study the behavior of online
consumers because the inherent consequences of Internet service failure and recovery mechanisms.

Furthermore, this research proposes to examine the following questions: (a) does consumers encounters
with a service failure incident, service provider, influence their attribution for failure? (b) After experiencing service
failures, to what extent are online customers engaging in complaint and blaming behavior? (c) How well are Internet
service providers managing their service recovery efforts after service failures and complaints by the customers? Are
the customers satisfied with the recovery efforts?

This study explores the attribution for failure after a service failure and how customers recovery
expectations influence post repurchase behavior. It is expected that the level and size of the expected recovery will
be influenced by customers attribution for service failure and who is responsible and accountable for the failure
whether the customers blame themselves, the service provider, or a combination of the two for the service failure.
The more the blame is assigned to service provider, the higher the expected recovery.

BACKGROUND AND RESEARCH QUESTIONS

Customers Encounter with Service Failure Incident Influences the Attribution for Failure
and Expected Recovery
Attribution relates to the meaning that people assign to events. Attribution theory focuses on the universal
concern with explanation why a particular event, or state, or outcome has come about and the consequences of
phenomenal causality (Weiner, 2000). Attribution research is concerned with all aspects of causal inferences - how
people arrive at causal inferences, what type of inferences they make, and what are the consequences of the
inferences (Folkes, 1988). Researchers have employed attribution theory to examine how consumers utilize
information to make product/service choices (Mizerski, 1982); communicate their product usage experiences with
others, and whom they blame when the product/service performance is unsatisfactory (Zemke & Connellan, 2001).
An important ingredient of attribution is the perception of the cause for a given event.

Weiner (2000) asserts that attributions generally follow dissatisfaction with a purchase, and not with a
satisfactory experience. When something goes wrong, the customer searches for the cause, and whom to blame for
the problem. Meuter, et al. (2000) report that the customers who are more familiar with technology-based shopping
are less likely to blame themselves for service failure as compared to the customers with less experience with
technology-based shopping. Customers expectations tend to be shaped by their experiences with a service and/or
service provider. Specifically, the more familiarity or experience customers have with a particular service or service
provider, the less they tend to blame themselves when there is a service failure. In cases whereby the customers
have previously dealt with the service provider, they know how and what to expect from the service encounter. It
was reported that some customers assumed more responsibility for product or service failure if they chose a lesser
known product or service that failed as compared to if they (customers) have chosen a better known and more
familiar product or service (Simonson, 1992).

Thus, the following hypothesis is presented:
Hypothesis 1: An Internet users encounter with a service failure influences his/he attribution for failure.




The Journal of American Academy of Business, Cambridge * Vol. 18 * Num. 1 * September 2012 27
Simonson (1992) reports that the higher the customers experience levels with a service and/or service
provider the more likely the customers are to blame the service provider for the service failure. In addition, these
customers are more informed about what recovery options are available to the service provider to rectify the service
encounter when things go wrong. These experienced customers will expect a higher level of recovery after a service
failure. Therefore, the following hypothesis is proposed:

Hypothesis 2: The service recovery expected by customers after a service failure is influenced by the
service failure incident experienced by the customers.

Expected Recovery is Influenced by Attribution
Folkes (1988) states that one of the antecedents of causal attribution is individuals are motivated to protect
their esteems. Individuals are more likely to assign blame to others or situations for unpleasant outcomes while
pleasant outcomes are attributed to oneself. Thus, attribution for failure will influence the magnitude and type of
recovery the customers feel they deserve (Folkes, 1984). When the customers believe that the service provider is
responsible for the service failure, they tend to expect more service recoveries in the form of a replacement, refund,
and an apology. On the other hand, when the customers believe that they are responsible for the service failure, no
redress is expected. Hence, the responsibility for solving a service problem rests with the party who caused the
service failure (Folkes, 1988). The following hypothesis is proposed:

Hypothesis 3: Customers service recovery expectation is influenced by the extent of the attribution for
failure (blame) the customers place on the service provider.

Expected Service Recovery is Related to Disconfirmation
The disconfirmation paradigm is the most widely used model in the realm of consumer
satisfaction/dissatisfaction literature (Oliver, 1981, 1989, 1993; Oliver & Burke, 1999; Swan & Trawick, 1981).
Also, disconfirmation has been employed as a model for understanding customers reactions to product/service
recovery (Oliver, 1981; Singh & Widing, 1991). The disconfirmation paradigm holds that customers compare
perceived service performance to expectations. Performance that exceeds expectations has positive disconfirmation,
performance that meets expectations is confirmed, and performance that is below expectations is negatively
disconfirmed. Generally speaking, the more negative the disconfirmation, the greater the dissatisfaction, whereas the
more positive the disconfirmation, the greater the satisfaction (McCollough, et al., 2000).

There are several studies that have looked into and embraced the disconfirmation model of satisfaction.
Notable among these studies are Churchill & Suprenant, 1982; Oliver, 1980; and, McCullough, et al., 2000. Oliver
(1980) states that satisfaction is an additive combination of expectation level and the subsequent disconfirmation.
Oliver further states that expectations, attitudes, and intentions affect satisfaction, attitude, and intention to remain
through disconfirmation between prior and subsequent experiences (Oliver, 1980). Additionally, Bolton & Drew
(1991) indicate that customer satisfaction is a function of current perception of service performance, prior
expectations about service performance, and perceptions about service discrepancy or disconfirmation between these
factors.

Research has shown that consumers expectation levels can be seen as adaptation level, i.e. in new service
encounters, expectations are affected by prior experiences. Post-decision deviations from the adaptation level are
thought to be caused by the degree to which the product/service exceeds, meets, or falls short of ones expectations,
i.e., positive, zero, or negative disconfirmation (Oliver, 1980). Oliver (1980) posits that expectations and
disconfirmation are said to lead to satisfaction, which in turn leads to behavioral attitude of satisfaction and intention
to remain. Therefore, the following hypothesis is presented:

Hypothesis 4: There is a significant relationship between customers service recover expectation and
disconfirmation.

Satisfaction and Disconfirmation are Related
Several studies state that disconfirmation lead to satisfaction. These studies report that positive
disconfirmation leads to satisfaction and negative disconfirmation leads to dissatisfaction (Oliver, 1980; Smith, et
al., 1999; Churchill & Suprenant, 1982; McCullough, et al., 2000).

It is therefore hypothesized that:




The Journal of American Academy of Business, Cambridge * Vol. 18 * Num. 1 * September 2012 28
Hypothesis 5: There is a significant positive relationship between satisfaction and disconfirmation with
Internet-based service encounters.

RESEARCH METHODS
This study examines online shoppers; hence, the population of interest consists of Internet users. A survey
design is employed using web-based survey questionnaires to collect data.The online survey is consistent with the
context of this study. It offers many potential advantages in the data collection process for the researchers as well as
the respondents, including higher quality data, faster data collection, and greater convenience (Stanton, 1998;
Taylor, 1999/2000). Research states that people view online surveys as more important, interesting, and enjoyable
than traditional surveys (Edmondson, 1997), and that they are more likely to respond accurately (CustomerSat.com,
1999).

This study employs a sample of online shoppers who are living in the United States and are over the age of
18. This study examines online shoppers and thus, an online survey is consistent with the context of this study. The
sample subjects are recruited by means of e-mail solicitations. All participants are provided with the appropriate
website to access the survey and complete the survey within a specified time period. The hypotheses and research
questions would be assessed using regression analysis, and ANOVA where applicable.

Measure of Variables
These variables measured in this study are: Service failure incident, Attribution for failure, Service
Recovery Expectation, Disconfirmation, and Satisfaction with recovery.

Service Failure Incident
The scale for measuring service failure incident was adapted from Hess, et al. (2003). The authors used a 5-
item scale to measure customers previous experience with the service failure incident in Internet service encounter.
The items measured relate to previous experience with the company, the quality of the service, service expectations,
and level of service provided by the company.

Attribution for Failure
The scale for attribution for failure (blame) is adapted from Hess, et al. (2003) and Meuter, et al. (2000).
This is a 4-item scale that measures the likely cause of the failure and how blame should be assigned, i.e. blame the
service provider, the service itself, the consumer, or a combination of these entities.

Service Recovery Expectation
The customers service recovery expectations scales are taken from Hess, et al. (2003) and Parasuraman,
Zeithaml, & Malhotra (2005). It is comprised of a 4-item seven-point scale.

Disconfirmation
The disconfirmation measure is adapted from Oliver (1980) and Oliver, et al. (1988). Oliver (1981) utilized
a 4-item seven-point disconfirmation scale based on the service failure experienced by the respondents and the
benefits the respondents expect to receive from the service providers. Respondents are asked to rate the service
providers response to the service failure as better than I anticipated to worse than I anticipated.

Satisfaction with Recovery
The satisfaction with service recovery is adapted from Oliver & Swain (1989). The scale is comprised of 5
items seven-point multi-item reflective scales with the anchors of strongly disagree to strongly agree.

FINDINGS AND RESULTS

The following statistical analyses are employed to analyze the data collected in this study. They are:
Analysis of variance (ANOVA), Regression, and Correlation analysis. ANOVA was employed to examine
hypothesis 1 to assess the extent to which an Internet users encounter with a service failure influences his/her
attribution to failure. Analysis of variance is an appropriate statistical analysis for this because the hypothesis seeks
to assess if mean differences exist between one continuous dependent variable and a discrete grouping independent
variable with at least two levels. ANOVA uses the F test which is designed to test if two population variances are
equal by comparing the ratio of two variances. In this analysis, a test of the means was conducted. The results of the
ANOVA are presented in Table 1, and the means and standard deviations are presented in Table 2.




The Journal of American Academy of Business, Cambridge * Vol. 18 * Num. 1 * September 2012 29
Table 1 ANOVA on Experience with Service Failure Incident by Attribution for Failure
df F Sig. Partial Eta Squared Observed Power *
Attribution Failure 1 2.52 .114 .010 0.35
Error 244 (1.12)
*Note. Number in parenthesis indicates mean squared error. Computed using alpha =.05

Table 2 Means and Standard Deviations for Attribution for Failure
Attribution Failure M SD N

Low 3.25 1.18 101
High 3.47 0.97 145

A linear regression was conducted to examine hypothesis H2 (how recovery level expected by customers
for a service failure influences customers level of experience with the service encounters) , and hypothesis 3 (the
extent to which customers service recovery expectation is influenced by the degree of the attribution for failure
(blame) the customers place on the service provider.

In order to examine hypotheses 4 and 5, Pearson Correlations are conducted to determine if a significant
relationship exists between customers service recovery expectation and disconfirmation (H4); significant positive
relationships are revealed between satisfaction and disconfirmation with Internet-based service encounters (H5).
Furthermore, the ANOVA, regression, and correlation models were assessed with all variables included whereby the
independent variables entered the model first, followed by each interaction item. The findings of each hypothesis
tested are discussed next.

DISCUSSION

The discussions of the findings that follow are based on attribution theory and the service failure recovery
literature. The first hypothesis (H1), states that an Internet users encounter with a service failure influences his/her
attribution for failure. To evaluate H1, an analysis of variance (ANOVA) was conducted on experience with
service failure incident and attribution for failure (high vs. low). The results of the ANOVA was not significant F
(1, 244) =2.52, p =.114, suggesting that an Internet users encounter with a service failure did not influence his/her
attribution for failure. The results do not provide support for the hypothesis. Similar findings were reported in
previous research which offers some evidence that providing information or explanations to customers during
recovery influences their attributions and may be a vital aspect of an effective recovery (Bitner 1990; Tax et al.
19998). The findings show that respondents subjective views of their previous encounters with a service incident
have no significant effect on their attribution of assigning blame for the service failure. This shows that the fact that
a customer has a service problem in the past might not affect how the customer assigns blame in other service
situations. It is possible that other factors are involved in how customers assign blame to the service providers, the
service process, technology, themselves, and/or a combination. The results of the ANOVA are presented in Table 1,
and the means and standard deviations are presented in Table 2.

Hypothesis 2 states that the service recovery expected by customers after a service failure is influenced by
the service failure incident experienced by the customers. To evaluate hypothesis 2, a linear regression was
conducted to assess if recovery expectation is influenced by previous experience with the service failure incident.
The regression result was significant F (1, 247) =94.94, p <0.001, suggesting that recovery expectation is
influenced by customers previous experience with the service incident. Meuter et al. (2000) report similar findings
and state that customers expectations tend to be shaped by their experiences with a service and/or service provider;
Simonson (1992) reports that the higher the customers experience levels with a service and/or service provider the
more likely the customers are to blame the service provider for the service failure and that experienced customers
will expect a higher level of recovery after a service failure. These findings are also consistent with those of Hess, et
al. (2003) which state that it is critical for managers to know what constitutes adequate recovery expectations for
their customers. As shown in the regression results in Table 3, these results are consistent with this hypothesis
suggesting that service failure incident experienced by customers influences the recovery expectations.

Table 3 Linear Regression on Previous Experience with Service Failure Incident by Recovery Expectation
B SE t Sig.
(Constant) 6.41 0.10 61.71 .001
Recovery Expectation 0.08 0.03 0.18 2.82 .005
Note. F (1, 247) =94.94, p <.001, R
2
=0.3



The Journal of American Academy of Business, Cambridge * Vol. 18 * Num. 1 * September 2012 30
Hypothesis 3 states that customers service recovery expectation is influenced by the extent of the
attribution for failure (blame) the customers place on the service provider. A linear regression was conducted to
determine if recovery expectation influences attribution for failure. The regression result was significant F (1, 248)
=337.56, p <.001, suggesting that there is a relationship between customers service recovery expectation and
attribution for failure (blame). The independent variable accounted for (R-square) 57.6% of the variance in the
dependent variable. These findings are consistent with previous studies that drawn on the attribution theory and
service failure literature (e.g. Harris et al. (2006)) report that attribution for failure had a significant effect on
recovery expectations. Similarly, Folkes (1984) states that attribution for failure influences the magnitude and type
of recovery the customers feel they deserve. The results are shown in Table 4 and these results provide support for
this hypothesis.

Table 4 Linear Regression on Attribution for Failure by Recovery Expectation
B SE t Sig.
(Constant) 2.57 0.23 11.45 .001
Recovery Expectation 0.65 0.04 0.76 18.37 .001
Note. F (1, 248) =337.56, p <.001, R
2
=.576.

Hypothesis 4 states that there is a significant relationship between customers service recovery expectation
and disconfirmation. A Pearson r, correlation was conducted on recovery expectation and disconfirmation. The
correlation was significant, p <0.001, suggesting that as recovery expectation increases disconfirmation also
increases. These results are consistent with the disconfirmation paradigm and previous studies on consumer
satisfaction/dissatisfaction (Oliver 1981, 1989, 1993; Oliver et al. 1999). Oliver (1981) states that customers
compare perceived service performance to expectations; performance that exceeds expectations has positive
disconfirmation, performance that meets expectations is confirmed, and performance that is below expectations is
negatively disconfirmed. The results of the correlation analysis are shown in Table 5.

Table 5 Pearson r Correlations on Recovery Expectation, Satisfaction with Disconfirmation
Disconfirmation
Recovery Expectation Pearson Correlation .221**
R
2
.048
Sig. (2-tailed) .001
N 252
Satisfaction Pearson Correlation .786**
R
2
.618
Sig. (2-tailed) .001
N 250
**Note. Correlation is significant at the .001 level (2-tailed).

Hypothesis 5 states that there is a significant positive relationship between satisfaction and disconfirmation
in Internet-based service encounters. Two Pearson r correlations were conducted between disconfirmation and
satisfaction with recovery. The correlation results were significant, p <0.001, suggesting that there is a significant
relationship between disconfirmation and satisfaction with recovery. These results provide support for this
hypothesis. Similar findings were reported by previous research (e.g. Oliver (1980); Bitner et al. (1990); Smith et al.
1999; McCollough et al. (2000)), and reveals that effective recoveries are essential to customer satisfaction. The
results of the correlation analysis are shown in Table 5 above.

LIMITATIONS AND SUGGESTIONS FOR FUTURE RESEARCH

There are some limitations that are inherent to this study and its findings. Firstly, this study is limited to
online consumers and online service failure and recovery incident that involved airline reservation. It is important
that replications of this study be conducted in other services. While there are previous studies on the role of
attribution for failure and dis/satisfaction on repurchase decisions after service failure/recovery in the traditional
retailing, additional research is needed that would allow for a comparison of the findings in the two service
environments.

Secondly, the research methods employed in this study have some limitations. This study employed a
hypothetical scenario-based technique to examine service failure and recovery in online service encounter. Although
this approach is common and widely used in the service failure/recovery studies and deemed acceptable, the use of
actual service failure and recovery incidents may allow for more reliable measures of post-recovery behaviors. Since
the respondents were asked to report on predicted rather than actual observable behaviors, the findings obtained may



The Journal of American Academy of Business, Cambridge * Vol. 18 * Num. 1 * September 2012 31
not accurately reflect what happens following a real service encounters. Furthermore, future research should
examine costs-benefits of specific service recovery efforts that service providers can use to determine the value of
service recovery management.

Thirdly, the sampling technique utilized in this research suggests some limitations. The sample involved
online customers who were recruited to participate in the web-based survey. The limitations of this approach are
apparent and thus, further research that employs a more random sample is needed to substantiate the findings and the
generalizability the results. A fourth limitation of the study is the research design which was limited to only one
hypothetical online service failure/recovery encounter. This scenario involved a fairly high service failure and
relatively low service recovery offerings. Further research is needed to examine scenarios that involved relatively
high service failure/high service recovery and low service failure/low service recovery.

Finally, since online service providers are employing a number of recovery mechanisms such as personal
telephone calls, letters, e-mail apologies, and discounts or coupons on future purchases as recovery offerings to
customers, it is important to determine how customers react to these offerings. We need additional knowledge and
understanding of how customers react to the different service failures they experience, their preferences in terms of
responding to complaints, and how they react to the recoveries provided by the service providers. In addition, not
enough is known about how customers evaluate recovery efforts and what is considered to be a successful recovery
in both online or offline (McCollough et al. 2000). Future study should explore which online recovery mechanisms
are most effective and their relationships to specific online service failures.

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