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Co-creation of service recovery: Utilitarian and hedonic value and post-recovery responses
Journal of Retailing and Consumer Services ∎ (∎∎∎∎) ∎∎∎–∎∎∎
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Co-creation of service recovery: Utilitarian and hedonic value and post-recovery responses Joohyung Park a,n, Sejin Ha b a
Department of Retailing, College of Hospitality, Retail, and Sport Management, University of South Carolina, Columbia, SC 29208, USA Department of Retail, Hospitality, and Tourism Management, College of Education, Health, and Human Sciences, University of Tennessee, Knoxville, TN 37996, USA
b
art ic l e i nf o
Keywords: Co-creation Service recovery Hedonic and utilitarian value
a b s t r a c t Based on the literature on customer value and service dominant (S-D) logic, this study suggests that hedonic and utilitarian value derived from co-creation of a service recovery contribute to perceived equity and affect toward the service recovery, which, in turn, enhance customers’ repurchase intentions. A scenario-based survey approach was used to collect data from U.S. consumers (N¼ 330). Results show that utilitarian value enhances both equity and affect toward the service recovery while hedonic value contributes only to equity. In addition, the findings reveal that both equity and affect toward the recovery are positively associated with repurchase intentions. & 2015 Elsevier Ltd. All rights reserved.
1. Introduction In response to growing attention to the concept of co-creation from marketers, research on the topic of co-creation is rapidly expanding to develop conceptual and empirical knowledge about co-creation (e.g., Gronroos, 2008; Prahalad and Ramaswamy, 2004; Vargo and Lusch, 2004; Yi and Gong, 2013). Co-creation refers to the process in which a consumer and a service provider jointly work, and co-creation of value represents joint creation of value by a consumer and a company (Prahalad and Ramaswamy, 2004). In practice, firms are actively seeking opportunities to engage and collaborate with customers. For example, they invite consumers to participate in various co-creation activities, ranging from offering input for advertising and new product development and customizing product designs and services to selling their designs to other customers (e.g., Nike, Lego, Kellogg, restaurants, and banks). In the current fast-paced, consumer-empowered business environment, firms see the co-creation strategy as an opportunity to develop a core competency of sustainable competitive advantage (Lusch et al., 2007; Vargo and Lusch, 2004). Since Vargo and Lusch (2004) presented a seminal work on a paradigm shift in marketing from traditional goods-dominant logic (G-D logic) to service-dominant logic (S-D logic), the concept of value co-creation has spawned a wealth of academic discourse. However, it is a still young and growing research field, with the literature thus far being largely situated in four areas. First, much n
Corresponding author. Tel.: þ 1 865 974 2141. E-mail addresses: [email protected] (J. Park), [email protected] (S. Ha).
research was conceptual, focusing on the development of cocreation models and clarification of relevant concepts, such as coproduction, prosumption, consumer participation, and consumer empowerment (e.g., Lusch and Vargo, 2006a; Prahalad and Ramaswamy, 2004; Vargo and Lusch, 2004). Second, studies proposed different types of value dimensions unique to idiosyncratic consumption contexts (Chan et al., 2010; Roggeveen et al., 2012), inviting further empirical identification of co-creation value dimensions in different consumption-experience contexts. Third, empirical research tended to rely on outcomes of co-creation, such as customer knowledge, perceived quality, satisfaction, and loyalty (Auh et al., 2007; Bendapudi and Leone, 2003; Claycomb et al., 2001), thereby lacking an understanding of customers’ perceptions of co-creation experiences and their effects on overall consumption experience. Finally, most studies focused on co-creation in successful exchange settings free of errors, yielding a need to approach co-creation from a different viewpoint, for example, as a service-recovery strategy (Dong et al., 2008; Roggeveen et al., 2012). Thus, this paper addresses this void by exploring the role of customer evaluation of value derived from co-creation experiences in the context of a service failure and recovery. Co-creation establishes value via “the intersection of the offerer, the customer, … and other value-creation partners” (Lusch et al., 2007, p. 11). Applying this notion to the setting of a service failure and recovery, we define co-creation of a service recovery as the joint creation of a service recovery through a series of interactions and dialogs between a customer and a service provider to identify a recovery solution that satisfies the customer’s needs in the situation
http://dx.doi.org/10.1016/j.jretconser.2015.01.003 0969-6989/& 2015 Elsevier Ltd. All rights reserved.
Please cite this article as: Park, J., Ha, S., Co-creation of service recovery: Utilitarian and hedonic value and post-recovery responses. Journal of Retailing and Consumer Services (2015), http://dx.doi.org/10.1016/j.jretconser.2015.01.003i
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J. Park, S. Ha / Journal of Retailing and Consumer Services ∎ (∎∎∎∎) ∎∎∎–∎∎∎
(Prahalad and Ramaswamy, 2004). We argue that the customer’s participating in shaping or personalizing the content and solution of the service recovery via interactive collaboration with a company’s representative creates value that helps alleviate negative effects of the service failure and contributes to favorable post-recovery responses. Therefore, the purpose of this study is to develop and empirically test a theoretical framework to explain how different dimensions of customer value emerging from co-creation of service recovery influence customers’ overall post-recovery responses in terms of perceived equity, affect toward recovery handling, and repurchase intention.
2. Theoretical background and hypothesis development 2.1. Value co-creation and customer value Value co-creation is a central concept in S-D logic. According to S-D logic, value is created when customers use products or services to satisfy their needs or wants, referred to as value in use (Lusch and Vargo, 2006a; Vargo and Lusch, 2004, 2008). This view emphasizes that value resides in a customer’s interactions with a firm’s offering, such as employees, facilities, goods, and services, rather than in the firm itself. Because every customer is unique in his or her consumption experience, skill, preference, and goal, value is subjective to a consumption situation (Vargo and Lusch, 2004). Thus, the customer is an essential part of the value creation process and is always a value co-creator (Lusch and Vargo, 2006b). Unique aspects of value of co-creation are well encapsulated in Holbrook’s conceptualization of customer value (Holbrook, 1999, 2006). Holbrook (1999) summarized the following key qualities of customer value: (a) “interactive” because it entails interactions between the consumer and the firm’s offerings; (b) “relativistic” because it involves preferences among various products or services, varies across individual customers, and depends on their situations; and (c) “preferential” because it is often associated with preferential judgment, such as attitude, affect, and approach or avoidance. Along the same line, Holbrook and Hirschman's (1982) framework of consumption emphasizes the importance of the experiential or hedonic aspect of consumption, together with the goal-oriented, task-related, and utility-driven aspects of consumption. These conceptualizations of customer value gained empirical support. Many studies confirmed that customer value is a multi-faceted concept and features different typologies across various consumption contexts (e.g., Babin et al., 1994; Childers et al., 2001; Holbrook, 1999; Jones et al., 2006; Mano and Oliver, 1993; Nambisan and Baron, 2007; Sweeney and Soutar, 2001; Tynan et al., 2010). For example, Babin et al. (1994) revealed that shopping—a consumption experience—produces both utilitarian and hedonic value in which utilitarian shopping value concerns the task-related value of shopping (i.e., obtaining desired products or services in an efficient manner) and the hedonic shopping value related to the emotional value of shopping (i.e., the multisensory experiences of shopping, such as excitement and enjoyment). Consistent with traditional customer value, co-creation value is also considered multifaceted. Perhaps not surprising, research on customer participation observed a dual dimensionality to the value of customer participation, with efficiency and usefulness (utilitarian) and enjoyment (hedonic) being primary benefits of customer participation in service (Bateson, 1985; Dabholkar, 1996; Rodie and Kleine, 2000). In a service recovery, the value of cocreation benefits both customers and service providers (Roggeveen et al., 2012). However, what specific value co-creation of a service recovery engenders and how it affects consumer post-recovery responses are relatively unknown and are the focus of this study. This study proposes that the dual-dimensionality of co-
creation would hold in a setting of co-creation of a service recovery, in which the two parties of a customer and a firm representative engage in a collaborative partnership to find the best solution for both of them. 2.2. Value of co-creation in service recovery When a service failure occurs, a customer’s complaint triggers a series of interactions between the customer and the firm or its representatives through which a resolution of the failure is derived and enacted to restore the firm’s relationship with the customer (Liao, 2007; Smith et al., 1999). With co-creation of recovery, the interaction evolves into a collaborative engagement between two parties, enacting the recovery together to achieve greater value for the customer (Roggeveen et al., 2012). The goal of this collaboration is to produce an optimum resolution to remedy the situation (utilitarian value) in an emotionally pleasing and socially satisfying manner (hedonic value). Thus, we suggest that both the utilitarian and the hedonic values of co-creation of service recovery play important roles in customers’ post-recovery responses. First, utilitarian value of co-creation of recovery refers to a customer’s evaluation of how efficient and useful co-creation of service recovery has been in meeting the customer’s goal (Mathwick and Rigdon, 2004; Sweeney and Soutar, 2001). When cocreation of recovery occurs, both the company and the consumer actively exchange operant resources (e.g., information, knowledge, and skill; Lusch et al., 2007; Vargo and Lusch, 2004) from which co-creation reduces the uncertainty of the recovery outcome (Prahalad and Ramaswamy, 2004), allows the customer to make an informed choice (Mattila and Cranage, 2005), and eventually helps both parties create greater value (Dong et al., 2008; Gelbrich, 2010; Roggeveen et al., 2012). Thus, such a collaborative process should heighten perceived utility because the co-creating experience accomplishes the shared goal of resolving the issue. Next, the hedonic value of co-creation of recovery captures a customer’s appreciation of intrinsic, emotional, and social reward of the collaboration. In the context of co-creation of service recovery, hedonic value represents a customer’s evaluation as to how meaningful co-creation of service recovery by itself has been socially or emotionally. More specifically, hedonic value emerges as two entities work together in a pleasant and respectful manner while having great flexibility to adapt the firm’s service mix to meet the customer’s preferences and idiosyncratic needs (Liao, 2007). Thus, empowering service representatives is a basic essential for a successful co-creation experience (Bitner et al., 1994, 1990; Prahalad and Ramaswamy, 2004). In the co-creation of service recovery setting, when the customer–employee interaction goes smoothly, the recovery can be viewed as a joyful and hopeful process (Chebat and Slusarczyk, 2005), with a customer making personal requests while an employee puts forth effort to customize service to this particular customer. Further, the customer becomes an agent of the recovery enactment, mobilizing necessary resources and reconfiguring the procedure and contents of the service recovery. Exercising such influence should be intrinsically gratifying because it provides feelings of mastery, competence, and efficacy over the impending harm caused by the service failure (De Charms, 1968; Schorr and Rodin, 1984). Thus, both utilitarian value and hedonic value are relevant to co-creation of recovery. 2.3. Consequences of co-creation of recovery: perceived equity, affect toward recovery, and repurchase intention To examine how utilitarian and hedonic values of co-creation of recovery play a role in consumer behavior, this study focuses on three post-recovery reactions: perceived equity, affect toward recovery handling, and repurchase intentions. Perceived equity
Please cite this article as: Park, J., Ha, S., Co-creation of service recovery: Utilitarian and hedonic value and post-recovery responses. Journal of Retailing and Consumer Services (2015), http://dx.doi.org/10.1016/j.jretconser.2015.01.003i
J. Park, S. Ha / Journal of Retailing and Consumer Services ∎ (∎∎∎∎) ∎∎∎–∎∎∎
refers to a customer’s perception of whether he or she has received what he or she deserves from a co-creation experience, and affect toward recovery handling represents the customer’s overall feeling toward the service recovery. These two outcome variables allow us to capture a customer’s cognitive and affective responses to the recovery experience and, together, predict the customer’s intention to repurchase. 2.3.1. Co-creation and perceived equity Customers want to be treated fairly in a service encounter. Perceived fairness plays a critical role in shaping customers’ responses, especially when a conflict arises in an exchange concerning service failure and recovery (e.g., Gelbrich and Roschk, 2010; Oliver and Swan, 1989; Smith et al., 1999). One of the important criteria in a customer’s fairness evaluation concerns the customer’s perception of whether he or receives what he or she deserves, referred to as perceived equity (Adams, 1965; Oliver and Swan, 1989; Smith et al., 1999). Perceived equity is determined according to a comparison of the gains (output) to costs (input) ratio of the customer with the ratio of the other involved in the exchange situation (Adams, 1965). When a service failure occurs, a customer fails to attain what he or she expects from the exchange, causing a sense of inequity (Maxham and Netemeyer, 2002; Smith et al., 1999; Tax et al., 1998). Perceived inequity, then, serves as a motivational force that directs the customer’s attention to restoring equity (Adams, 1965). The service marketing literature has indicated that a customer evaluates a recovery encounter in terms of how well the recovery enactment brings the balance back to the customer–company relationship (see Gelbrich and Roschk, 2010). Therefore, perceived equity is particularly important in a service failure and recovery context. The utilitarian aspect of a consumption experience has long been considered a basis of positive customer reaction (Cronin et al., 2000; Mano and Oliver, 1993). In the context of service failure and recovery, utilitarian value is enhanced when a customer and a company collaboratively find an optimal remedy for a service failure. Given that utilitarian value largely reflects a customer’s perception of the extent to which the co-creation of recovery is useful and efficient, it is likely that perceived utilitarian value directs the customer’s perceived fairness regarding the customer–company relationship. Thus, when the customer believes that the co-creation of service recovery renders a desired recovery outcome efficiently, perceived equity in the relationship will improve. Additionally, hedonic value of co-creation of recovery improves consumers’ perceived equity of service recovery. Smith et al. (1999) stated that “service failure can result in the loss of economic (e.g., money, time) and/or social (e.g., status, esteem) resources for customers” (p. 358) and argued that a firm’s recovery effort devoted to the customer’s loss produces more favorable evaluation of fairness. The implication is that a customer’s equity perception often involves the customer’s judgment of how well he or she was treated socially and emotionally during the co-creation experience. Social and emotional rewards reflect perceived hedonic value. Thus, when a customer believes that co-creation of service recovery is socially and emotionally pleasing, his or her perception of equity in the exchange improves. H1. Utilitarian value of co-creation of recovery will positively influence consumers’ perceived equity. H2. Hedonic value of co-creation of recovery will positively influence consumers’ perceived equity. 2.3.2. Co-creation of recovery and affect toward recovery handling The importance of emotion in customers’ post-recovery is well
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documented in the service marketing literature (Chebat and Slusarczyk, 2005; del Río-Lanza et al., 2009; Gelbrich, 2010; Schoefer and Ennew, 2005; Smith and Bolton, 2002). Affect toward a recovery handling, representing a more enduring abstract form of emotional state (Bagozzi et al., 1999), results from a customer’s appraisal of the nature of the recovery event as well as of its components, such as information, people, rules, norms, and relationships involved (e.g., Lazarus, 1991). According to appraisal theory, emotions come from appraisal, which is a consumer’s subjective evaluation of the significance of environmental stimuli (e.g., a situation, objective, and event) in relation to the consumer’s well-being (Scherer, 2005). That is, a customer’s subjective interpretation of a stimulus (e.g., co-creation of recovery) triggers emotional responses (e.g., positive or negative affect) to the stimulus while motivating the customer to react accordingly (Lazarus, 1991). A key criterion for appraisal of an event lies in whether the event facilitates meeting the customer’s goal (goal congruence) or thwarts it (goal incongruence; Lazarus, 1991). When the event is appraised as congruent with the customer’s personal goal, the customer experiences positive feelings. On the other hand, an appraisal of goal-incongruence produces negative feelings (Lazarus, 1991). A customer’s perception of utilitarian value of a recovery event would increase as the event works in favor of his or her goal—achieving successful recovery. Thus, the more the customer believes that the co-creation of service recovery produces a desired result (utilitarian value), the more likely he or she experiences positive feelings toward the recovery handling. Similarly, perceived hedonic value serves as a cue that a customer’s social interaction with a service provider works in achieving the recovery goal without a problem. Hedonic value of co-creation captures customers’ appraisal of how pleasant or enjoyable the co-creation experience has been. Such an experience cannot occur without mutual respect, seamless interaction, and successful iteration between the collaborative partners (Bitner et al., 1994, 1990; Liao, 2007; Prahalad and Ramaswamy, 2004). The more the customer perceives that the co-creation of service recovery itself is intrinsically pleasing, the more likely he or she will experience positive feelings. H3. Utilitarian value of co-creation of recovery will positively influence consumers’ affect toward the recovery handling. H4. Hedonic value of co-creation of recovery will positively influence affect toward the recovery handling. 2.3.3. Relationships among post-recovery outcomes Delivering an effective service recovery is vital for sustainable business success because a recovery encounter plays a critical role in a customer’s decision to stay with a business or leave it (e.g., Keaveney, 1996; Tax et al., 1998). Regarding the effectiveness of service-recovery strategies, researchers focused on two domains: cognitive evaluations, such as perceived equity and perceived justice (Maxham and Netemeyer, 2002; Smith et al., 1999; Tax et al., 1998), and affective responses, such as positive and negative effects, discrete emotions, and satisfaction (Chebat and Slusarczyk, 2005; Gelbrich, 2010; Schoefer and Ennew, 2005; Smith and Bolton, 2002). In line with the literature, this study addresses perceived equity and affect toward the service recovery handling, which together contribute to repurchase intention. Perceived equity can have a positive effect on a customer’s feelings after service recovery (Schoefer and Ennew, 2005; Schoefer, 2008). Research on service recovery has shown that a customer’s cognitive evaluation determines the customer-company relationship by shaping the customer’s emotional responses toward a specific recovery encounter (i.e., transaction-specific
Please cite this article as: Park, J., Ha, S., Co-creation of service recovery: Utilitarian and hedonic value and post-recovery responses. Journal of Retailing and Consumer Services (2015), http://dx.doi.org/10.1016/j.jretconser.2015.01.003i
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J. Park, S. Ha / Journal of Retailing and Consumer Services ∎ (∎∎∎∎) ∎∎∎–∎∎∎
emotion). Chebat and Slusarczyk (2005) confirmed that justice perceptions regarding service recovery affect positive and negative emotions that influence customers’ decisions to remain loyal or leave. Similarly, Schoefer and Ennew (2005) and Schoefer (2008) found that perceived fairness constitutes cognitive appraisal that elicits positive and negative emotions in response to service recovery encounters. Given that restoring fairness is a primary recovery goal, appraisal of enhanced equity is likely to elicit positive affective responses to the recovery. H5. Perceived equity will positively influence consumers’ affect toward the recovery. Perceived equity can influence customers’ loyalty (McCollough et al., 2000; Smith et al., 1999; Tax et al., 1998). Equity theory assumes that inequity creates tension in an exchange relationship, which serves as a motivational force (Adams, 1965). Further, inequity stimulates customers’ psychological and behavioral attempts to restore the balance (Adams, 1965). When a customer’s co-creation of recovery successfully restores his or her equity perception, it diffuses the tension, making the customer more prone to maintain the relationship in the future (Blodgett et al., 1997; McCollough et al., 2000). On the other hand, when cocreation of recovery following a failed service encounter fails itself, subsequent judgment of inequity will motivate the customer to withdraw from the relationship (Chebat and Slusarczyk, 2005). Thus, we propose that enhanced equity judgment from successful co-creation of recovery will lead to a customer’s intention to continue his or her business with the focal service provider. H6. Perceived equity will positively influence consumers’ repurchase intention. Additionally, we posit that affect toward service recovery leads to loyalty intentions. Appraisal theory indicates that emotions trigger psychological and behavioral coping responses to adapt to a stimulus (e.g., service recovery; Lazarus, 1991). In other words, in the context of service recovery, people try to avoid experiencing negative emotions and promote the chance of experiencing positive emotions in the future (DeWitt et al., 2008). Positive affect resulting from successful recovery tends to reinforce customers’ behaviors toward the emotion-eliciting service encounter in favorable ways, helping them stay loyal to the service provider. Empirical evidence supported the strong association between customers’ affective responses and loyalty (Chebat and Slusarczyk, 2005; DeWitt et al., 2008; Schoefer and Ennew, 2005; Schoefer, 2008). H7. Affect toward the recovery will positively influence consumers’ repurchase intention. Fig. 1 represents the conceptual framework of this study.
3. Method 3.1. Data collection and sample The data were collected using a structured, online survey. A panel of U.S. consumers was recruited by a professional panel provider and asked to participate in the research. The survey contained a written scenario of a service failure and subsequent enactment of collaborative recovery by a service provider and a customer. Participants were asked to envision themselves as the customer in the situation and answer how they would perceive, evaluate, and behave. This study applied the scenario-based approach for two reasons: (a) its robustness relative to a recall-based approach, which is usually vulnerable to respondents’ memory lapses, rationalization tendencies, and consistency factors (Smith et al., 1999), and (b) its capability to avoid ethical and managerial issues that may arise from enacting a service failure in a real-life setting (Roggeveen et al., 2012). The scenario was developed in the context of a hotel reservation failure as a part of a large research project. In the scenario, a customer could not get a hotel room that he or she had booked in advance because of a miscommunication between hotel employees. The hotel was fully booked for the day, and the front-desk employee took action to find an alternative hotel room for the customer. In this process, co-creation of service recovery was enacted in such a way that the employee invited the customer to find and evaluate alternative hotels and rooms in conjunction with the employee and let him or her decide on a hotel to stay. To engender sufficient variations in service recovery encounters, four scenarios were developed to depict different conditions of the service recovery outcome (a positive as opposed to a negative outcome) and compensation for service recovery (30% discount or no discount). Experimental manipulations to increase variations in research variables have been commonly used in research studying the effects of different levels of retail cues on consumer behavior (e.g., Baker et al., 2002). Participants were randomly assigned to one of the four conditions. Responses from the four groups were aggregated for data analysis, and potential effects of the two experimentation variables (recovery outcomes and compensation) on post-recovery responses were statistically controlled in hypothesis testing. 3.2. Measures Table 1 shows measures of research constructs. Utilitarian and hedonic values of co-creation of service recovery were measured using a 5-item, 7-point semantic differential scale adopted from Voss et al. (2003). Affect toward the company’s handling of the problem was measured using a 3-item, 7-point semantic differential scale adopted from Stuart et al. (1987). Perceived equity was assessed using a 4-item scale adopted from Roggeveen et al. (2012), and repurchase intention was measured with a 3-item scale adopted from Zeithaml et al. (1996). Perceived equity and repurchase intention were measured on a 7-point Likert scale (1 ¼strongly disagree; 7 ¼strongly agree).
4. Results
Fig. 1. Theoretical framework.
The sample consisted of 330 consumers in the United States. The average age of respondents was 48 years, with ages ranging from 18 to 86. Female and male respondents were evenly distributed (female ¼50.6%). Participants were largely Caucasian (80.9%) and well educated, with over half of them (51.1%) having 2 years or higher of college education. Nearly half of respondents (53.3%) reported annual household incomes above $50,000. On
Please cite this article as: Park, J., Ha, S., Co-creation of service recovery: Utilitarian and hedonic value and post-recovery responses. Journal of Retailing and Consumer Services (2015), http://dx.doi.org/10.1016/j.jretconser.2015.01.003i
J. Park, S. Ha / Journal of Retailing and Consumer Services ∎ (∎∎∎∎) ∎∎∎–∎∎∎ Table 1 Measurement and CFA results.
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Table 3 Hypothesis Test Results.
Constructs/items
Factor loadings CR
Utilitarian value My participation in the service recovery process is… Ineffective–effective Unhelpful–helpful Not functional–functional Not necessary–necessarya Impractical–practical
Hypotheses
Relationships tested
Standardized coefficients (β)
t Values Test results
H1 H2 H3 H4 H5 H6
Utilitarian-equity Hedonic-equity Utilitarian-affect Hedonic-affect Equity-affect Equity-repurchase intention Affect-repurchase intention
0.38*** 0.15** 0.13* 0.03n.s. 0.65*** 0.65*** 0.14*
2.35
Compensationequity Compensationaffect Compensationrepurchase intention Outcome-equity Outcome-affect Outcome-repurchase intention
0.18**
4.57
0.93 0.92 0.90 0.87 n.s. 0.80
Hedonic value My participation in the service recovery process is… Not fun–fun Dull–exciting Not delightful–delightful Not thrilling–thrilling Unenjoyable–enjoyable
0.94 0.87 0.81 0.93 0.87 0.91
Perceived equity The outcome received was fair. I got what I deserved. In resolving the problem, the hotel gave me what I needed. The outcome that I received was right.
H7
Control variables
0.95 0.89 0.84 0.93 0.97
Affect toward recovery Unpleasant–Pleasant 0.97 Dislike vary much–Like very much 0.98 Left me with a bad feeling–left me with a good feeling 0.98
0.95
Repurchase intention I will stay in this hotel in the future. I will consider this hotel as my first choice when traveling again in the future. I will use this hotel next time I travel.
0.97
7.30 3.07 2.25 0.61 10.03 9.15
0.03n.s.
0.74
0.02n.s.
0.59
0.37** 0.02n.s. 0.00n.s.
8.43 0.43 0.03
Supported Supported Supported Not Supported Supported Supported Supported
Note: n.s. ¼not significant, χ2(172) ¼361.49, po 0.001, CFI¼ 0.98, NFI ¼0.95, IFI¼ 0.98, RMSEA ¼0.06. n
p o 0.05. po 0.01. nnn po 0.001. nn
0.96 0.98 0.95
a Items removed from the final measurement model; CR¼ Construct Reliability; χ2 (142) ¼ 276.86, po 0.001, CFI ¼ 0.98, NFI¼ 0.96, IFI¼ 0.98, RMSEA ¼0.05.
average, respondents used hotels 3.3 times per year and stayed for 2.9 days per visit.
Next, discriminant validity was tested by comparing the AVE of each construct with the squared correlations between all pairs of constructs. The AVEs were greater than the squared correlations of all pair of constructs, confirming discriminant validity among the five constructs in this study (Fornell and Larcker, 1981). Last, for each construct, composite reliability was greater than 0.9, providing evidence for internal reliability of each scale. Tables 1 and 2 show the psychometric properties of the measures used in this study.
4.1. Assessment of measurement model 4.2. Hypothesis test Confirmatory factor analysis was conducted to test the measurement model, using AMOS 22.0. We examined diagnostic statistics, including standardized residuals and modification indices, together with theoretical consideration for model improvement (Hair et al., 2010). One item concerning utilitarian value was deleted from the final measures because of its large standardized residual. The final measurement model revealed a good model fit with the data: χ2 (142) ¼276.86, p o0.001, CFI ¼0.98, NFI ¼0.96, IFI¼ 0.98, and RMSEA ¼0.05. Convergent and discriminant validity were assessed from the final measurement model. First, convergent validity was confirmed because the standardized factor loadings of all indicators on their designated latent construct were high (4 0.80; Anderson and Gerbing, 1988) and significant (p o0.001), and the average variance extracted (AVE) for each latent construct was greater than 0.5 (Anderson and Gerbing, 1988).
Structural equation modeling (SEM) with covariance matrix and maximum likelihood method was conducted to test research hypotheses. Two experimental factors—compensation and recovery outcome—were included in the main structural model to control their potential effects on the structural model under investigation. The results revealed an acceptable model fit of the proposed model to the data: χ2 (172) ¼361.49, p o0.001, CFI ¼0.98, NFI ¼0.95, IFI ¼0.98, and RMSEA¼ 0.06. Table 3 shows the hypothesis test results. Both utilitarian value (β ¼ 0.38, t¼ 7.30, p o0.001) and hedonic value of co-creation in recovery (β ¼0.15, t¼ 3.07, p o0.01) have positive effect on customers’ perceived equity, supporting H1 and H2. Additionally, consistent with H3, utilitarian value of co-creation has a positive effect on customers’ affect toward service recovery (β ¼0.13, t ¼2.25,
Table 2 Psychometric property of measures. Constructs
Mean
SD
Cronbach’s α
Utilitarian value
Hedonic value
Equity
Affect
Repurchase intention
Utilitarian value Hedonic value Equity Affect Repurchase intention
5.40 3.84 4.51 4.92 3.81
1.30 1.45 1.77 1.83 1.82
0.93 0.94 0.95 0.95 0.98
0.76 0.29 0.39 0.31 0.34
0.77 0.24 0.19 0.34
0.82 0.57 0.57
0.87 0.40
0.93
Note: Numbers in diagonal are average variance extracted for each construct. Numbers below diagonal are squared correlation coefficients between constructs.
Please cite this article as: Park, J., Ha, S., Co-creation of service recovery: Utilitarian and hedonic value and post-recovery responses. Journal of Retailing and Consumer Services (2015), http://dx.doi.org/10.1016/j.jretconser.2015.01.003i
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p o0.05). However, the effect of hedonic value on customers’ affect was not significant (β ¼0.03, t¼0.61, n.s.), contrary to H4. With respect to the associations among post-recovery outcomes, results revealed that perceived equity has a positive effect on customers’ affect toward service recovery (β ¼0.65, t¼10.03, p o0.001), as well as on customer repurchase intentions (β ¼0.65, t¼9.15, po 0.001), supporting H5 and H6, respectively. Last, as expected, customers’ affective responses positively influenced their repurchase intentions (β ¼0.14, t¼2.35, po 0.05). Thus, H7 was supported. Overall, the structural model explained 57% of variance in perceived equity, 58% in affect toward the recovery handling, and 59% in repurchase intention.
5. Discussion 5.1. Theoretical and managerial implications The overarching aim of this research was to develop and empirically test a theoretical framework that delineates how individual consumers’ perceptions of co-creation value in service recovery encounters affect their post-recovery responses. To this end, we conceptualized that co-creation of a service recovery entails two dimensions of utilitarian and hedonic values and postrecovery responses involve cognitive (perceived equity), emotional (affect toward the recovery handling), and behavioral (repurchase intention) reactions. Bringing together the concepts of customer value, co-creation and customer participation, and service recovery, we proposed that utilitarian and hedonic values of cocreation from a service recovery have an effect on a customer’s perceived equity and affect toward a company’s recovery handling, which, in turn, determine the customer’s repurchase intention. Overall, the results supported our proposition. The findings from this study provide theoretical contributions to the value co-creation literature. First, this study extends the potential role of co-creation value by demonstrating that customers’ co-creation experiences for service recovery in which the issues are addressed satisfyingly generate not only utilitarian value but also hedonic value (Nambisan and Baron, 2007; Tynan et al., 2010). The dual-dimensionality of co-creation value observed in this study is in line with findings in previous research investigating traditional consumption values (e.g., Babin et al., 1994; Bateson, 1985; Dabholkar, 1996). Second, this study examined the dynamic effects of utilitarian and hedonic values on customers’ postrecovery responses. More specifically, consumers’ decisions to continue their business with firms after service failure and recovery depends on perceived equity and affect toward the recovery, with the former enhanced through perceptions of both utilitarian and hedonic values and the latter through only perceived utilitarian value of recovery co-creation. Overall, these findings are consistent with previous studies showing the critical role of utilitarian and hedonic values on consumer behavior (e.g., McCollough et al., 2000; Smith et al., 1999). However, in this study, hedonic value from the collaborative recovery did not lead to positive customer emotional response, contrary to our prediction. One possible explanation is that, when a service failure is ascribed to the firm, anger caused by the initial service failure is very high (Gelbirch, 2010; Lazarus, 1991) and could counteract the favorable effect of hedonic value of co-creation on the customer’s affective response. Third, this study delineates the psychological process through which utilitarian and hedonic values arising from a co-creation experience contribute to recouping consumers’ loyalty, manifested in their repurchase intentions. More specifically, the collaborative problem solving customers experience during the service recovery encounter affects them both cognitively (perceived equity) and
emotionally (affect toward the recovery). These two transactionspecific, psychological responses, in turn, influence the customer decision to continue a relationship with a company, indicating the important roles that perceived equity and affect toward the recovery play in retaining customers and fostering their loyalty. Additionally, this study contributes to the service-marketing literature by applying the concept of value co-creation to a servicerecovery context. Seeing co-creation as a promising concept in research, prior literature has focused on exploring the role of cocreation in successful product or service provision (Auh et al., 2007; Chan et al., 2010; Claycomb et al., 2001), indicating the need for investigating co-creation in diverse contexts; only a handful of studies have approached co-creation as a recovery strategy (Dong et al., 2008; Roggeveen et al., 2012). This study enriches the existing body of service-marketing literature by showing that a positive co-creation experience in a service recovery interaction enhances cognitive, affective, and behavioral responses concerning the exchange. This study provides practitioners with information they can use in service-recovery management. Overall, the results indicate that companies with strong service-marketing emphasis should put strategic effort into making customer co-creation experiences as useful and enjoyable as possible. Specifically, first, service-oriented companies should ensure that frontline employees are well trained to handle collaborative recovery processes as constructively, attentively, and efficiently as possible. While resolving a service failure, customers shape perceptions of how effective and fun their participation experiences are; both perceptions directly and indirectly influence perceived equity and affect about the recovery experiences. Second, companies should design servicescapes and customer service policies in ways that foster smooth and seamless interactions between customers and frontline employees. From the finding that the hedonic value of a co-creation experience develops customer evaluation of how fair the exchange has been, extra efforts to help customers manage their emotions are needed. Although customers often experience negative emotions caused by a service failure, when they find co-creation of a service recovery following the failure intrinsically gratifying and pleasant, they are more likely to perceive they are fairly treated, receiving what they deserve. Last, companies should pay extra attention to restoring customers’ equity perception during a service-recovery process because its effect on business performance includes customer loyalty going beyond the particular recovery encounter. 5.2. Limitations and future research This study had some limitations, which prompt ideas for future research. First, the use of scenario-based experiments using a hotel setting limited the external validity of the results of this research. Alternative approaches (e.g., a field experiment or industry data analysis) using a variety of service-failure contexts (e.g., department stores, restaurants, online and off-line stores) could be useful in investigating the validity of our findings. Second, a servicefailure context of particular focus in this study was a companycaused service failure. Attribution of a service failure plays a critical role in shaping customers’ reactions (Choi and Mattila, 2008; Folkes, 1984). Thus, future research needs to explore how cocreation of a service recovery works across service failure occurrences of different attribution types. For example, researchers could investigate how the co-creation experience affects customers’ responses when the original failure is attributed to customers (internal attribution) or uncontrollable external factors. Finally, culture plays a critical role in consumers’ service evaluations and their perceptions of attributions for service failures and service-recovery efforts (e.g., Mattila and Patterson, 2004). An
Please cite this article as: Park, J., Ha, S., Co-creation of service recovery: Utilitarian and hedonic value and post-recovery responses. Journal of Retailing and Consumer Services (2015), http://dx.doi.org/10.1016/j.jretconser.2015.01.003i
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examination of our research model in a cross-cultural context could be worthwhile.
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Please cite this article as: Park, J., Ha, S., Co-creation of service recovery: Utilitarian and hedonic value and post-recovery responses. Journal of Retailing and Consumer Services (2015), http://dx.doi.org/10.1016/j.jretconser.2015.01.003i
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Journal of Retailing and Consumer Services journal homepage: www.elsevier.com/locate/jretconser
Co-creation of service recovery: Utilitarian and hedonic value and post-recovery responses Joohyung Park a,n, Sejin Ha b a
Department of Retailing, College of Hospitality, Retail, and Sport Management, University of South Carolina, Columbia, SC 29208, USA Department of Retail, Hospitality, and Tourism Management, College of Education, Health, and Human Sciences, University of Tennessee, Knoxville, TN 37996, USA
b
art ic l e i nf o
Keywords: Co-creation Service recovery Hedonic and utilitarian value
a b s t r a c t Based on the literature on customer value and service dominant (S-D) logic, this study suggests that hedonic and utilitarian value derived from co-creation of a service recovery contribute to perceived equity and affect toward the service recovery, which, in turn, enhance customers’ repurchase intentions. A scenario-based survey approach was used to collect data from U.S. consumers (N¼ 330). Results show that utilitarian value enhances both equity and affect toward the service recovery while hedonic value contributes only to equity. In addition, the findings reveal that both equity and affect toward the recovery are positively associated with repurchase intentions. & 2015 Elsevier Ltd. All rights reserved.
1. Introduction In response to growing attention to the concept of co-creation from marketers, research on the topic of co-creation is rapidly expanding to develop conceptual and empirical knowledge about co-creation (e.g., Gronroos, 2008; Prahalad and Ramaswamy, 2004; Vargo and Lusch, 2004; Yi and Gong, 2013). Co-creation refers to the process in which a consumer and a service provider jointly work, and co-creation of value represents joint creation of value by a consumer and a company (Prahalad and Ramaswamy, 2004). In practice, firms are actively seeking opportunities to engage and collaborate with customers. For example, they invite consumers to participate in various co-creation activities, ranging from offering input for advertising and new product development and customizing product designs and services to selling their designs to other customers (e.g., Nike, Lego, Kellogg, restaurants, and banks). In the current fast-paced, consumer-empowered business environment, firms see the co-creation strategy as an opportunity to develop a core competency of sustainable competitive advantage (Lusch et al., 2007; Vargo and Lusch, 2004). Since Vargo and Lusch (2004) presented a seminal work on a paradigm shift in marketing from traditional goods-dominant logic (G-D logic) to service-dominant logic (S-D logic), the concept of value co-creation has spawned a wealth of academic discourse. However, it is a still young and growing research field, with the literature thus far being largely situated in four areas. First, much n
Corresponding author. Tel.: þ 1 865 974 2141. E-mail addresses: [email protected] (J. Park), [email protected] (S. Ha).
research was conceptual, focusing on the development of cocreation models and clarification of relevant concepts, such as coproduction, prosumption, consumer participation, and consumer empowerment (e.g., Lusch and Vargo, 2006a; Prahalad and Ramaswamy, 2004; Vargo and Lusch, 2004). Second, studies proposed different types of value dimensions unique to idiosyncratic consumption contexts (Chan et al., 2010; Roggeveen et al., 2012), inviting further empirical identification of co-creation value dimensions in different consumption-experience contexts. Third, empirical research tended to rely on outcomes of co-creation, such as customer knowledge, perceived quality, satisfaction, and loyalty (Auh et al., 2007; Bendapudi and Leone, 2003; Claycomb et al., 2001), thereby lacking an understanding of customers’ perceptions of co-creation experiences and their effects on overall consumption experience. Finally, most studies focused on co-creation in successful exchange settings free of errors, yielding a need to approach co-creation from a different viewpoint, for example, as a service-recovery strategy (Dong et al., 2008; Roggeveen et al., 2012). Thus, this paper addresses this void by exploring the role of customer evaluation of value derived from co-creation experiences in the context of a service failure and recovery. Co-creation establishes value via “the intersection of the offerer, the customer, … and other value-creation partners” (Lusch et al., 2007, p. 11). Applying this notion to the setting of a service failure and recovery, we define co-creation of a service recovery as the joint creation of a service recovery through a series of interactions and dialogs between a customer and a service provider to identify a recovery solution that satisfies the customer’s needs in the situation
http://dx.doi.org/10.1016/j.jretconser.2015.01.003 0969-6989/& 2015 Elsevier Ltd. All rights reserved.
Please cite this article as: Park, J., Ha, S., Co-creation of service recovery: Utilitarian and hedonic value and post-recovery responses. Journal of Retailing and Consumer Services (2015), http://dx.doi.org/10.1016/j.jretconser.2015.01.003i
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(Prahalad and Ramaswamy, 2004). We argue that the customer’s participating in shaping or personalizing the content and solution of the service recovery via interactive collaboration with a company’s representative creates value that helps alleviate negative effects of the service failure and contributes to favorable post-recovery responses. Therefore, the purpose of this study is to develop and empirically test a theoretical framework to explain how different dimensions of customer value emerging from co-creation of service recovery influence customers’ overall post-recovery responses in terms of perceived equity, affect toward recovery handling, and repurchase intention.
2. Theoretical background and hypothesis development 2.1. Value co-creation and customer value Value co-creation is a central concept in S-D logic. According to S-D logic, value is created when customers use products or services to satisfy their needs or wants, referred to as value in use (Lusch and Vargo, 2006a; Vargo and Lusch, 2004, 2008). This view emphasizes that value resides in a customer’s interactions with a firm’s offering, such as employees, facilities, goods, and services, rather than in the firm itself. Because every customer is unique in his or her consumption experience, skill, preference, and goal, value is subjective to a consumption situation (Vargo and Lusch, 2004). Thus, the customer is an essential part of the value creation process and is always a value co-creator (Lusch and Vargo, 2006b). Unique aspects of value of co-creation are well encapsulated in Holbrook’s conceptualization of customer value (Holbrook, 1999, 2006). Holbrook (1999) summarized the following key qualities of customer value: (a) “interactive” because it entails interactions between the consumer and the firm’s offerings; (b) “relativistic” because it involves preferences among various products or services, varies across individual customers, and depends on their situations; and (c) “preferential” because it is often associated with preferential judgment, such as attitude, affect, and approach or avoidance. Along the same line, Holbrook and Hirschman's (1982) framework of consumption emphasizes the importance of the experiential or hedonic aspect of consumption, together with the goal-oriented, task-related, and utility-driven aspects of consumption. These conceptualizations of customer value gained empirical support. Many studies confirmed that customer value is a multi-faceted concept and features different typologies across various consumption contexts (e.g., Babin et al., 1994; Childers et al., 2001; Holbrook, 1999; Jones et al., 2006; Mano and Oliver, 1993; Nambisan and Baron, 2007; Sweeney and Soutar, 2001; Tynan et al., 2010). For example, Babin et al. (1994) revealed that shopping—a consumption experience—produces both utilitarian and hedonic value in which utilitarian shopping value concerns the task-related value of shopping (i.e., obtaining desired products or services in an efficient manner) and the hedonic shopping value related to the emotional value of shopping (i.e., the multisensory experiences of shopping, such as excitement and enjoyment). Consistent with traditional customer value, co-creation value is also considered multifaceted. Perhaps not surprising, research on customer participation observed a dual dimensionality to the value of customer participation, with efficiency and usefulness (utilitarian) and enjoyment (hedonic) being primary benefits of customer participation in service (Bateson, 1985; Dabholkar, 1996; Rodie and Kleine, 2000). In a service recovery, the value of cocreation benefits both customers and service providers (Roggeveen et al., 2012). However, what specific value co-creation of a service recovery engenders and how it affects consumer post-recovery responses are relatively unknown and are the focus of this study. This study proposes that the dual-dimensionality of co-
creation would hold in a setting of co-creation of a service recovery, in which the two parties of a customer and a firm representative engage in a collaborative partnership to find the best solution for both of them. 2.2. Value of co-creation in service recovery When a service failure occurs, a customer’s complaint triggers a series of interactions between the customer and the firm or its representatives through which a resolution of the failure is derived and enacted to restore the firm’s relationship with the customer (Liao, 2007; Smith et al., 1999). With co-creation of recovery, the interaction evolves into a collaborative engagement between two parties, enacting the recovery together to achieve greater value for the customer (Roggeveen et al., 2012). The goal of this collaboration is to produce an optimum resolution to remedy the situation (utilitarian value) in an emotionally pleasing and socially satisfying manner (hedonic value). Thus, we suggest that both the utilitarian and the hedonic values of co-creation of service recovery play important roles in customers’ post-recovery responses. First, utilitarian value of co-creation of recovery refers to a customer’s evaluation of how efficient and useful co-creation of service recovery has been in meeting the customer’s goal (Mathwick and Rigdon, 2004; Sweeney and Soutar, 2001). When cocreation of recovery occurs, both the company and the consumer actively exchange operant resources (e.g., information, knowledge, and skill; Lusch et al., 2007; Vargo and Lusch, 2004) from which co-creation reduces the uncertainty of the recovery outcome (Prahalad and Ramaswamy, 2004), allows the customer to make an informed choice (Mattila and Cranage, 2005), and eventually helps both parties create greater value (Dong et al., 2008; Gelbrich, 2010; Roggeveen et al., 2012). Thus, such a collaborative process should heighten perceived utility because the co-creating experience accomplishes the shared goal of resolving the issue. Next, the hedonic value of co-creation of recovery captures a customer’s appreciation of intrinsic, emotional, and social reward of the collaboration. In the context of co-creation of service recovery, hedonic value represents a customer’s evaluation as to how meaningful co-creation of service recovery by itself has been socially or emotionally. More specifically, hedonic value emerges as two entities work together in a pleasant and respectful manner while having great flexibility to adapt the firm’s service mix to meet the customer’s preferences and idiosyncratic needs (Liao, 2007). Thus, empowering service representatives is a basic essential for a successful co-creation experience (Bitner et al., 1994, 1990; Prahalad and Ramaswamy, 2004). In the co-creation of service recovery setting, when the customer–employee interaction goes smoothly, the recovery can be viewed as a joyful and hopeful process (Chebat and Slusarczyk, 2005), with a customer making personal requests while an employee puts forth effort to customize service to this particular customer. Further, the customer becomes an agent of the recovery enactment, mobilizing necessary resources and reconfiguring the procedure and contents of the service recovery. Exercising such influence should be intrinsically gratifying because it provides feelings of mastery, competence, and efficacy over the impending harm caused by the service failure (De Charms, 1968; Schorr and Rodin, 1984). Thus, both utilitarian value and hedonic value are relevant to co-creation of recovery. 2.3. Consequences of co-creation of recovery: perceived equity, affect toward recovery, and repurchase intention To examine how utilitarian and hedonic values of co-creation of recovery play a role in consumer behavior, this study focuses on three post-recovery reactions: perceived equity, affect toward recovery handling, and repurchase intentions. Perceived equity
Please cite this article as: Park, J., Ha, S., Co-creation of service recovery: Utilitarian and hedonic value and post-recovery responses. Journal of Retailing and Consumer Services (2015), http://dx.doi.org/10.1016/j.jretconser.2015.01.003i
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refers to a customer’s perception of whether he or she has received what he or she deserves from a co-creation experience, and affect toward recovery handling represents the customer’s overall feeling toward the service recovery. These two outcome variables allow us to capture a customer’s cognitive and affective responses to the recovery experience and, together, predict the customer’s intention to repurchase. 2.3.1. Co-creation and perceived equity Customers want to be treated fairly in a service encounter. Perceived fairness plays a critical role in shaping customers’ responses, especially when a conflict arises in an exchange concerning service failure and recovery (e.g., Gelbrich and Roschk, 2010; Oliver and Swan, 1989; Smith et al., 1999). One of the important criteria in a customer’s fairness evaluation concerns the customer’s perception of whether he or receives what he or she deserves, referred to as perceived equity (Adams, 1965; Oliver and Swan, 1989; Smith et al., 1999). Perceived equity is determined according to a comparison of the gains (output) to costs (input) ratio of the customer with the ratio of the other involved in the exchange situation (Adams, 1965). When a service failure occurs, a customer fails to attain what he or she expects from the exchange, causing a sense of inequity (Maxham and Netemeyer, 2002; Smith et al., 1999; Tax et al., 1998). Perceived inequity, then, serves as a motivational force that directs the customer’s attention to restoring equity (Adams, 1965). The service marketing literature has indicated that a customer evaluates a recovery encounter in terms of how well the recovery enactment brings the balance back to the customer–company relationship (see Gelbrich and Roschk, 2010). Therefore, perceived equity is particularly important in a service failure and recovery context. The utilitarian aspect of a consumption experience has long been considered a basis of positive customer reaction (Cronin et al., 2000; Mano and Oliver, 1993). In the context of service failure and recovery, utilitarian value is enhanced when a customer and a company collaboratively find an optimal remedy for a service failure. Given that utilitarian value largely reflects a customer’s perception of the extent to which the co-creation of recovery is useful and efficient, it is likely that perceived utilitarian value directs the customer’s perceived fairness regarding the customer–company relationship. Thus, when the customer believes that the co-creation of service recovery renders a desired recovery outcome efficiently, perceived equity in the relationship will improve. Additionally, hedonic value of co-creation of recovery improves consumers’ perceived equity of service recovery. Smith et al. (1999) stated that “service failure can result in the loss of economic (e.g., money, time) and/or social (e.g., status, esteem) resources for customers” (p. 358) and argued that a firm’s recovery effort devoted to the customer’s loss produces more favorable evaluation of fairness. The implication is that a customer’s equity perception often involves the customer’s judgment of how well he or she was treated socially and emotionally during the co-creation experience. Social and emotional rewards reflect perceived hedonic value. Thus, when a customer believes that co-creation of service recovery is socially and emotionally pleasing, his or her perception of equity in the exchange improves. H1. Utilitarian value of co-creation of recovery will positively influence consumers’ perceived equity. H2. Hedonic value of co-creation of recovery will positively influence consumers’ perceived equity. 2.3.2. Co-creation of recovery and affect toward recovery handling The importance of emotion in customers’ post-recovery is well
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documented in the service marketing literature (Chebat and Slusarczyk, 2005; del Río-Lanza et al., 2009; Gelbrich, 2010; Schoefer and Ennew, 2005; Smith and Bolton, 2002). Affect toward a recovery handling, representing a more enduring abstract form of emotional state (Bagozzi et al., 1999), results from a customer’s appraisal of the nature of the recovery event as well as of its components, such as information, people, rules, norms, and relationships involved (e.g., Lazarus, 1991). According to appraisal theory, emotions come from appraisal, which is a consumer’s subjective evaluation of the significance of environmental stimuli (e.g., a situation, objective, and event) in relation to the consumer’s well-being (Scherer, 2005). That is, a customer’s subjective interpretation of a stimulus (e.g., co-creation of recovery) triggers emotional responses (e.g., positive or negative affect) to the stimulus while motivating the customer to react accordingly (Lazarus, 1991). A key criterion for appraisal of an event lies in whether the event facilitates meeting the customer’s goal (goal congruence) or thwarts it (goal incongruence; Lazarus, 1991). When the event is appraised as congruent with the customer’s personal goal, the customer experiences positive feelings. On the other hand, an appraisal of goal-incongruence produces negative feelings (Lazarus, 1991). A customer’s perception of utilitarian value of a recovery event would increase as the event works in favor of his or her goal—achieving successful recovery. Thus, the more the customer believes that the co-creation of service recovery produces a desired result (utilitarian value), the more likely he or she experiences positive feelings toward the recovery handling. Similarly, perceived hedonic value serves as a cue that a customer’s social interaction with a service provider works in achieving the recovery goal without a problem. Hedonic value of co-creation captures customers’ appraisal of how pleasant or enjoyable the co-creation experience has been. Such an experience cannot occur without mutual respect, seamless interaction, and successful iteration between the collaborative partners (Bitner et al., 1994, 1990; Liao, 2007; Prahalad and Ramaswamy, 2004). The more the customer perceives that the co-creation of service recovery itself is intrinsically pleasing, the more likely he or she will experience positive feelings. H3. Utilitarian value of co-creation of recovery will positively influence consumers’ affect toward the recovery handling. H4. Hedonic value of co-creation of recovery will positively influence affect toward the recovery handling. 2.3.3. Relationships among post-recovery outcomes Delivering an effective service recovery is vital for sustainable business success because a recovery encounter plays a critical role in a customer’s decision to stay with a business or leave it (e.g., Keaveney, 1996; Tax et al., 1998). Regarding the effectiveness of service-recovery strategies, researchers focused on two domains: cognitive evaluations, such as perceived equity and perceived justice (Maxham and Netemeyer, 2002; Smith et al., 1999; Tax et al., 1998), and affective responses, such as positive and negative effects, discrete emotions, and satisfaction (Chebat and Slusarczyk, 2005; Gelbrich, 2010; Schoefer and Ennew, 2005; Smith and Bolton, 2002). In line with the literature, this study addresses perceived equity and affect toward the service recovery handling, which together contribute to repurchase intention. Perceived equity can have a positive effect on a customer’s feelings after service recovery (Schoefer and Ennew, 2005; Schoefer, 2008). Research on service recovery has shown that a customer’s cognitive evaluation determines the customer-company relationship by shaping the customer’s emotional responses toward a specific recovery encounter (i.e., transaction-specific
Please cite this article as: Park, J., Ha, S., Co-creation of service recovery: Utilitarian and hedonic value and post-recovery responses. Journal of Retailing and Consumer Services (2015), http://dx.doi.org/10.1016/j.jretconser.2015.01.003i
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J. Park, S. Ha / Journal of Retailing and Consumer Services ∎ (∎∎∎∎) ∎∎∎–∎∎∎
emotion). Chebat and Slusarczyk (2005) confirmed that justice perceptions regarding service recovery affect positive and negative emotions that influence customers’ decisions to remain loyal or leave. Similarly, Schoefer and Ennew (2005) and Schoefer (2008) found that perceived fairness constitutes cognitive appraisal that elicits positive and negative emotions in response to service recovery encounters. Given that restoring fairness is a primary recovery goal, appraisal of enhanced equity is likely to elicit positive affective responses to the recovery. H5. Perceived equity will positively influence consumers’ affect toward the recovery. Perceived equity can influence customers’ loyalty (McCollough et al., 2000; Smith et al., 1999; Tax et al., 1998). Equity theory assumes that inequity creates tension in an exchange relationship, which serves as a motivational force (Adams, 1965). Further, inequity stimulates customers’ psychological and behavioral attempts to restore the balance (Adams, 1965). When a customer’s co-creation of recovery successfully restores his or her equity perception, it diffuses the tension, making the customer more prone to maintain the relationship in the future (Blodgett et al., 1997; McCollough et al., 2000). On the other hand, when cocreation of recovery following a failed service encounter fails itself, subsequent judgment of inequity will motivate the customer to withdraw from the relationship (Chebat and Slusarczyk, 2005). Thus, we propose that enhanced equity judgment from successful co-creation of recovery will lead to a customer’s intention to continue his or her business with the focal service provider. H6. Perceived equity will positively influence consumers’ repurchase intention. Additionally, we posit that affect toward service recovery leads to loyalty intentions. Appraisal theory indicates that emotions trigger psychological and behavioral coping responses to adapt to a stimulus (e.g., service recovery; Lazarus, 1991). In other words, in the context of service recovery, people try to avoid experiencing negative emotions and promote the chance of experiencing positive emotions in the future (DeWitt et al., 2008). Positive affect resulting from successful recovery tends to reinforce customers’ behaviors toward the emotion-eliciting service encounter in favorable ways, helping them stay loyal to the service provider. Empirical evidence supported the strong association between customers’ affective responses and loyalty (Chebat and Slusarczyk, 2005; DeWitt et al., 2008; Schoefer and Ennew, 2005; Schoefer, 2008). H7. Affect toward the recovery will positively influence consumers’ repurchase intention. Fig. 1 represents the conceptual framework of this study.
3. Method 3.1. Data collection and sample The data were collected using a structured, online survey. A panel of U.S. consumers was recruited by a professional panel provider and asked to participate in the research. The survey contained a written scenario of a service failure and subsequent enactment of collaborative recovery by a service provider and a customer. Participants were asked to envision themselves as the customer in the situation and answer how they would perceive, evaluate, and behave. This study applied the scenario-based approach for two reasons: (a) its robustness relative to a recall-based approach, which is usually vulnerable to respondents’ memory lapses, rationalization tendencies, and consistency factors (Smith et al., 1999), and (b) its capability to avoid ethical and managerial issues that may arise from enacting a service failure in a real-life setting (Roggeveen et al., 2012). The scenario was developed in the context of a hotel reservation failure as a part of a large research project. In the scenario, a customer could not get a hotel room that he or she had booked in advance because of a miscommunication between hotel employees. The hotel was fully booked for the day, and the front-desk employee took action to find an alternative hotel room for the customer. In this process, co-creation of service recovery was enacted in such a way that the employee invited the customer to find and evaluate alternative hotels and rooms in conjunction with the employee and let him or her decide on a hotel to stay. To engender sufficient variations in service recovery encounters, four scenarios were developed to depict different conditions of the service recovery outcome (a positive as opposed to a negative outcome) and compensation for service recovery (30% discount or no discount). Experimental manipulations to increase variations in research variables have been commonly used in research studying the effects of different levels of retail cues on consumer behavior (e.g., Baker et al., 2002). Participants were randomly assigned to one of the four conditions. Responses from the four groups were aggregated for data analysis, and potential effects of the two experimentation variables (recovery outcomes and compensation) on post-recovery responses were statistically controlled in hypothesis testing. 3.2. Measures Table 1 shows measures of research constructs. Utilitarian and hedonic values of co-creation of service recovery were measured using a 5-item, 7-point semantic differential scale adopted from Voss et al. (2003). Affect toward the company’s handling of the problem was measured using a 3-item, 7-point semantic differential scale adopted from Stuart et al. (1987). Perceived equity was assessed using a 4-item scale adopted from Roggeveen et al. (2012), and repurchase intention was measured with a 3-item scale adopted from Zeithaml et al. (1996). Perceived equity and repurchase intention were measured on a 7-point Likert scale (1 ¼strongly disagree; 7 ¼strongly agree).
4. Results
Fig. 1. Theoretical framework.
The sample consisted of 330 consumers in the United States. The average age of respondents was 48 years, with ages ranging from 18 to 86. Female and male respondents were evenly distributed (female ¼50.6%). Participants were largely Caucasian (80.9%) and well educated, with over half of them (51.1%) having 2 years or higher of college education. Nearly half of respondents (53.3%) reported annual household incomes above $50,000. On
Please cite this article as: Park, J., Ha, S., Co-creation of service recovery: Utilitarian and hedonic value and post-recovery responses. Journal of Retailing and Consumer Services (2015), http://dx.doi.org/10.1016/j.jretconser.2015.01.003i
J. Park, S. Ha / Journal of Retailing and Consumer Services ∎ (∎∎∎∎) ∎∎∎–∎∎∎ Table 1 Measurement and CFA results.
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Table 3 Hypothesis Test Results.
Constructs/items
Factor loadings CR
Utilitarian value My participation in the service recovery process is… Ineffective–effective Unhelpful–helpful Not functional–functional Not necessary–necessarya Impractical–practical
Hypotheses
Relationships tested
Standardized coefficients (β)
t Values Test results
H1 H2 H3 H4 H5 H6
Utilitarian-equity Hedonic-equity Utilitarian-affect Hedonic-affect Equity-affect Equity-repurchase intention Affect-repurchase intention
0.38*** 0.15** 0.13* 0.03n.s. 0.65*** 0.65*** 0.14*
2.35
Compensationequity Compensationaffect Compensationrepurchase intention Outcome-equity Outcome-affect Outcome-repurchase intention
0.18**
4.57
0.93 0.92 0.90 0.87 n.s. 0.80
Hedonic value My participation in the service recovery process is… Not fun–fun Dull–exciting Not delightful–delightful Not thrilling–thrilling Unenjoyable–enjoyable
0.94 0.87 0.81 0.93 0.87 0.91
Perceived equity The outcome received was fair. I got what I deserved. In resolving the problem, the hotel gave me what I needed. The outcome that I received was right.
H7
Control variables
0.95 0.89 0.84 0.93 0.97
Affect toward recovery Unpleasant–Pleasant 0.97 Dislike vary much–Like very much 0.98 Left me with a bad feeling–left me with a good feeling 0.98
0.95
Repurchase intention I will stay in this hotel in the future. I will consider this hotel as my first choice when traveling again in the future. I will use this hotel next time I travel.
0.97
7.30 3.07 2.25 0.61 10.03 9.15
0.03n.s.
0.74
0.02n.s.
0.59
0.37** 0.02n.s. 0.00n.s.
8.43 0.43 0.03
Supported Supported Supported Not Supported Supported Supported Supported
Note: n.s. ¼not significant, χ2(172) ¼361.49, po 0.001, CFI¼ 0.98, NFI ¼0.95, IFI¼ 0.98, RMSEA ¼0.06. n
p o 0.05. po 0.01. nnn po 0.001. nn
0.96 0.98 0.95
a Items removed from the final measurement model; CR¼ Construct Reliability; χ2 (142) ¼ 276.86, po 0.001, CFI ¼ 0.98, NFI¼ 0.96, IFI¼ 0.98, RMSEA ¼0.05.
average, respondents used hotels 3.3 times per year and stayed for 2.9 days per visit.
Next, discriminant validity was tested by comparing the AVE of each construct with the squared correlations between all pairs of constructs. The AVEs were greater than the squared correlations of all pair of constructs, confirming discriminant validity among the five constructs in this study (Fornell and Larcker, 1981). Last, for each construct, composite reliability was greater than 0.9, providing evidence for internal reliability of each scale. Tables 1 and 2 show the psychometric properties of the measures used in this study.
4.1. Assessment of measurement model 4.2. Hypothesis test Confirmatory factor analysis was conducted to test the measurement model, using AMOS 22.0. We examined diagnostic statistics, including standardized residuals and modification indices, together with theoretical consideration for model improvement (Hair et al., 2010). One item concerning utilitarian value was deleted from the final measures because of its large standardized residual. The final measurement model revealed a good model fit with the data: χ2 (142) ¼276.86, p o0.001, CFI ¼0.98, NFI ¼0.96, IFI¼ 0.98, and RMSEA ¼0.05. Convergent and discriminant validity were assessed from the final measurement model. First, convergent validity was confirmed because the standardized factor loadings of all indicators on their designated latent construct were high (4 0.80; Anderson and Gerbing, 1988) and significant (p o0.001), and the average variance extracted (AVE) for each latent construct was greater than 0.5 (Anderson and Gerbing, 1988).
Structural equation modeling (SEM) with covariance matrix and maximum likelihood method was conducted to test research hypotheses. Two experimental factors—compensation and recovery outcome—were included in the main structural model to control their potential effects on the structural model under investigation. The results revealed an acceptable model fit of the proposed model to the data: χ2 (172) ¼361.49, p o0.001, CFI ¼0.98, NFI ¼0.95, IFI ¼0.98, and RMSEA¼ 0.06. Table 3 shows the hypothesis test results. Both utilitarian value (β ¼ 0.38, t¼ 7.30, p o0.001) and hedonic value of co-creation in recovery (β ¼0.15, t¼ 3.07, p o0.01) have positive effect on customers’ perceived equity, supporting H1 and H2. Additionally, consistent with H3, utilitarian value of co-creation has a positive effect on customers’ affect toward service recovery (β ¼0.13, t ¼2.25,
Table 2 Psychometric property of measures. Constructs
Mean
SD
Cronbach’s α
Utilitarian value
Hedonic value
Equity
Affect
Repurchase intention
Utilitarian value Hedonic value Equity Affect Repurchase intention
5.40 3.84 4.51 4.92 3.81
1.30 1.45 1.77 1.83 1.82
0.93 0.94 0.95 0.95 0.98
0.76 0.29 0.39 0.31 0.34
0.77 0.24 0.19 0.34
0.82 0.57 0.57
0.87 0.40
0.93
Note: Numbers in diagonal are average variance extracted for each construct. Numbers below diagonal are squared correlation coefficients between constructs.
Please cite this article as: Park, J., Ha, S., Co-creation of service recovery: Utilitarian and hedonic value and post-recovery responses. Journal of Retailing and Consumer Services (2015), http://dx.doi.org/10.1016/j.jretconser.2015.01.003i
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p o0.05). However, the effect of hedonic value on customers’ affect was not significant (β ¼0.03, t¼0.61, n.s.), contrary to H4. With respect to the associations among post-recovery outcomes, results revealed that perceived equity has a positive effect on customers’ affect toward service recovery (β ¼0.65, t¼10.03, p o0.001), as well as on customer repurchase intentions (β ¼0.65, t¼9.15, po 0.001), supporting H5 and H6, respectively. Last, as expected, customers’ affective responses positively influenced their repurchase intentions (β ¼0.14, t¼2.35, po 0.05). Thus, H7 was supported. Overall, the structural model explained 57% of variance in perceived equity, 58% in affect toward the recovery handling, and 59% in repurchase intention.
5. Discussion 5.1. Theoretical and managerial implications The overarching aim of this research was to develop and empirically test a theoretical framework that delineates how individual consumers’ perceptions of co-creation value in service recovery encounters affect their post-recovery responses. To this end, we conceptualized that co-creation of a service recovery entails two dimensions of utilitarian and hedonic values and postrecovery responses involve cognitive (perceived equity), emotional (affect toward the recovery handling), and behavioral (repurchase intention) reactions. Bringing together the concepts of customer value, co-creation and customer participation, and service recovery, we proposed that utilitarian and hedonic values of cocreation from a service recovery have an effect on a customer’s perceived equity and affect toward a company’s recovery handling, which, in turn, determine the customer’s repurchase intention. Overall, the results supported our proposition. The findings from this study provide theoretical contributions to the value co-creation literature. First, this study extends the potential role of co-creation value by demonstrating that customers’ co-creation experiences for service recovery in which the issues are addressed satisfyingly generate not only utilitarian value but also hedonic value (Nambisan and Baron, 2007; Tynan et al., 2010). The dual-dimensionality of co-creation value observed in this study is in line with findings in previous research investigating traditional consumption values (e.g., Babin et al., 1994; Bateson, 1985; Dabholkar, 1996). Second, this study examined the dynamic effects of utilitarian and hedonic values on customers’ postrecovery responses. More specifically, consumers’ decisions to continue their business with firms after service failure and recovery depends on perceived equity and affect toward the recovery, with the former enhanced through perceptions of both utilitarian and hedonic values and the latter through only perceived utilitarian value of recovery co-creation. Overall, these findings are consistent with previous studies showing the critical role of utilitarian and hedonic values on consumer behavior (e.g., McCollough et al., 2000; Smith et al., 1999). However, in this study, hedonic value from the collaborative recovery did not lead to positive customer emotional response, contrary to our prediction. One possible explanation is that, when a service failure is ascribed to the firm, anger caused by the initial service failure is very high (Gelbirch, 2010; Lazarus, 1991) and could counteract the favorable effect of hedonic value of co-creation on the customer’s affective response. Third, this study delineates the psychological process through which utilitarian and hedonic values arising from a co-creation experience contribute to recouping consumers’ loyalty, manifested in their repurchase intentions. More specifically, the collaborative problem solving customers experience during the service recovery encounter affects them both cognitively (perceived equity) and
emotionally (affect toward the recovery). These two transactionspecific, psychological responses, in turn, influence the customer decision to continue a relationship with a company, indicating the important roles that perceived equity and affect toward the recovery play in retaining customers and fostering their loyalty. Additionally, this study contributes to the service-marketing literature by applying the concept of value co-creation to a servicerecovery context. Seeing co-creation as a promising concept in research, prior literature has focused on exploring the role of cocreation in successful product or service provision (Auh et al., 2007; Chan et al., 2010; Claycomb et al., 2001), indicating the need for investigating co-creation in diverse contexts; only a handful of studies have approached co-creation as a recovery strategy (Dong et al., 2008; Roggeveen et al., 2012). This study enriches the existing body of service-marketing literature by showing that a positive co-creation experience in a service recovery interaction enhances cognitive, affective, and behavioral responses concerning the exchange. This study provides practitioners with information they can use in service-recovery management. Overall, the results indicate that companies with strong service-marketing emphasis should put strategic effort into making customer co-creation experiences as useful and enjoyable as possible. Specifically, first, service-oriented companies should ensure that frontline employees are well trained to handle collaborative recovery processes as constructively, attentively, and efficiently as possible. While resolving a service failure, customers shape perceptions of how effective and fun their participation experiences are; both perceptions directly and indirectly influence perceived equity and affect about the recovery experiences. Second, companies should design servicescapes and customer service policies in ways that foster smooth and seamless interactions between customers and frontline employees. From the finding that the hedonic value of a co-creation experience develops customer evaluation of how fair the exchange has been, extra efforts to help customers manage their emotions are needed. Although customers often experience negative emotions caused by a service failure, when they find co-creation of a service recovery following the failure intrinsically gratifying and pleasant, they are more likely to perceive they are fairly treated, receiving what they deserve. Last, companies should pay extra attention to restoring customers’ equity perception during a service-recovery process because its effect on business performance includes customer loyalty going beyond the particular recovery encounter. 5.2. Limitations and future research This study had some limitations, which prompt ideas for future research. First, the use of scenario-based experiments using a hotel setting limited the external validity of the results of this research. Alternative approaches (e.g., a field experiment or industry data analysis) using a variety of service-failure contexts (e.g., department stores, restaurants, online and off-line stores) could be useful in investigating the validity of our findings. Second, a servicefailure context of particular focus in this study was a companycaused service failure. Attribution of a service failure plays a critical role in shaping customers’ reactions (Choi and Mattila, 2008; Folkes, 1984). Thus, future research needs to explore how cocreation of a service recovery works across service failure occurrences of different attribution types. For example, researchers could investigate how the co-creation experience affects customers’ responses when the original failure is attributed to customers (internal attribution) or uncontrollable external factors. Finally, culture plays a critical role in consumers’ service evaluations and their perceptions of attributions for service failures and service-recovery efforts (e.g., Mattila and Patterson, 2004). An
Please cite this article as: Park, J., Ha, S., Co-creation of service recovery: Utilitarian and hedonic value and post-recovery responses. Journal of Retailing and Consumer Services (2015), http://dx.doi.org/10.1016/j.jretconser.2015.01.003i
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examination of our research model in a cross-cultural context could be worthwhile.
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Please cite this article as: Park, J., Ha, S., Co-creation of service recovery: Utilitarian and hedonic value and post-recovery responses. Journal of Retailing and Consumer Services (2015), http://dx.doi.org/10.1016/j.jretconser.2015.01.003i