Customer complaints and organizational responses: the effects of complainants’ perceptions of justice on satisfaction and loyalty

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Hospitality Management 25 (2006) 69–90 www.elsevier.com/locate/ijhosman

Customer complaints and organizational responses: the effects of complainants’ perceptions of justice on satisfaction and loyalty Osman M. Karatepe School of Tourism and Hospitality Management, Eastern Mediterranean University, Gazimagusa, Turkish Republic of Northern Cyprus, via Mersin 10, Turkey

Abstract This study investigates: (i) the effects of various organizational responses to complaints on distributive, procedural, and interactional justice; and (ii) the effects of complainants’ perceptions of distributive, procedural, and interactional justice on satisfaction and loyalty. This study is conducted on a sample of Turkish guests in Northern Cyprus hotels. The hypothesized relationships are tested using LISREL 8.30 through path analysis. Path analysis demonstrates that atonement is an organizational response to customer complaints associated with distributive justice, and facilitation and promptness have significant positive effects on procedural justice. Promptness appears to have a stronger effect on procedural justice than that of facilitation. In addition, path analysis reveals that apology, explanation, attentiveness, and effort are the four organizational response dimensions influencing interactional justice. Of the four organizational response options, attentiveness and effort have the largest effects on interactional justice. Path analysis shows that all justice dimensions exert significant positive effects on complainant satisfaction and loyalty. Of the three justice dimensions, the effect of interactional justice on complainant satisfaction and loyalty is stronger than those of

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E-mail address: [email protected] (O.M. Karatepe). 0278-4319/$ - see front matter r 2005 Elsevier Ltd. All rights reserved. doi:10.1016/j.ijhm.2004.12.008

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distributive and procedural justice. Discussions of the results, implications for hotel managers, and avenues for future research are presented in the study. r 2005 Elsevier Ltd. All rights reserved. Keywords: Distributive justice; Procedural justice; Interactional justice; Complainant satisfaction; Complainant loyalty; Northern Cyprus

1. Introduction In an era of global competition, many service firms focus on service quality and excellence to acquire and retain a pool of loyal and profitable customers. However, mistakes, failures, and complaints are inevitable in service businesses (Hart et al., 1990). This is especially true in tourism and hospitality settings (Collie et al., 2000). Since service companies may not be able to prevent all complaints, they can learn to find effective solutions to them. It has been shown that effective complaint handling may convert aggrieved customers into satisfied and loyal ones (Gilly and Hansen, 1992). In addition, successful service firms such as Ritz-Carlton and Federal Express desire to provide ‘‘just’’ resolutions in their complaint handling practices (Tax et al., 1998, p. 60). Unfortunately, the majority of service recovery efforts in service firms are dissatisfactory (Tax and Brown, 1998). Worse, several firms learn from mistakes and problems (Johnston and Mehra, 2002). As persuasively discussed by Schlesinger and Heskett (1991), attracting new customers is more costly and less profitable than retaining the existing ones. In recognition of this, effective complaint handling becomes inevitable for tourism and hospitality organizations. The current study develops and tests a model that examines the effects of various organizational responses to complaints on distributive, procedural, and interactional justice. This study also investigates the effects of complainants’ perceptions of distributive, procedural, and interactional justice on satisfaction and loyalty. This study uses a sample of Turkish guests in Northern Cyprus hotels to test the aforementioned relationships. The present study aims to contribute to the existing knowledge base by addressing two important research issues that have received relatively little empirical attention. First, research indicates that customers’ evaluations of service encounters are important elements of customer satisfaction and long-term loyalty (Berry and Parasuraman, 1997). A synthesis of the literature indicates that complaint handling and/or service recovery has been identified as a neglected research area (cf. Johnston and Mehra, 2002; Tax et al., 1998). Most of the studies in the existing literature are related to laboratory or scenario-based experiments (e.g., Smith and Bolton, 1998; McCollough et al., 2000). These studies have made a significant contribution to our understanding of complaint handling and/or service recovery. However, there is still a need for solid empirical research regarding the impact of organizational responses to a customer complaint (Davidow, 2000, 2003a). There is a paucity of empirical research regarding the effects of complainants’ perceptions of justice on satisfaction

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and intent (cf. Maxham and Netemeyer, 2002). There is also a need for extensions of the existing prior work that may provide effective ways for minimizing certain failures in service delivery systems (Shugan, 2004). Second, research shows that the application of service recovery and justice theory in tourism and hospitality services is in its infancy stage (cf. Becker, 2000; Collie et al., 2000). Thus, the present study also aims to contribute to the existing body of knowledge in the tourism and hospitality literature. Finally, research indicates that customers often complain about services in the Northern Cyprus tourism and hospitality industry (e.g., Kozak et al., 2003; Karatepe and Avci, 2002; Yavas et al., 2004). Therefore, the current research provides managers with important implications for business practice in the Northern Cyprus hotel industry. In the next section the conceptual model and hypotheses are presented. This is followed by discussions of the method and results of the empirical study. The study concludes with the implications of the results and avenues for future research.

2. Theoretical background and research hypotheses Fig. 1 demonstrates the conceptual model and hypotheses. A synthesis of the literature reveals that common potential organizational responses to complaints which refer to a good complaint management process consist of atonement, facilitation, promptness, apology, explanation, attentiveness, and effort (e.g., Johnston, 2001; Boshoff, 1999, 1997; Smith et al., 1999; Davidow, 2000, 2003a; Tax et al., 1998; Leong and Kim, 2002; Yavas et al., 2004; Hoffman and Chung, 1999). Fig. 1 shows that organizational responses to complaints are related to complainants’ perceptions of justice. Perceived justice encompasses three distinct dimensions designated as distributive justice, procedural justice, and interactional justice (Erdogan, 2002; Smith et al., 1999). Distributive justice refers to ‘‘the allocation of costs and benefits in achieving equitable exchange relationships’’ (Smith et al., 1999, pp. 358–359). It has been shown that atonement is the most important organizational response to a customer complaint associated with distributive justice (Tax et al., 1998). Procedural justice refers to ‘‘the perceived fairness of policies, procedures, and criteria used by decision makers in arriving at the outcome of a dispute or negotiation’’ (Blodgett et al., 1997, p. 189). Organizations having policies, procedures, and tools in place are expected to facilitate a complaint handling process and provide quick responses to customer complaints (Davidow, 2000). Therefore, appropriate policies, procedures, and tools which enable customers to lodge their complaints and the speed with which complaints are handled are the two dimensions of procedural justice (Davidow, 2003b). Interactional justice is related to ‘‘the fairness of the interpersonal treatment people receive during the enactment of procedures’’ (Tax et al., 1998, p. 62). It has also been shown that apology, explanation, attentiveness, and effort are the four dimensions of interactional justice (Tax et al., 1998; Smith et al., 1999; Blodgett et al., 1997). Organizations responding to customer complaints on the basis of distributive, procedural, and interactional

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Organizational responses to complaints

Complainants’ perceptions of justice dimensions

Atonement (ATON)

Facilitation (FAC)

H1

H2

Distributive justice (DISTJUST)

H8 H11

Promptness (PROMPT)

Apology (APO)

Satisfaction with complaint handling and loyalty

Complainant satisfaction (CSAT)

H9 H3 Procedural justice (PROCJUST)

H12

H14

H4 H10

H5 Explanation (EXP)

Complainant loyalty (CLOYAL) H13

Interactional justice (INTERJUST) H6

Attentiveness (ATT) H7

Effort (EFFORT)

Fig. 1. Conceptual model.

justice are likely to acquire and retain a pool of satisfied and loyal customers (cf. Smith et al., 1999; Tax et al., 1998). The hypothesized relationships are discussed next. 2.1. Relationships between organizational responses to complaints and justice dimensions 2.1.1. Atonement Atonement refers to ‘‘the benefits or response outcome that a customer receives from the organization in response to the complaint’’ (Davidow, 2003a, p. 232).

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Therefore, complainants’ perceptions of distributive justice involve the allocation of atonement in terms of refunds, free gifts, coupons, and discounts by the service provider in response to the inequity caused by a service failure (Smith et al., 1999). As mentioned earlier, Tax et al. (1998) found that compensation was the most important dimension associated with complainants’ perceptions of distributive justice. Smith et al. (1999) reported that higher levels of compensation increased customers’ perceptions of distributive justice in hotel and restaurant settings. As convincingly discussed by Bowen et al. (1999), compensation is the dominating dimension in distributive justice. In view of the above findings, the following hypothesis is proposed: H1. Atonement is positively related to complainants’ perceptions of distributive justice. 2.1.2. Facilitation Facilitation refers to ‘‘the policies, procedures, and tools that a service firm has in place to support customer complaints’’ (Davidow, 2000, p. 475). Facilitation enables dissatisfied customers to report their complaints to the organization. Having said this, it should be noted that facilitation does not necessarily guarantee an effective complaint handling which leads to the satisfaction of the complainant. In order to make unhappy customers register their complaints, a single point of contact is needed (Johnston and Mehra, 2002). In addition, customers can be encouraged to voice their complaints through, for example, toll-free lines and service guarantees (Davidow, 2000; Callan and Moore, 1998). Organizations aiming to facilitate customers to lodge their complaints should ensure that customers fully understand the willingness of the organization to handle complaints through the use of clear guidelines (cf. Davidow, 2003a). Procedural justice is related to the perceived fairness of the organization’s policies and procedures that guide employees in the service encounter (cf. Smith et al., 1999). Therefore, the present study posits that facilitation is one of the dimensions associated with complainants’ perceptions of procedural justice. This prompts the hypothesis that: H2. Facilitation is positively related to complainants’ perceptions of procedural justice. 2.1.3. Promptness The issue of promptness has received empirical attention in both the service quality literature and the complaint literature. For instance, research indicated that delays in the airline setting had a negative impact on passengers’ perceptions of service quality (Taylor, 1994). Research also showed that providing fast response was a key to successful resolution of customer complaints (Johnston, 2001; Hart et al., 1990). The amount of time taken to deal with the complaint is related to complainants’ perceptions of procedural justice. Specifically, promptness has been identified or found to be an important dimension of procedural justice (Tax et al., 1998; Davidow, 2003b; Blodgett et al., 1997; Smith et al., 1999). Recognizing this, promptness is posited to be one of the principles of procedural fairness in complaint handling process.

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Accordingly, the following hypothesis is proposed: H3. Promptness is positively related to complainants’ perceptions of procedural justice. 2.1.4. Apology An apology refers to ‘‘a valuable reward that redistributes esteem (a social resource) in an exchange relationship’’ (Smith et al., 1999, p. 359). In terms of service recovery, an apology can be considered psychological compensation, because it might assist customers to restore equilibrium (Davidow, 2000). Complainants expect the organization to treat them with courtesy and respect and give an apology. Providing a sincere apology can show an understanding of the dissatisfaction felt by the complainant, without admitting the guilt (Davidow, 2003a, p. 241). An apology is related to the interpersonal treatment the complainant receives during service recovery and is considered an important dimension of complainants’ perceptions of interactional justice. In view of the aforementioned information, the following hypothesis is proposed: H4. Apology is positively related to complainants’ perceptions of interactional justice. 2.1.5. Explanation Explanation refers to the fact that firms are aware of the problem (Yavas et al., 2004), are willing to account for the problem (Davidow, 2000), and are doing their best to recover it (Andreassen, 2000). However, service firms may not recover failures, when frontline employees lack the inability to provide a logical explanation to the customer (cf. Bitner et al., 1994). Effective explanations given by service providers may lower a complainant’s perception of the seriousness of a failure. As persuasively discussed by Bowen et al. (1999), complainants expect the organization to explain why service failure occurred in the first place. Fair interpersonal treatment requires the provision of an explanation in the resolution of a failure (Tax et al., 1998). This prompts the hypothesis that: H5. Explanation is positively related to complainants’ perceptions of interactional justice. 2.1.6. Attentiveness Attentiveness refers to the interpersonal communication and the interaction between the organization’s representative and the complainant (Davidow, 2003a). This dimension consists of respect and politeness (Davidow, 2000), empathy (Parasuraman et al., 1988), and willingness to listen (Plymire, 1991). Due to the nature of their boundary-spanning roles, frontline employees have frequent contact with customers. However, research indicates that nearly two-thirds of customer complaints are initiated by frontline employees (Tax and Brown, 1998). With this realization, the attitudes and behaviors of frontline employees become critical in effective service recovery efforts. Frontline employees who are really willing to listen to customer complaints, respect complainants and show empathy to them in the

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service encounter are likely to provide fair interpersonal treatment to complainants (cf. Bowen et al., 1999; Blodgett et al., 1997; Tax et al., 1998). Accordingly, the following hypothesis is proposed: H6. Attentiveness is positively related to complainants’ perceptions of interactional justice. 2.1.7. Effort Effort refers to the force, energy, or activity by which work is accomplished (Brown and Peterson, 1994). Therefore, effort can be conceptualized as the amount of positive energy spent by frontline employees for recovering service failures. Prior studies demonstrate that frontline employees putting much effort into their work report increased performance (Brown and Peterson, 1994) and provide superior quality as perceived by customers (Yoon et al., 2001). In order to receive fair interpersonal treatment, customers expect frontline employees to put a great deal of effort into resolving their complaints (cf. Tax et al., 1998; Blodgett et al., 1997). Thus, the following hypothesis is proposed: H7. Effort is positively related to complainants’ perceptions of interactional justice. 2.2. The effects of justice dimensions on complainant satisfaction Organizations providing ‘‘just’’ resolutions in their complaint handling practices are likely to have a pool of satisfied customers. In this study, satisfaction is conceptualized as ‘‘the customer’s overall feeling about the company as a result of the company’s handling of the complaint’’ (Davidow, 2000, p. 478). The following sections provide evidence to support the effects of distributive, procedural, and interactional justice on complainant satisfaction. 2.2.1. Distributive justice Distributive justice outcomes may be evaluated in terms of refunds, free gifts, coupons, and offers to mend in response to inequity resulting from a service failure (cf. Kelley et al., 1993). There is empirical evidence to support the premise that customers receiving a fair treatment with regard to the final recovery outcome are satisfied with the organization’s complaint handling process. For example, Goodwin and Ross (1992) found that distributive justice influenced satisfaction with complaint handling. Mattila (2001) reported that distributive justice had the largest impact on satisfaction in restaurants and dry-cleaning services. Recently, Maxham and Netemeyer (2002) also found that retailers providing complainants with refunds and discounts were likely to increase satisfaction with recoveries. More recently, Davidow (2003b) indicated that of the three justice dimensions, distributive fairness was the most important dimension affecting satisfaction. Thus, the following hypothesis is proposed: H8. Distributive justice is positively related to complainant satisfaction.

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2.2.2. Procedural justice In terms of complaint handling process, procedural justice refers to the perceived fairness of policies, procedures, and tools in place to support a complaint and the perceived amount of time taken to deal with a complaint (cf. Davidow, 2003b). There are empirical studies which show that procedural justice is important for complainant satisfaction. For instance, Tax et al. (1998) demonstrated that customers experiencing higher levels of procedural justice reported higher levels of satisfaction with complaint handling. De Ruyter and Wetzels (2000) reported that service recovery with higher procedural fairness (voice-opportunity to express feelings) led to more positive perceptions of customer satisfaction. Recently, Maxham and Netemeyer (2002) also showed that retailers offering procedural justice increased satisfaction with the recovery. In light of the aforementioned evidence, the following hypothesis is proposed: H9. Procedural justice is positively related to complainant satisfaction. 2.2.3. Interactional justice Interactional justice, as the third type of justice (Erdogan, 2002), refers to the fairness of the interpersonal treatment customers receive in the service encounter (Tax et al., 1998). As discussed by Maxham and Netemeyer (2002), the interaction between the organization’s representative and customers heavily influences customers’ evaluations of service recovery. In a study of hotel guests, Lewis and McCann (2004) reported that one of the most common service failures experienced by hotel guests was associated with unfriendly and unhelpful frontline employee (receptionist). Empirical studies showed that the provision of fair interpersonal treatment positively affected satisfaction with complaint handling (Tax et al., 1998; Davidow, 2003b). Therefore, the following hypothesis is proposed: H10. Interactional justice is positively related to complainant satisfaction. 2.3. The effects of justice dimensions and satisfaction on complainant loyalty In this study, the behavioral aspects of the loyalty construct are characterized in terms of repurchase intentions, word-mouth-communication, and recommendations of the organization (cf. Yi, 1990; Zeithaml et al., 1996). There is empirical support which indicates that high levels of distributive, procedural, and interactional justice result in high levels of complainant loyalty. For example, Blodgett et al. (1997) found interactional justice as the most influential dimension on complainants’ repatronage and negative word-of-mouth intentions. De Ruyter and Wetzels (2000) reported that organizations providing effective recoveries based on distributive and procedural justice were likely to increase complainant loyalty. In view of the above findings, the following hypotheses are proposed: H11. Distributive justice is positively related to complainant loyalty.

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H12. Procedural justice is positively related to complainant loyalty. H13. Interactional justice is positively related to complainant loyalty. Studies indicate that an increase in customer satisfaction should lead to an increase in customer loyalty (Heskett et al., 1994; Reichheld and Sasser, 1990). In addition, when service firms stand behind the service and become fair in resolving complaints, they are likely to achieve customer loyalty (Blodgett et al., 1993). Empirical evidence in various service settings also indicates that highly satisfied customers will be more loyal to organizations (Smith and Bolton, 1998; Hallowell, 1996). Accordingly, the following hypothesis is proposed: H14. Satisfaction with complaint handling is positively related to complainant loyalty.

3. Methodology 3.1. Sample In this study, the hypothesized relationships were tested using data collected from Turkish guests in Northern Cyprus hotels. There are twenty-eight 3-, eight 4-, and six 5-star hotels in Northern Cyprus (Statistical Yearbook of Tourism, 2003). A total of 1000 questionnaires were personally distributed by the research team to guests who were accommodated in 3-, 4-, and 5-star hotels in Northern Cyprus. Judgmental sampling procedure was applied (Judd et al., 1991). The research team screened the respondents for eligibility to participate in the study. Specifically, only those guests who had experienced service failures and reported their complaints during their stay were given questionnaires. Respondents were requested to fill out the questionnaires in a self-administered manner and return them directly to the research team. By the cut-off date for data collection, 781 usable surveys were personally retrieved from the respondents for a response rate of 78.1%. The types of guests’ complaints ranged from inappropriate functioning of airconditioning systems in rooms and lack of cleanliness in rooms and public areas to noise pollution in the vicinity of hotels, errors in reservations, and lack of quality in food and beverage services. Most of the complainants told the research team that: (i) they did not know how to lodge their complaints, (ii) they did not receive proper compensation, (iii) they did not receive reasonable explanations in response to their complaints, and (iv) they were dissatisfied with the behavior and efforts of frontline employees who were supposed to deal with complainants. 3.2. Measures The relevant writings were canvassed in order to measure the constructs specified in the conceptual model. Atonement, facilitation, promptness, apology, explanation,

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attentiveness, and complainant satisfaction were measured using three (3) items each from Davidow (2000). Four (4) items were adapted from Brown and Leigh (1996) to measure effort. A four-item distributive justice scale was adapted from Smith et al. (1999). A three-item procedural justice scale was adapted from Blodgett et al. (1997). Interactional justice was measured using seven (7) items. Specifically, five (5) items from Severt (2002) and two (2) items from Smith et al. (1999) were used to measure interactional justice. Five (5) items were adapted from Zeithaml et al. (1996) to measure complainant loyalty. Responses to the loyalty items were elicited on 5-point scales ranging from ‘‘5 ¼ extremely likely’’ to ‘‘1 ¼ not at all likely’’. Responses to the items in atonement, facilitation, promptness, apology, explanation, attentiveness, and effort were elicited on 5-point scales ranging from ‘‘5 ¼ strongly agree’’ to ‘‘1 ¼ strongly disagree’’. The items in justice dimensions and complainant satisfaction were also measured on five-point scales from ‘‘5 ¼ strongly agree’’ and ‘‘1 ¼ strongly disagree’’. The survey was originally prepared in English and then translated into Turkish in light of the back-translation method (McGorry, 2000). The measuring instrument was finalized based upon feedback from a pilot sample of 50 Turkish hotel guests. Specifically, all respondents had no difficulty in understanding the items.

4. Results 4.1. Respondents’ profile As can be seen in Table 1, more than forty percent (42.4%) of the respondents were between the ages of 18–37 and one-half of the respondents between the ages of 38–57. The majority of the respondents were male (56.3%). More than fifty percent of the respondents had university education and more than one-third of respondents secondary or high school education. For the overwhelming majority of the respondents (74.4%), the main reason for their stay was vacation. 4.2. Dimensionality, convergent and discriminant validity of the scales Joreskog et al. (2000, pp. 143–144) state ‘‘In confirmatory factor analysis, y one builds a model assumed to describe, explain, or account for the empirical data in terms of relatively few parameters’’. Therefore, the measures were subjected to confirmatory factor analysis to provide support for issues of dimensionality, convergent and discriminant validity (Anderson and Gerbing, 1988; Fornell and Larcker, 1981). One item from explanation was deleted due to its low standardized loading (o0.50). The results of the confirmatory factor analysis demonstrated a reasonable fit of the twelve-factor measurement model to the data on a number fit statistics (w2 ¼ 3259:30; df ¼ 794, GFI ¼ 0.84, AGFI ¼ 0.81, NFI ¼ 0.89, NNFI ¼ 0.90, CFI ¼ 0.91, RMSEA ¼ 0.06, RMR ¼ 0.04). As shown in Table 2, the factor loadings ranged from 0.60 to 0.95 and the overwhelming majority of the factor loadings were above 0.70. All t-values (42.00) were significant (Anderson and

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Table 1 Demographic breakdown of the sample (n ¼ 781) Frequency

%

Gender Female Male Total

341 440 781

43.7 56.3 100.0

Age (year) 18–27 28–37 38–47 48–57 58–67 68 and above Total

129 202 237 155 46 12 781

16.5 25.9 30.3 19.9 5.9 1.5 100.0

Education Primary school Secondary or high school Vocational school University first degree Graduate degree Total

14 293 134 281 59 781

1.8 37.5 17.2 35.9 7.6 100.0

Purpose of visit Business Vacation VFR Other Total

134 581 47 19 781

17.2 74.4 6.0 2.4 100.0

Gerbing, 1988). In addition, average variance extracted for each construct was computed as an evidence of convergent validity. Fornell and Larcker (1981) suggest that average variance extracted for each construct should not be below 0.50. Table 2 demonstrates that average variance extracted for each construct is higher than 0.50, excluding procedural justice. Model fit statistics as well as the magnitudes of the factor loadings and average variances extracted provided support for convergent validity (Anderson and Gerbing, 1988; Fornell and Larcker, 1981). In addition, a series of pairwise confirmatory factor analyses were employed to assess the issue of discriminant validity. In particular, we first fit a two-dimensional model for each pair of study constructs and then we forced items representing each factor into a single factor solution. Various fit statistics produced better results for a two-factor model. The results strongly suggest that each set of items represents a single underlying construct and provides evidence for discriminant validity (Anderson and Gerbing, 1988). As also reported in Table 2, reliability coefficients exceeded the 0.70 cut-off value as recommended by Nunnally (1978).

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Table 2 Scale items, reliabilities and confirmatory factor analysis results Scale items

Atonement (ATON) After receiving the hotel response, I am in the same shape or better than I was before the complaint. The hotel response left me in a similar or improved position to where I was before the problem. The outcome that I received from the hotel returned me to a situation equal to or greater than before the complaint. Facilitation (FAC) It was easy to determine where to lodge my complaint. Hotel policies made it clear how to complain. It was hard to figure out where to complain in this hotel. (R) Promptness (PROMPT) It took longer than necessary to react to my complaint. (R) They were very slow in responding to the problem. (R) The complaint was not taken care of as quickly as it could have been. (R) Apology (APO) I received a sincere ‘‘I’m sorry’’ from the hotel. The hotel gave me a genuine apology. I did not receive any form of apology from the hotel. (R) Explanation (EXP) I did not believe the hotel explanation of why the problem occurred. (R) The hotel explanation of the problem was not very convincing. (R) Attentiveness (ATT) The hotel’s employee treated me with respect. The hotel’s employee paid attention to my concerns. The hotel’s employee was quite pleasant to deal with.

Standardized loadings

t-values

0.87

30.32

0.89

31.41

0.88

30.62

0.84

27.60

0.86

28.50

0.73

22.76

0.83

26.89

0.60

17.36

0.81

25.90

0.95

34.88

0.90 0.79

31.87 26.10

0.84

26.89

0.84

26.74

0.68

20.37

0.71

21.80

0.84

27.63

Average variance

a

0.78

0.91

0.66

0.85

0.57

0.79

0.78

0.91

0.71

0.83

0.56

0.78

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Table 2 (continued ) Scale items

Effort (EFFORT) The hotel’s employee put all his/her energy into resolving my complaint. The hotel’s employee worked at his/her full capacity to resolve my complaint. The hotel’s employee devoted himself/ herself to resolving my complaint. The hotel’s employee strived as hard as he/she could to be successful in resolving my complaint. Distributive justice (DISTJUST) The outcome I received was fair. I did not get what I deserved. (R) In resolving the problem, the hotel gave me what I needed. The outcome I received was not right. (R) Procedural justice (PROCJUST) My complaint was handled in a very timely manner. My complaint was not resolved as quickly as it should have been. (R) I often had to apply to the related hotel’s employee for the resolution of my problem. (R) Interactional justice (INTERJUST) The hotel’s employee was courteous to me. The hotel’s employee was honest with me. The hotel’s employee showed a real interest in trying to be fair. The hotel’s employee showed concern. The hotel’s employee tried to help me. The hotel employee’s communication with me was appropriate. The hotel’s employee put the proper effort into resolving my problem. Complainant satisfaction (CSAT) My satisfaction with this hotel has increased. My impression of this hotel has improved. I now have a more positive attitude toward this hotel.

Standardized loadings

t-values

0.83

27.72

0.83

28.08

0.84

28.55

0.82

27.52

0.82 0.86 0.85

27.31 29.42 28.73

0.79

25.57

0.74

22.88

0.60

17.44

0.70

21.01

0.65

20.13

0.77

25.40

0.83

28.06

0.85 0.83 0.70

29.10 28.11 22.04

0.82

27.53

0.91

32.67

0.91

32.91

0.90

32.14

Average variance

a

0.69

0.90

0.69

0.90

0.46

0.73

0.61

0.92

0.82

0.93

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Table 2 (continued ) Scale items

Complainant loyalty (CLOYAL) Say positive things about this hotel to other people. Recommend this hotel to someone who seeks your advice. Encourage friends and relatives to accommodate in this hotel. Consider this hotel my first choice for accommodation. Consider this hotel more for accommodation in the next few years.

Standardized loadings

t-values

0.82

27.19

0.87

30.14

0.89

31.44

0.77

24.87

0.76

24.49

Average variance

a

0.68

0.91

Model fit statistics (w2 ¼ 3259:30; df ¼ 794, GFI ¼ 0.84, AGFI ¼ 0.81, NFI ¼ 0.89, NNFI ¼ 0.90, CFI ¼ 0.91, RMSEA ¼ 0.06, RMR ¼ 0.04). Notes: Loyalty items are measured on five-point scales ranging from ‘‘5 ¼ extremely likely’’ to ‘‘1 ¼ not at all likely’’. Other items are measured on five-point scales ranging from ‘‘5 ¼ strongly agree’’ to ‘‘1 ¼ strongly disagree’’. All loadings are significant at the 0.01 level or better. All reliability estimates are above the 0.70 cut-off value, and all average variances extracted are above 0.50, except for procedural justice whose average variance is 0.46. GFI ¼ Goodness of fit index, AGFI ¼ Adjusted goodness of fit index, NFI ¼ Normed fit index, NNFI ¼ Non-normed fit index, CFI ¼ Comparative fit index, RMSEA ¼ Root mean square error of approximation, and RMR ¼ Root mean square residual.(R): These items were reverse scored.

The correlations among the study variables were calculated using composite scores. Specifically, composite scores for each construct were computed by averaging scores across items representing that construct. Table 3 indicates the correlations among the composite scores representing the study variables ranged from 0.40 (promptness and complainant loyalty) to 0.78 (interactional justice and complainant satisfaction). Means and standard deviations of composite scores of study variables are also presented in Table 3. 4.3. Path analysis results The correlation matrix shown in Table 3 was used as input in order to test the hypothesized relationships using LISREL 8.30 through path analysis (Joreskog and Sorbom, 1996). The path-analytic approach enables the researcher to test a number of hypothesized relationships simultaneously involving multiple dependent variables. This approach also ‘‘permits for restricted models with systematic constraints on relationships among variables. Thus, models that include only those paths hypothesized a priori can be tested’’ (Yavas et al., 2003, p. 259). The model depicted in Fig. 1 fits the data reasonably based on a number of fit statistics (e.g., w2 ¼ 618:36; df ¼ 31, GFI ¼ 0.88, NFI ¼ 0.90, CFI ¼ 0.90). Table 4 shows that all hypothesized relationships are supported.

1.00 0.58 0.50 0.64 0.52 0.65 0.71 0.67 0.65 0.74 0.73 0.60 3.17 1.08

Atonement (ATON) Facilitation (FAC) Promptness (PROMPT) Apology (APO) Explanation (EXP) Attentiveness (ATT) Effort (EFFORT) Distributive justice (DISTJUST) Procedural justice (PROCJUST) Interactional justice (INTERJUST) Complainant satisfaction (CSAT) Complainant loyalty (CLOYAL) Mean Standard deviation 1.00 0.52 0.63 0.47 0.60 0.55 0.56 0.56 0.65 0.62 0.51 3.20 1.06

2

1.00 0.55 0.62 0.52 0.55 0.48 0.58 0.52 0.55 0.40 3.04 1.07

3

1.00 0.46 0.57 0.53 0.51 0.56 0.65 0.61 0.51 3.28 1.12

4

1.00 0.49 0.53 0.52 0.56 0.53 0.56 0.48 2.95 1.09

5

1.00 0.66 0.58 0.61 0.77 0.69 0.55 3.41 0.84

6

1.00 0.65 0.67 0.75 0.74 0.62 3.11 1.02

7

1.00 0.63 0.73 0.70 0.57 3.17 1.11

8

1.00 0.68 0.70 0.57 3.09 0.96

9

1.00 0.78 0.63 3.45 0.86

10

1.00 0.70 3.14 1.15

11

1.00 3.07 1.10

12

Notes: Composite scores were calculated by averaging scores across items representing that construct. The scores range from 1 to 5. A higher score indicates a more favorable response. All correlations are significant at the 0.01 level (2-tailed).

1

Variables

Table 3 Correlations, means and standard deviations of composite scores of study variables

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Table 4 Path analysis results Hypothesized relationships

Standardized parameter estimates (ML)*

t-values**

I. Impact on distributive justice H1 ATON-DISTJUST R2 ¼ 0:44

0.66

24.43

II. Impact on procedural justice H2 FAC-PROCJUST H3 PROMPT-PROCJUST R2 ¼ 0:43

0.35 0.40

11.12 12.43

III. Impact on interactional justice H4 APO-INTERJUST H5 EXP-INTERJUST H6 ATT-INTERJUST H7 EFFORT-INTERJUST R2 ¼ 0:73

0.22 0.05 0.39 0.35

9.17 2.36 14.54 13.13

IV. Impact on complainant satisfaction H8 DISTJUST-CSAT H9 PROCJUST-CSAT H10 INTERJUST-CSAT R2 ¼ 0:62

0.20 0.26 0.45

8.95 11.73 18.59

V. Impact on complainant loyalty H11 DISTJUST-CLOYAL H12 PROCJUST-CLOYAL H13 INTERJUST-CLOYAL H14 CSAT-CLOYAL R2 ¼ 0:46

0.08 0.10 0.14 0.46

2.65 3.24 4.03 10.50

Model fit statistics (e.g., w2 ¼ 618:36; df ¼ 31, GFI ¼ 0.88, NFI ¼ 0.90, CFI ¼ 0.90). Notes: GFI ¼ Goodness of fit index, NFI ¼ Normed fit index, and CFI ¼ Comparative fit index. * Maximum likelihood. ** po0.05. All hypothesized relationships are significant and supported.

4.3.1. The effect of atonement on complainants’ perceptions of distributive justice Hypothesis 1 stated that atonement (ATON) is positively associated with complainants’ perceptions of distributive justice (DISTJUST). Path analysis provided empirical support for a significant positive relationship between the two constructs. Hypothesis 1 was therefore supported. Atonement explained 44% of the variance in distributive justice. 4.3.2. The effects of facilitation and promptness on complainants’ perceptions of procedural justice Hypothesis 2 suggested that facilitation (FAC) has a significant positive effect on complainants’ perceptions of procedural justice (PROCJUST). Path analysis indicated a significant positive relationship between the two constructs. Hypothesis 2

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was therefore supported. Hypothesis 3 stated that promptness (PROMPT) is positively related to complainants’ perceptions of procedural justice (PROCJUST). The result involving path from promptness to procedural justice was significant and positive. Hypothesis 3 was therefore supported. Facilitation and promptness jointly explained 43% of the variance in procedural justice. 4.3.3. The effects of apology, explanation, attentiveness, and effort on complainants’ perceptions of interactional justice Apology (APO), explanation (EXP), attentiveness (ATT), and effort (EFFORT) exerted significant positive effects on complainants’ perceptions of interactional justice (INTERJUST). Hypotheses 4–7 were therefore supported. Apology, explanation, attentiveness, and effort jointly explained 73% of the variance in interactional justice. 4.3.4. The effects of justice dimensions on complainant satisfaction Distributive justice (DISTJUST), procedural justice (PROCJUST), and interactional justice (INTERJUST) were positively associated with complainant satisfaction (CSAT). Hypotheses 8–10 were therefore supported. Distributive, procedural, and interactional justice jointly explained 62% of the variance in satisfaction. 4.3.5. The effects of justice dimensions and satisfaction on complainant loyalty Hypothesis 11 stated that distributive justice (DISTJUST) exerts a significant positive influence on complainant loyalty (CLOYAL). Path analysis showed a significant positive relationship between distributive justice and complainant loyalty. Hypothesis 11 was therefore supported. Hypothesis 12 indicated that procedural justice (PROCJUST) is positively related to complainant loyalty (CLOYAL). Path analysis also showed that procedural justice was positively associated with complainant loyalty. Hypothesis 12 was therefore supported. Interactional justice (INTERJUST) had a significant positive association with complainant loyalty (CLOYAL). Hypothesis 13 was therefore supported. Finally, complainant satisfaction (CSAT) demonstrated a significant positive relationship with complainant loyalty (CLOYAL). Hypothesis 14 was therefore supported. Justice dimensions and satisfaction jointly explained 46% of the variance in loyalty.

5. Discussion and implications The current study investigated: (i) the effects of various organizational responses to complaints on distributive, procedural, and interactional justice; and (ii) the effects of complainants’ perceptions of distributive, procedural, and interactional justice on satisfaction and loyalty. The empirical results demonstrate that all hypothesized relationships were supported. However, this is a generalized summary. Consonant with prior studies (e.g., Smith et al., 1999; Tax et al., 1998; Davidow, 2003b), the present study reports that the organizational responses to complaints affect their underlying justice dimensions. Specifically, the empirical findings indicate

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that atonement is a necessary condition for distributive justice. Complainants expect to be offered some forms of atonement such as replacement, refund, free gifts, and coupons by the organization relative to the failures they experienced. Path analysis indicates that facilitation and promptness are positively associated with procedural justice. Promptness seems to have a stronger effect on complainants’ perceptions of procedural justice than that of facilitation. Customers also expect the organization to respond to their complaints ‘swiftly’. However, it should here be noted that perceived response time is important for customers, not the actual time (cf. Gilly, 1987). Apology, explanation, attentiveness, and effort have been found to be positively related to complainants’ perceptions of interactional justice. Of the four organizational response options, explanation is the least important dimension influencing interactional justice. In addition, attentiveness and effort exert stronger effects on complainants’ perceptions of interactional justice than those of apology and explanation. This study shows that the interpersonal skills (attentiveness and effort) displayed by the organization’s frontline employee appear to have a key role on complainants’ perceptions of interactional justice. The findings of the current study indicate that the effects of distributive, procedural, and interactional justice on complainant satisfaction are significant and positive. Specificially, complainants who experience higher levels of distributive, procedural, and interactional justice report increased satisfaction with complaint handling. However, the effect of interactional justice on complainant satisfaction is stronger than that of distributive justice. This finding is inconsistent with those of Smith et al. (1999) and Maxham and Netemeyer (2002). In addition, the impact of interactional justice on complainant satisfaction is stronger than that of procedural justice. This provides empirical support for that of Davidow (2003b). The empirical results of this study point to the importance of fair interpersonal treatment for achieving complainant satisfaction. As is the case with the relationship between justice dimensions and complainant satisfaction, the present study also reports that all justice dimensions are positively associated with complainant loyalty. However, the effect of interactional justice on complainant loyalty is stronger than those of distributive and procedural justice. Once again, these results point to the importance of fair interpersonal treatment in the service encounter. As hypothesized, customers who are satisfied with complaint handling report increased loyalty to the organization. 5.1. Managerial implications This empirical study has a number of useful implications for hotel managers. First, each organizational response has been found to have a different proportional effect on their underlying justice dimensions (except for atonement). In addition, it has been shown that the effect of promptness on procedural justice appears to be stronger than that of facilitation. Therefore, managers should develop policies and procedures that aim to process the complaint and arrive at a decision quickly by

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considering the response time as perceived by complainants (cf. Davidow, 2003b). Second, this study demonstrates that the interpersonal skills (attentiveness and effort) displayed by the organization’s frontline employee play a critical role on the provision of interactional fairness. With this realization, managers are supposed to select the most suitable candidates with outstanding interpersonal skills for the vacant boundary-spanning positions. Third, this study has shown that interactional justice has a greater impact on complainant satisfaction and loyalty than do distributive and procedural justice. Consistent with Blodgett et al.’s (1997) argument, the present study suggests that an increase in interactional justice can compensate for a decrease in distributive justice. Therefore, partial atonement seems to be a remedy for complainant satisfaction and loyalty, if complainants receive fair interpersonal treatment. Finally, the critical roles of promptness and interactional justice (as evidenced by attentiveness and effort) points to the management’s emphasis on training, empowerment, and rewards simultaneously (cf. Babakus et al., 2003). Arranging ongoing training programs is of great importance to learning how to recover from a number of service failures as experienced by customers. Through training programs, frontline employees can learn how to provide quick responses to complaints, be attentive to complainants, and display positive energy to resolve the complaint. In addition, training programs that really focus on the critical importance of interactional justice can influence the long-term profitability of the hotel. With empowerment, frontline employees have a degree of increased responsibility and authority to be able to resolve the complaint at first hand. Appropriate recognition and reward programs should also be in use to motivate frontline employees extrinsically so that frontline employees can focus on the importance of interactional justice in achieving complainant satisfaction and loyalty. However, it should be kept in mind that efforts for establishing effective complaint handling mechanisms are doomed to failure, if frontline employees are underpaid, undertrained, and overworked in the organization. 5.2. Limitations and future research directions It should be underscored that several limitations are of note. First, the specific service industry chosen for this empirical investigation is hotel industry, and this may raise concerns about the issue of generalizability. Hartline and Ferrell (1996) have observed that the selection of a single service industry eliminates problems associated with industry differences. Nevertheless, replication studies with large sample sizes in other tourism and hospitality settings simultaneously (e.g., travel agencies, restaurants, and airlines) elsewhere would be fruitful. Second, constructs such as process control, decision control, empathy, and initiation (Tax et al., 1998; Smith et al., 1999) were not incorporated into the current conceptual model. Their inclusion in future studies may shed further light on our understanding of the justice dimensions. Third, the purpose of this empirical study was not to investigate the moderating roles of types and magnitudes of failures among the study constructs. Therefore, future studies may test the hypothesized

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relationships in Fig. 1 on the basis of types and magnitudes of failures (cf. Smith et al., 1999). Finally, the current study has not employed an in-depth interview, a critical incident technique, or a scenario-based experiment to examine the relationships in the conceptual model. However, the use of one of these techniques in future research would provide further understanding of the relationships in the conceptual model.

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