Service in the restaurant industry: an American and Irish comparison of service failures and recovery strategies

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Hospitality Management 22 (2003) 395–418

Service in the restaurant industry: an American and Irish comparison of service failures and recovery strategies R.D. Muellera,*, A. Palmerb, R. Macka, R. McMullanc a

College of Charleston, School of Business and Economics, 9 Liberty Street, Charleston, SC 29424, USA b University of Gloucestershire, The Park, Cheltenham, GL50 2QF, UK c York Street, Belfast BT15 RD, UK

Abstract The literature on service failure and recovery has to date tended to focus on American experiences or on single nation studies. As large numbers of service firms continue to seek opportunities in foreign markets, more effort needs to be directed at assessing cross-national similarities and differences so that appropriate strategies can be developed. This study compares the effects of failure and recovery strategies in the restaurant sector of two countries with very different dining traditions—the United States and Ireland. Analysis of over 700 personal interviews with restaurant customers shows that there is much commonality with regard to service failures but significant differences in recovery efforts. Especially noteworthy, however is that American customers are much more likely to expect such measures. In both countries, overcompensation methods do not appear to influence customer repeat patronage intentions, nor do they have significant influence on the rating of recovery effort. This last finding suggests that restaurants could and should use less expensive recovery methods. r 2003 Elsevier Ltd. All rights reserved. Keywords: Service failures; Restaurant industry; American–Irish comparison; Recovery strategies

1. Introduction Early service marketing research concentrated on defining and determining the dimensions of service quality; later research examined customer defection due to service quality failure. In little over a decade, service quality research has come *Corresponding author. Fax: +1-803-953-5697. E-mail addresses: [email protected] (R.D. Mueller), [email protected] (R. McMullan). 0278-4319/$ - see front matter r 2003 Elsevier Ltd. All rights reserved. doi:10.1016/S0278-4319(03)00072-0

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full-circle as service firms start to assess the bottom-line impact of customer defections and begin to adopt continuous improvement strategies. More recently, there has been much attention, by both the business and academic press, devoted to the art of service recovery when service failures do occur. Although a lot of attention has been devoted toward defining and categorizing service failures and recovery efforts, only limited empirical research examining failure and recovery has been conducted (e.g. Hoffman et al., 1995; Mattila, 1999; McDougall and Levesque, 1998). Another important gap in the current servicerelated research and outcomes is its applicability in cross-national settings It is wellknown that culture shapes consumer behavior (Maheswaran and Shavitt, 2000) and hospitality and tourism researchers have been encouraged to focus efforts on identifying and understanding cultural differences in order to provide useful information to practitioners. Nevertheless, as Stauss and Mang (1999) note, there has been hardly any prior discussion about customers with differing (national) cultural backgrounds having differing expectations toward service encounters. The research adds to the literature by empirically studying restaurant service failure, recovery, and expectations in two countries: Ireland and the US.

2. Theoretical background Parasuraman et al. (1985) define service quality as an overall evaluation that results from comparing a firm’s performance with the customer’s general expectations of how the industry should perform. If service expectations are not met, service failure occurs. Boulding et al. (1999) investigated the effects of prior expectations on customers’ cumulative perceptions of quality. The authors discussed the issue of confirmatory bias in evaluating new data, and noted that consumers’ prior expectations are likely to be double counted as they update their perceptions of quality. According to Hoch and Ha (1986), the disconfirmation paradigm suggests that individuals are more likely to select and attend to information that confirms their prior expectations, rather than information that disconfirms them. Consumers appeared to form biased perceptions of new service experiences based upon their prior expectations. Results of this research suggested that consumers’ prior perceptions influence not only their overall assessment of quality, but also their perceptions of each specific transaction. Although zero defects is the desired objective for most firms, it is unlikely organizations will achieve this goal. This is particularly true of service industries where the multi-dimensional nature of the service encounter creates an environment where service failure is almost inevitable. The initial research used to validate the SERVQUAL methodology showed that service quality consists of five dimensions: tangibles, reliability, responsiveness, assurance, and empathy (Parasuraman et al., 1988). Because many of these dimensions relate to human interaction, failure is almost unavoidable. Indeed, service failure differs profoundly from tangible goods failure primarily because a service usually provides a psychological and largely personal outcome, whereas a tangible product failure is usually impersonal in its

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impact on the customer (Hocutt et al., 1997). A number of attempts have been made to replicate the SERVQUAL methodology in the hospitality sector, often finding different factor structures and suggesting alternative frameworks for measuring service quality within the sector (e.g. Oyewole, 1999; Ekinci and Riley, 1999). One reason for the failure of studies within the hospitality sector to consistently replicate a factor structure for service quality is that each consumer has unique requirements for what is considered ‘‘good service’’, i.e. the same mistake is perceived differently by different consumers (Bell, 1994). There is also a growing realization that the pursuit of total quality may not be economically feasible as the costs of investing in higher quality may not be matched by price premiums which customers are prepared to pay. The notion of ‘‘return on quality’’ recognizes that it may not be profitable to satisfy all incidents of customer dissatisfaction and studies have shown that the pursuit of ‘‘total quality’’ is not necessarily the most profitable option for operators within the hospitality sector (e.g. Breiter and Bloomquist, 1998). There has now been considerable research into the classification of consumer complaint behavior, building on frameworks developed in social psychology (Alicke et al., 1992). Hirschman (1970) found three types: exit (where the consumer terminates the relationship), voice (where the customer vocalizes the complaint), and loyalty (where the customer passively accepts the failure). A number of other researchers have noted that complainers are the exception (Hart et al., 1990; Boshoff, 1997)—most unhappy people simply do not speak up (Zemke, 1991). According to Scarborough, and Scarborough et al. (1996), 96 percent of dissatisfied customers never complain but 91 percent would not buy again from the business. Other research (Goodwin and Ross, 1990; Stewart, 1997) has examined this further and found that younger and more educated customers are more likely to volunteer complaints. A link has been observed between the act of complaining and consumer satisfaction (Nyer, 2000). The hospitality sector has been rich in studies of service failure and recovery, and studies have been undertaken from both the customers’ and employees’ perspectives (e.g. Mack et al., 2000; Hoffman et al., 1995; Hoffman and Chung, 1999; McDougall and Levesque, 1998). More recently, researchers have been exploring why customers ‘‘switch’’ or ‘‘defect’’. According to a study conducted by Keaveney (1995), the top two critical incident categories are core-service failures and service-encounter failures (Keaveney, 1995). Core-service failures (the largest category) are incidents that are due to mistakes or technical problems with the service itself. Service encounters (the second largest category of failures), are personal interactions between customers and employees of service firms. Berry and Parasuraman (1992) summarize, in general, that service failure leads to a decline in customer confidence, lost customers, negative word-of mouth, possible negative publicity, and the direct cost of re-performing the service. A number of other authors have tried to be more specific in ‘‘measuring the costs’’ of service failures. Hart et al. (1990), e.g. found that when customers have bad experiences they tell an average of 11 people; when the experience is good, they tell six. This negative word of mouth can be especially important in industries where

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recommendations from friends and acquaintances carry more clout (Zemke and Bell, 1990). Keaveney (1995) emphasizes that most continuing customers increase their spending at an increasing rate of purchase. Consequently, firms are not just losing the future revenue stream but, because most customers increase their spending at an increasing rate, purchasing at full margin, the cost of acquiring a new customer (new account setup, credit search, advertising and promotion, etc.) can cost five times the cost of effort that might have enabled the firms to retain a customer. Indeed, Power (1992) writes that improving a company’s customer retention rate by 20 percent has the same effect on profits as cutting costs by 10 percent. Reichheld and Sasser (1990) report on even more dramatic bottom-line effect: profits can be boosted by almost 100 percent by retaining just 5 percent more of a company’s customers. For firms that have measured the bottom line, the results of reduced service failure and increased effectiveness of recovery efforts, have been impressive. Hampton Inn, e.g. claimed to have realized $11 million in additional annual revenue when it implemented its service quality program (Ettorre, 1994). Even more striking, Canadian Airlines calculated the value of a satisfied business travel customer to be $915,000 over 10 years (Jenkins, 1992). Given the bottom-line implications, it is not surprising that recent research has shifted toward categorizing and assessing service recovery strategies and their success. According to Groonroos (1988) service recovery strategies include all the actions taken in response to service defects or failure. Initial findings are not surprising: when rating service recovery strategies, the best scores come from customers who have experienced no problems, the second from those who have had problems resolved satisfactorily, and the worst from customers whose problems go unsolved (Berry and Parasuraman, 1992). Perhaps more importantly, Anderson and Sullivan (1993) found that quality that falls short of expectations has a greater impact on satisfaction and repurchase intentions than quality that exceeds expectations. Zemke (1991) noted that firms should ‘‘do it right the first time’’. If the firm fails the first time, however, the way a company responds can help turn the situation around. According to Zemke (1991), customers who complain and have their complaint satisfied are more likely to purchase additional products than are customers who have experienced no problems with the organization or its products and services. In a similar vein, Hocutt et al. (1997) found that when the customer causes the service failure, satisfaction (complaint) levels are higher (lower) after service recovery efforts than in situations where no service failure occurs. Indeed, Hart et al. (1990) stress that a good recovery can turn angry, frustrated customers into loyal ones. Based on its own research, Technical Assistance Research Program (TARP, 1987) offers its own often quoted views on service recovery that supports this theory: *

*

swift and effective service recovery enhances consumers’ perceptions of the quality of product or service they have already purchased; service recovery can enhance customers’ perception of the organization’s competence; and

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good recovery enhances the perceived quality and value of other products and services.

Fortunately, there seems to be considerable overlap in agreement between practitioners and academics on how firms can recover from a service failure. Hart et al. (1990), e.g. suggest that firms measure the cost of a dissatisfied customer, break customer silence by encouraging them to complain and listen for complaints, anticipate needs for recovery, act fast, train employees, empower the front line, and close the customer feedback loop. Zemke (1991) suggests that, if a failure occurs, firms should apologize, offer a fair fix, correct the failure and demonstrate that the firm cares about the work and customer’s satisfaction, offer some value-added atonement (if necessary), and keep promises about the firm’s ability to fix the mistake. Nevertheless there is still an issue in developing customers’ willingness to complain, with research evidence pointing to widespread apathy by customers (Stewart, 1997). With regard to satisfaction of service recovery efforts, Boshoff (1997) noted the positive relationship between dollar amount spent and customer satisfaction. Furthermore, it was discovered that positive inequitable outcomes (over benefiting) lead to the highest levels of satisfaction. Though not examined through statistical analyses, Power (1991) has noted that today’s customers are more demanding. Indeed, anecdotal evidence suggests that customers have little tolerance for service failure and are more demanding in expecting compensation when failures do occur. By using the critical incident technique (CIT), Bitner et al. (1990) and Hoffman et al. (1995) have delineated the major groupings that collectively represent incidents leading to satisfying and dissatisfying service encounters from the customer’s perspective. In their studies, the researchers found 11 (Hoffman et al. found 12) unique failure subgroups which fell under three major groups: employee response to service delivery system failure (unavailable, slow service or core-service failure); employee responses to implicit/explicit customer requests (responses to special needs, customer preferences, admitted customer error, disruptive others); and unprompted and unsolicited employee actions (attention paid to customer, out-of-the-ordinary employee behavior, employee behaviors in the context of cultural norms, gestalt evaluation, and performance under adverse circumstances). In addition, the researchers were able to categorize and assess the recovery strategies of service firms. The categorization of recoveries resulted in 12 strategies that fell into five classifications: compensatory, managerial response, corrective response, empathetic response and no action taken. Further research to classify service failures in the hospitality sector has used an attribution theory approach (Sparks and Callan, 1996). The most significant finding of research within the hospitality sector is that successful recovery is largely a function of the employee’s knowledge and control and; therefore, employees must be empowered to take whatever action is proper for a specific situation. In addition, the interactive nature of service within the hospitality sector has led to some researchers noting that the customer is an active part of a recovery process, and a successful outcome can be dependent upon their skills as a problem solver (Colenutt and McCarville, 1994).

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Much of the work on recovery strategies is grounded on equity theory. In categorizing recovery strategies, Gilley and Hansen (1985) found three broad categories: under-benefiting, equitable, and overbenefiting. Which strategy is being used and which is most effective has become the focus of many studies. Goodwin and Ross (1990) used equity theory in evaluating which strategy customers perceive as being fair. They hypothesized that people will become angry when equity principles are violated and that people will try to reduce their discomfort by trying to restore either physical or psychological equity. Furthermore, the researchers found that a simple apology was perceived as being false but that an apology plus some sort of compensation was perceived as being genuine and more satisfactory. These general principles have been validated in a study of the hotel sector which found perceived justice to be an important factor leading to customers restoring their confidence in a hotel following a service failure (McCollough, 2000). As businesses, including those in the hospitality sector, continue to go global, the need to understand a number of nation-related phenomena increases. As Stauss and Mang (1999) point out, because people from different cultures have different behavioral norms, it is plausible that there are differences in expectation of service.Yet the issue of national culture on service recovery strategies is underresearched and the majority of literature on service failure has taken a US perspective.

3. National culture differences There is increasing evidence that national culture does make a difference in consumer behavior. According to research carried out by Trompenaars (1997), the American culture tends to exhibit emotions, separate them from rational decision making. The American culture has been attributed with a desire for seeking an overall sense of fair play (Klopf, 1984). Conversely, Italians exhibit emotions and not separate them from objective decisions. By contrast, Confucianism has been noted to encourage people to become righteous citizens by reciprocating value in return for the favors that they receive (Yeung and Tung, 1996). Given this diversity of cultural characteristics, it is quite likely that customer responses to service failure and recovery will differ between national cultures. Among the limited research within the hospitality sector, an exploratory study by Becker (2000) identified some differences between customers of the hospitality sectors in the USA, Scandinavia, Asia and Latin America, noting that differences in cultural attitudes and expectations should inform operators’ recovery strategies. At the consumer level, there has been considerable research into the (national) cultural interpretation of messages given by an organization’s employees, especially its front line sales personnel (Pitt et al., 2000; Armstrong and Sweeney, 1994). Related to this is the issue of whether national culture has a significant effect on individual employees working in the services sector. In a cross-national comparison of the hotel sector, Gilbert and Tsao (2000) noted that service organizations differ in their ability and willingness to empower front employees to correct the effects of service failure. They noted in a study of Taiwanese

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hotels that a policy of ‘‘smiling’’ and ‘‘acting by the book’’ may have met a hotel’s standardized operation procedure but may have failed in their ability to satisfy customers’ sense of fairness. While the term culture is too broad to be captured by a single variable such as country, nationality is often used to describe the idea of a national culture or character. Indeed, country is often (problematically) used as an operational measure of national culture (Balabanis et al., 2002). That is, not to say that researchers do not recognize the multi-dimensionality of culture. Increasingly, researchers are using the multi-dimensional ‘‘culture as values’’ frameworks developed by Hofstede (1980) and Schwartz (1992) to explain national differences in consumer behavior. The models of both these authors have been widely used throughout the behavioral sciences. Although a number of international researchers have noted the superior value of Schwartz’s values system framework (Bond and Smith, 1996; Maheswaran and Shavitt, 2000; Balabanis et al., 2002), as Litvin and Goh (pending publication) review, Hofestede’s (1980) five-dimensional model of national culture (power distance, uncertainty avoidance, individualism–collectivism, masculinity–feminity, and Confucianism/dynamism) is the most widely used national culture model (The model is described in Table 1). More recently, researchers have been using the model to help explain national differences in consumer behavior as well (Van Birgelen et al., 2001; Litvin and Goh, pending publication; Stauss and Mang, 1999; de Mooij, 2000; Crotts and Pizam, 2003; Chelminski, 2001). This has coincided with the growing recognition that service sector researchers need to move beyond explaining nationality differences and move toward explaining differences within the broader framework of national culture. Several studies have used Hofstede’s national value scores to explain national differences in visitor/customer satisfaction and evaluations (Litvin and Goh, pending publication; Crotts and Pizam, 2003; Van Birgelen et al., 2001), consumer complaint behavior (Chelminski, 2001), tipping customs (Lynn and Lynn, 2002), service expectations (Stauss and Mang, 1999), and product usage (de Mooij, 2000). Interestingly, while the most used dimension is widely regarded as being the individualism/collectivism dimension (Litvin and Goh, pending publication; Maheswaran and Shavitt, 2000), a review of literature shows that hospitality and tourism researchers seem to find differences in masculinity–feminity, power distance, and uncertainty avoidance dimensions as also being useful in explaining behavioral differences. Table 1 summarizes some of these findings. So how do the national cultures of the US and Ireland differ? As noted in the table above, the US and Ireland (part of the UK), score similarly on all of Hofstede’s cultural dimensions. They are most different on the Uncertainty Avoidance Index. Out of the 69 countries reported on, however, they ranked within four places of each other (the UK ranked 47–48 and the US ranked 43) on this dimension. Consequently, it might also be insightful, therefore, to examine other types and sources of national differences. Despite a shared ancestry, the US and Ireland differ in many aspects of their culture, e.g. with regard to the role of the family, education, employment patterns

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Table 1 Cultural comparison (Hofstede’s Index: A 100-point scale) Index and description

Service research application

US score

UK score

Power distance: acceptance of inequality

Cultures scoring high on power distance have higher expectations for service (Crotts and Pizam, 2003) and report higher satisfaction when the company apologizes and/or when people in authority interact during the recovery process (Pasongsukarn and Patterson, 2001) Customers in cultures with high uncertainty avoidance might be more irritated at the breakdown of the system (Stauss and Mang, 2001) Collectivist cultures find it difficult to voice complaints and place higher value on organization-initiated recovery (Pasongsukarn and Patterson, 2001) and customers from individualist countries will expect a more personalized service (Stauss and Mang, 1999) High masculinity cultures are more likely to report dissatisfaction (Crotts and Erdmann, 2002) Long-term oriented customers have lower expectations for first-time service (Donthu and Yoo, 1998)

40

35

46

35

91

89

62

66

29

25

Uncertainty avoidance: extent to which people feel comfortable in unstructured situations Individualism vs. collectivism: ability to subordinate group goals to those of the group

Masculinity vs. femininity: preference for achievement and assertiveness vs. modesty and nurturing relationships Long-term vs. short-term (Confucianism–dynacism): willingness to delay gratification of their material, social and emotional needs

and material and spiritual aspirations. In the context of the restaurant sector, the US has a strong cultural tradition of eating out, whereas family meals at home have remained more important in Ireland. This may be due to families living in close proximity, reduced commuting distance to and from work and embedded social norms. However, eating out in Ireland is on the increase (The Irish Food Service Market, 1997). This rise in eating out is attributed to a number of motivations, including celebration, entertainment, convenience, variety and impulse. There are three general differences to eating out in the US and in Ireland. Firstly, frequency of eating out in the USA is greater than in Ireland. Secondly, the range and styles of eating and dining experiences is much more limited in Ireland than in the USA (Ireland and Northern Ireland Hotel Industry Survey, 1998). This may be partly based on the dominance of independent restaurants in Ireland serving traditional Irish food as opposed to a dominance of chains in the US serving a variety of food and dining experiences. A consequence of this issue in Ireland is a belief that people can

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substitute a homemade meal of equal quality for that of a restaurant experience. A third difference is related to training within independent restaurants within Ireland, which has often been limited due to high staff turnover; consequently, standard procedures for dealing with complaints are generally not developed or implemented (BHA, 1999).

4. The study The restaurant industry is typically one of the largest sectors of western economies. Americans, e.g. spend approximately $970 million a day dining out, making the restaurant sector the largest service industry (Lord, 1999). Likewise, a growing number of countries have noted the important role that hospitality and tourism plays in their economy. In Ireland, e.g. there is mounting political and public awareness of the role that the industry plays in economic recovery and growth (Ridley, 1998). Consumers spent between d1.5 and d1.7 billion eating out in Ireland in 1996, representing 3 percent of the combined GDP of the Republic of Ireland and Northern Ireland (The Irish Food Service Market, 1997). At the micro-level, restaurants are finding competition to be fierce. Because recent economic forecasts show that, with few exceptions, every region of the world is expected to experience growth, many restaurant chains are looking for growth opportunities outside their national borders (McDowell, 1995). Research shows that few things are as important to restaurant customers as good service. In the US, the restaurant industry has conducted a number of studies that confirm the importance of service quality and effective recovery from service failure. According to restaurant experts, the level of service can even impact the way food tastes (Waters, 1998). In one large-scale US study, 90 percent of male heads of household ranked customer service as important to extremely important (84 percent of women agreed) (Waters, 1998). Likewise, another industry survey found that restaurant patrons, across all age groups and all demographics, rated the quality of service as an important factor when it came to deciding where to eat (Restaurant and Institutions, 2000). In western economies, it has been noted that the focus of consumption has moved from a tangible product to an intangible service to a focus on ‘‘experiences’’ (Pine and Gilmore, 1998). With increasing consumption of restaurant services, American restaurant consumers have raised expectations of these experiences and are further advanced than consumers in other countries in the shift from service to experience. This was also evidenced by Clarke and Wood (1998) who investigated the role of loyalty on restaurant choice within the UK restaurant sector. They identified that the intangible aspects of the meal experience appeared to be a function rather than cause of loyalty. Patrons ranked atmosphere and speed of service within the top five criteria for developing loyalty. A major trend in the service industry, including the restaurant subsector, is international expansion. For many, the global marketplace presents a growing opportunity for increasing sales by seeking out new consumer markets (Weinstein,

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1994; McDowell, 1995) and also for diversifying risk (tough times in one region can be offset by better times in another) (Oetzel, 2000). Over the last two decades, many major chains and others have made the international plunge by bringing foreign audiences everything from gourmet coffee and ice cream to American-style Steak Houses and deep-dish pan pizzas (Weinstein, 1994; Masur, 1997). Indeed, according to Technomic Inc.’s findings, international sales for the top 100 chains increased faster than domestic sales (Oetzel, 2000). Many of the restaurants that are expanding internationally are chain restaurants and franchises (Oetzel, 2000). The domestic success of these restaurants has been due, in large part, to the standardization of products and services. While some international researchers argue that cross-cultural differences have little relevance to marketing practice (Ohmae, 1985) or that there is often more within-country differences than between-country differences (Douglas and Craig, 1992), others argue that differences are actually increasing (Costa and Bamossy, 1995). Indeed, industry interviews with key decision-makers suggest that restaurants will fail internationally if they do not consider national differences (Oetzel, 2000). A key decision managers must make, therefore, is whether to standardize or customize and how far to go with either strategy. A review of restaurant literature shows that there is considerable evidence that international restaurants customize, at least to a certain extent, food items so that they are more in line with local (national) tastes. Very little, however, has been written on the standardization or customization of responses to service failures. This study uses restaurant patrons in two countries (Ireland and the United States) to explore cross-national differences and similarities of service failure and recovery. The primary aim of the study is to determine the most prevalent service failures and recovery strategies used in each country. The study also investigated the effectiveness of each strategy and customers’ expectations for recovery. The study sought to test the following hypotheses with respect to restaurant customers: H1: There are no differences between Irish and USA customers’ responses to service failure. H2: There are no differences between Irish and USA customers’ responses to firms’ efforts at recovering from service failure.

5. Methodology The study uses frameworks suggested by a number of authors but most particularly those of Hoffman et al. (1995) and Bitner et al. (1990). In particular, the researchers, in a personal interview setting, asked 392 US and 327 Irish restaurant patrons to answer the following (open-ended) questions related to a service failure or service mistake: * *

What happened? Why did it happen?

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What did the restaurant do to correct the mistake? If the restaurant did not satisfactorily correct the mistake, what else could it have done?

The methodology employed in categorizing these open-ended question answers was the CIT (Flanagan, 1954). This technique is a systematic interview procedure for recording behavior that has been observed to lead to success and/or failure regarding the accomplishment of a specific task (Ronon and Latham, 1974). It has been used in analyzing a variety of marketing and management performances and has been especially useful in analyzing customer (dis)satisfaction (Bitner et al., 1990, 1994; Hoffman et al., 1995; Keaveney, 1995). Two assessors were used to categorize all reported incidents and Perreault and Leigh’s (1989) estimate of reliability index was used in determining interjudge reliability and the reliability of the coding process. The reliability indices exceeded 0.90 in the American and 0.87 in the Irish study. It was recognized that in any crosscultural research, differing interpretations may be placed on any reported phenomenon, and so to judge consistency between the two data sets, a sample of questionnaires was judged by assessors from each country. The level of crossnational reliability using Perreault and Leigh’s methodology was 0.85. A number of other questions were asked regarding: the date of occurrence, the type of restaurant, the purpose of the dining occasion, the estimate of the amount of money spent on the occasion, whether the customer did anything to draw attention to the mistake, and whether the customer would dine there again. A 5-point semantic differential was used to gauge how major or minor the mistake was perceived, and how good the recovery strategy was. In addition, other demographic variables were asked. To facilitate analysis of the consequences of service failures, some attitudinal questions used semantic differentials. For the question ‘‘How would you rate the severity of the mistake?’’ answers were given as a semantic differential (1=minor mistake, 5=major mistake). A semantic differential was also used to obtain answers for ‘‘How would you rate the efforts of the restaurant regarding the correction of the mistake (service recovery)? (1=very poor to 5=very good). The critical incidents were collected by students as part of a service marketing class project in Charleston, SC and County Londonderry, Northern Ireland. Non-probability, convenience sampling was employed. Although quotas were not required, the samples were found to be representative of reasonable demographic diversity. Details of key characteristics of the samples are shown in Table 2.

6. Findings 6.1. Service failures Service failures that occurred as long as 20+ years ago were reported by the respondents. While one can expect some forgetting of details, the CIT can

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Table 2 Sample characteristics

Sample size Gender Male Female Missing Mean age Average frequency of dining out per month Average amount spent during reported incident (US$) Self-elicited complaint? Restaurant type Fast food Other chain Independent/other

Irish sample

USA sample

327

392

145 (43.8%) 184 (55.6%) 2 (0.6%) 27 3.6 27.04 40.0

186 (47.4%) 202 (51.5%) 4 (1.1%) 35 9.1 35.48 76.9

33.4 16.4 48.2

46.0 43.5 10.5

demonstrate just how long a service failure can linger. Service failure was operationally defined to include an incident that was defined by the respondent as being a failure. There appears to be considerable commonality with regards to types of restaurant service failures (see Table 3). In both samples, the top three critical incident failures reported were the same: cook error, wait staff error and unreasonably slow service. True to the Pareto Principle (80/20 rule), these top three failures account for approximately 80 percent (81.5 percent in the Irish and 78 percent of the US sample) of service failure incidents. The remaining 12 categories account for 20 percent or less. A comparison of the distribution of failures with those found in previous studies by Bitner et al. (1990) and Hoffman et al. (1995) is shown in Table 3. In both the earlier studies, subclassifications were grouped into three main categories by interjudge agreement. Using the same classification system, the current study found that twice as many service failures were attributed to service delivery system failures than in the previous two studies. These differences merit further investigation. Of particular interest would be whether factor analytic techniques would uncover a similar number of classifications or whether the incidents would possibly be categorized differently. Restaurant locations were coded as fast food restaurants, other chain restaurants, or independent restaurants. There was no statistical difference in service failure severity perceptions across the various category types. In addition, no differences in the perceptions of the service failures were noted across the amount spent on the dining occasion, purpose of the dining occasion and frequency of dining out. One interesting finding was that Irish customers tended to list more than one incident (1.8 vs. the US respondents’ 1.14). This is consistent with Crotts and Erdman’s (2002) suggestion that high masculinity cultures are more likely to report dissatisfaction. Overall, however, Americans tended to perceive the failures as more severe (3.84 vs. 3.75) and a t-test comparison of these means found them to be

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Table 3 Critical incident failures Critical incident

% and number of incidents

% of total incidents

Irish

Irish

Unavailable service Unreasonably slow service Employee/wait staff error Employee/cook error Manager error Customer special needs not met Customer preferences not met Customer error Disruptive others Poor level of attention Usual action Cultural norms violated Gestalt Adverse conditions Other

03.7 20.5 60.6 68.8 08.6 0.90

Total

US (12) (67) (198) (225) (14) (3)

Degree of failure 1=minor 5=major US

Irish

US

— 20.9 (82) 27.0 (106) 39.5 (155) 36 (14) 0.5 (2)

0.02 0.12 0.33 0.38 0.02 0.00

0.00 0.18 0.34 0.31 0.00 0.5

3.17 3.79 3.68 3.72 3.93 2.33

— 3.85 3.62 3.88 4.28 4.50

03.7 (12) 0.30 (1) 1.20(4) 11.6 (38) 5.2 0(17) — 1.50 (5) 0.30 (1) 0.90 (3)

5.9 0.5 0.3 4.1 5.4 1.0 1.5 2.3 1.3

0.02 0.00 0.01 0.06 0.02 0.00 0.00 0.00 0.00

0.00 0.00 0.00 0.04 0.05 0.01 0.01 0.02 0.01

3.92 3.00 4.00 3.47 3.82 — 4.60 5.00 4.00

3.56 2.50 3.00 4.00 4.23 3.50 4.67 3.78 4.40

1.83 (600)

1.14 (446)

3.75

3.84

(23) (2) (1) (16) (21) (4) (6) (9) (5)

100

100

Table 4 Comparison of service failure findings

Service delivery system failures (%) Customer needs and requests Unprompted/unsolicited employee action

Bitner et al.

Hoffman et al.

US sample

Irish sample

23.3 32.9 43.8

44.4 18.4 37.2

86 4 10

86 3 11

significantly different at p ¼ 0:023: Again, this supports research that suggests cultures scoring high on power distance have higher expectations for service (Crotts and Pizam, 2003) and that customers from countries with higher-uncertainty avoidance scores become more irritated at the breakdown of the system (Stauss and Mang, 2001) (Table 4). Particularly significant differences were found in the incidence of reporting failed incidents which can best be described as relating to the attention given by the restaurant to consumers’ individual needs (‘‘Customer special needs not met’’ and ‘‘Poor level of attention’’). In both cases, the USA sample regarded this as a significantly more frequent source of dissatisfaction. Again, this is consistent with others’ explanation that the more individualistic a culture is, the more personalized attention they expect (Stauss and Mang, 1999).

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6.2. Service recovery strategies It appeared that the American sample was more vocal in its complaints. While only 40 percent of the Irish respondents made the restaurant aware of the failure, 77 percent of the Americans voiced their complaints. This contradicts several experts’ opinions that the majority of consumers never complain. These findings are also inconsistent with Crotts and Erdmann’s (2002) assertion that customers from cultures that score higher on masculinity are more likely to report dissatisfaction. Interestingly, the Irish respondents stated that more service recovery strategies were used on each occasion (1.33 vs. 1.23) though no attempt at recovery was made in 28.4 percent of the reported Irish incidents and 21.9 percent of the reported USA incidents (Table 5). In the Irish sample, when recovery strategies were used, they were most likely to take the form of simply replacing or correcting the food order and/or apologizing for the failure. These three recovery strategies accounted for 52.5 percent of the strategies. In the US sample, these same strategies accounted for 47.5 percent of the total incidents. In the US however, the most popular recovery strategy was to replace

Table 5 Comparison of recovery strategies used Strategies

Strategy used (%, #)

Perceived effort

% who would return

Irish

Irish

US

Irish

US

(65) (53) (27) (16) (27)

3.59 3.13 3.14 3.42 4.40 3.54

4.2 3.9 4.15 4.19 4.31 4.11

40.7 66.7 71.4 66.7 50.0

75.0 79.2 70.4 79.2 87.5

1.8 (6)

4.8 (19)

3.33

3.84

20.0

74.1

17.1 (56) 19.9 (65)

16.3 (64) 13.0 (51)

3.21 2.88 3.05

2.84 3.20 3.02

45.6 46.2

50.8 60.8

Empathetic responses Apology

15.3 (50)

15.6 (61)

2.92

3.02

62.0

60.8

No action taken No response

28.4 (93)

15.6 (61)

1.07

1.19

18.3

28.2

0.57 2.88

1.86 3.34

66.7 36.0

57.1 55.6

Compensatory Gratis-replace Gratis-ancillary Gratis-overkill Discount Coupon Average compensatory response Managerial response Managerial interventions Corrective responses Replacement Correction Average corrective response

Other Average of all categories

8.3 7.3 2.1 3.7 1.5

US (93) (24) (27) (12) (5)

0.8 (3) 1.33

16.6 13.5 6.9 4.1 6.9

1.8 1.02

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the food AND offer it at no charge (vs. on 8.6 percent in the Irish sample). Indeed, compensatory responses were far more prevalent in the US (48 percent) than in Ireland (23 percent). In both samples, 15 percent of the respondents indicated that an apology was given. Normally, the apology was given in conjunction with some other strategy. In the Irish sample, e.g. 68 percent of those receiving an apology also stated that another recovery effort was made (most often replacement). In the US, 71 percent of the respondents stated that multiple recovery efforts were used (most often gratis replacement or gratis partial). Full details of recovery strategies used following different types of service failure are shown in Table 6. 6.3. Recovery ratings and repeat patronage The Irish respondents rated overall recovery strategies on slightly the poor side (2.88) whereas the Americans rated the overall efforts slightly on the good (3.34) side (p ¼ 0:000). Despite scale differences in mean response, in both cases, respondents rated compensatory efforts the highest (Irish 3.54, US 4.11). Interestingly, the highest rating, in both samples, was given to coupons (4.40 in the Irish and 4.31 in the US). In the Irish sample, respondents reported that coupons were given without any other strategies. In the US sample, 20 percent of those receiving a coupon also received other compensation (most often the coupon was accompanied by a simple apology). Perhaps the most important finding, however, is the responses related to repeat patronage. In general, if a service failure occurred, Irish respondents were less likely to state that they would dine at the restaurant again—even if they rated the effort of recovery average (3.0) or better. In fact, only 37 percent said they would dine at the restaurant again. As can be viewed from the overall results, Americans appear to be much more forgiving: 56 percent said they would dine at the restaurant again. When the restaurant took no action to correct the mistake, 88 percent of Irish respondents and 78 percent of American respondents indicated they would not dine at the restaurant again. The highest repeat patronage rates were generated by compensatory strategies; apologies were also likely to generate repeat patronage. In the US sample, however, it is worthwhile to note that the most expensive compensatory strategy: gratis overkill (restaurant gave a free meal AND offered other compensations such as free food for the entire table, complimentary drinks or desserts, coupons, etc.) did not generate as much repeat patronage as did coupons, gratis-ancillary (customer paid for the meal but got complimentary drinks, dessert, or other item), and discounts. Although gratis overkill received the highest marks in the Irish sample, gratisancillary and discount also received high marks. When no action was taken by the restaurant to recover from the service failure, fewer than 20 percent of the Irish and 30 percent of the American respondents said they would return. Respondents were also asked what else could have been done to improve the service (Table 7). Fifty-nine percent of the American sample and 44 percent of the Irish sample felt that some compensatory strategy could have been used (discount, at 27 percent, was mentioned most often in both samples). It was notable that among

410

Unreasonably slow service Irish

USA

Irish

Cook error

USA

Irish

Manager error USA

Irish %

USA

Irish

Poor level

USA

Irish

USA

No.

%

No.

%

No.

%

No.

%

No.

%

No.

%

No.

%

No.

%

No.

%

No.

%

No.

4.5 14.9 0 7.5 0

(3) (10)

12.2 24.4 4.9 3.7 6.1

(10) 20 4 (3) (5)

7.6 7.6 2.5 4.0 15.7

(15) (15) (5) (8) (31)

17.0 16.0 3.8 2.8 3.8

(18) (17) (4) (3) (4)

10.7 8.4 2.7 5.3 0

(24) 21.9 (34) 10.7 (19) 9.7 (15) 3.6 (6) 10.3 (16) 0 (12) 4.5 (7) 0 7.7 (12) 0

(3) (1)

14.3 7.1 7.1 0 7.1

(2) (1) (1)

8.3 8.3 0 8.3 0

(1) (1)

8.7 0 0 0 8.7

(2)

(2)

5.3 2.6 26.1 2.6 7.9

(2) (1) (1) (1) (3)

12.5 (2) 18.8 (3) 0 6.3 (1) 0

8.7

(2)

2.6 (1)

12.5 (2)

(5)

No.

Customer preferences not met

(1)

(1)

%

Managerial response Managerial Interventions

1.0

(2)

3.7

(3)

1.0

(2)

3.8

(4)

Corrective responses Replacement Correction

4.5 9.0

(3) (6)

4.9 3.7

(4) (3)

15.7 25.8

(31) (51)

18.9 13.2

(20) (14)

20.4 (46) 24.5 (38) 14.3 20.0 (45) 18.1 (28) 25.0

(4) (7)

28.6 28.6

(4) (4)

25.0 16.7

(3) (2)

30.4 8.7

(7) (2)

2.6 (1) 21.1 (8)

0 12.5 (2)

Empathic responses Apology

23.9

(16)

17.1

(14)

15.7

(31)

20.8

(22)

15.6 (35)

(4)

7.6

(1)

33.3

(4)

17.4

(4)

23.7 (9)

6.3 (1)

No action taken No response

37.3

(25)

31.7

(26)

27.3

(54)

16.0

(17)

26.2 (59) 15.5 (24) 35.7

(10)

28.6

(4)

25.0

(3)

0

2.4

(2)

1.0

(2)

2.8

(3)

Other

0

2.2 (5)

0.4 (1)

3.2 (5)

0

9.0 (14) 14.3

1.3 (2)

0

0

0

0

0

0

31.6 (12) 56.3 (9) 0

0

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Compensatory Gratis-replace Gratis-ancillary Gratis-overkill Discount Coupon

Wait staff error

R.D. Mueller et al. / Hospitality Management 22 (2003) 395–418

Table 6 Causes of service failures and restaurants’ recovery strategy—a comparison of US and Irish samples

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those for whom no corrective action was taken, the Irish sample was more likely than the American to stress the need for the restaurant to make a strategic view about reviewing its service delivery processes (42.2 percent of all comments in the Irish sample, compared with 15.4 percent in the USA sample). This might be reflective of Ireland’s slightly higher score on the collectivism index which is hypothesized to mean that customers would place higher value on organization-initiated recovery (Pasongsukarn and Patterson, 2001). 6.4. Conclusions and management implications Much has been written about the globalization of marketing and the need to standardize or customize marketing strategies to better serve various national markets (e.g. Levitt, 1983; Douglas and Wind, 1988). According to industry experts, the opportunities for international marketers of consumer goods and services have never been greater. Not surprisingly, an increasing number of restaurant operators are looking at entering international markets. The issue is no longer simply to expand or not to expand; it is ‘‘when, where, how and how fast’’ (Oetzel, 2000). A particular challenge, however, has been how to adapt restaurant concepts to fit unique (national) cultures (Oetzel, 2000). While the art of service failure and recovery has received much attention in the US, there have been few instances of cross-national comparisons. This research has sought to redress the balance of literature on service failure and recovery techniques that has tended to focus on US situations. It might have been expected that differences would occur between countries reflecting different sets of expectations with regard to the manner of service delivery and the recovery from failure. In many ways, the cultural values of the USA and Ireland could have been expected to differ in terms of expectations, e.g. consumerism is more developed as a principle in the USA than Ireland. Patterns of eating out differ, with eating out on a regular basis being less common in Ireland than USA. This was reflected in the finding during this research that respondents in the USA eat out on average three times more frequently than respondents in Ireland. The average expenditure per meal was higher for USA respondents than for those from Ireland. The USA restaurant sector is dominated by large national chains, while these are much less frequent in Ireland where family owned restaurants remain dominant. Despite the differences in the environment of eating out, there is considerable commonality in service failures and consumers’ responses to recovery efforts, thereby giving strong support to both hypotheses that there are few differences between Irish and American restaurant customers’ responses to service failure and recovery. Placing these findings in the context of cultural differences is more problematic. On the one hand, Hofestede’s scores suggest that Ireland and the US have similar cultural values i.e their scores are remarkably alike. It is not, therefore, apparent that their national cultures are that different. Overall, our research supports this contention. On the other hand, the small differences we did find can frequently be justified by applying explanations others have given when describing or

412

All respondents

Respondents for whom no corrective action was taken

No. of times mentioned Management intervention Actively encourage complaints Anticipate needs for recovery Respond quickly Train employees Empower the front line Close the loop Total Compensatory strategies Discount Gratis—replacement or correction Gratis—overcompensation Refund Coupon

USA %

No. of times mentioned

14

(3.271)

0

44

(10.280)

31

19 22 7 14 120

(4.439) (5.140) (1.635) (3.271) (28.037)

94 24

Irish %

0

No. of times mentioned

USA %

No. of times mentioned

%

5

(4.310)

0

0

(6.709)

21

(18.103)

10

(8.130)

3 19 1 5 59

(0.650) (4.112) (0.216) (1.082) (12.770)

7 10 0 6 49

(6.034) (8.620) 0 (5.172) (42.241)

1 7 0 1 19

(0.813) (5.691) 0 (0.813) (15.447)

(21.962) (5.607)

127 39

(27.490) (8.441)

20 6

(17.241) (5.172)

3 16

(2.440) (13.008)

26

(6.074)

24

(5.194)

3

(2.586)

10

(8.130)

4 19

(0.934) (4.439)

40 7

(0.216) (1.515)

0 7

0 (6.034)

7 2

(5.691) (1.626)

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Irish

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Table 7 Comparison of desired recovery actions between all respondents and those respondents for whom no corrective action was taken

Total Corrective responses Correction/replacement Free food partial Total

237

(51.299

36

(31.034)

38

(30.894)

30 13 43

(7.010) (3.037) (10.047)

34 27 61

(0.216) (5.844) (13.203)

15 9 24

(12.931) (7.758) (20.689)

14 11 25

(11.382) (8.943) (20.325)

2 0

(0.467) 0

17 11

(3.680) (2.380)

0 0

0 0

6 4

(4.878) (3.252)

2

(0.467)

28

(6.060)

0

0

10

(8.130)

(1.401) (21.028) (100)

30 47 462

(6.493) (10.173) (100)

16 15 123

(13.008) (12.195) (100)

6 90 428

4 3 116

(3.448) (2.586) (100)

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Other Nothing Total

(39.018)

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Empathetic responses Apology Reaffirmation—admit to mistake Total

167

413

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hypothesizing how differences in values might translate to consumer behavior and, in particular, to service expectations. It is important to note, however, that Hofstede’s work was developed by examining worker values. Hofestede’s original scale items are job related and the findings, therefore, are not necessarily applicable to the consumer sphere. Further, we did not test Hofstede’s model, we simply used his cultural value scores for the UK and US as a basis for explaining differences that we found. While some people have suggested this is a satisfactory approach (Van Birgelen et al., 2001), others have raised serious methodological and conceptual concerns. As some review, there has been a lot of frustration at the lack of insight and also with the behavioral inconsistencies with ‘‘values and culture’’ frameworks (see Boyatzis et al., 2000 for a review) and specifically with national culture and service (Van Birgelen et al., 2001). Indeed, our own research found at least one inconsistency. Consequently, while Hofestede’s framework and others’ findings have assisted in offering more fruitful explanations of our findings, we would caution the reader about relying too heavily on these explanations. At a broader methodological level, this research failed to replicate the distribution of types of service failure found in pervious studies by Hoffman et al. (1995) and Bitner et al. (1994). A higher proportion of failures were observed to be the result of weaknesses in the design and implementation of delivery systems rather than a failure to respond to customers’ needs and requests. While the findings of this survey were based on two raters assessing each described incident independently and with a high level of interjudge reliability, it must nevertheless be recognized that a failure to acknowledge customers’ needs may itself be the result of a poorly designed service delivery system. Although there has been a lot written on service failure in the restaurant sector, to date there has been little empirical evidence linking failures, recovery strategies and revisit intention. This research, however, confirms a number of authors’ contentions that simple apologies are not enough, successful recovery strategies should be used in conjunction with some sort of compensation—regardless of nationality. This research has also confirmed earlier research that some recovery action is much more likely to result in repeat business than no action. Despite considerable commonality in the patterns of service failures and recoveries, a number of differences were quite notable. The American sample appeared to be much more forgiving of service failure, as evidenced by their intention to return to the restaurant where a failure took place. This may reflect growing sophistication of American restaurant customers and their expectation of adequate service recovery processes. This would appear to be consistent with previous research that suggests a strong recovery from a service failure may actually strengthen the loyalty of a customer to an organization. In the more sophisticated American market for restaurant dining, this research has suggested that the quality of recovery may be the critical factor in determining repeat patronage, rather than the failure itself. Compensatory strategies appeared to be particularly effective in encouraging repeat behavior, especially in the US sample. Within this category of compensation strategies, coupons appeared to be particularly effective, with 50 percent of the Irish

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sample and 87 percent of the US sample saying that they would return to the restaurant following a service failure, for which a coupon had been given. This is probably a very cost-effective strategy for the restaurant, as the coupon promotes further income from a repeat visit, including income from friends who may dine with the coupon holder. A coupon also allows the restaurant a second opportunity to demonstrate the effectiveness of its service processes. However, the cost–effectiveness of other forms of compensatory strategies may be questioned. A ‘‘gratis overkill’’ strategy did not yield significantly greater intention of returning compared with a less costly free replacement or free ancillary service.

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Further reading Hofestede, G., 1984. Culture’s Consequences: International Differences in Work-Related Values. Newbury Park, Sage Publications. Hofstede, G.H., 2001. Culture’s Consequences: Comparing Values, Behaviors, Institutions, and Organizations Across Nations. Sage Publications, Beverly Hills, California.