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The role of culture in the perception of service recovery
Journal of Business Research 57 (2004) 957 – 963
The role of culture in the perception of service recovery Nancy Y. Wong* Department of Marketing, Dupree College of Management, Georgia Institute of Technology, 755 Ferst Drive, Atlanta, GA 30332-0520, USA Received 14 August 2001; accepted 18 November 2002
Abstract In international service settings, customers’ evaluations of service encounters are influenced by their evaluations of the service failure and recovery contexts, which are shaped by their cultural orientation. Knowledge of how critical service factors are perceived by customers from different cultural background is important in the design and implementation of global service strategy. Service recovery, in the form of compensation or apology, is tested in three cross-national samples. Compensation is found to improve customers’ assessment of the service encounter in all three countries, but positive effects on repurchase intention and word of mouth (WOM) are only found for the American sample and not for the Singaporean and Australian samples. Apology is found to improve satisfaction in Singapore and Australia but not in the United States. Culture’s influence on the evaluation process is examined to account for the differential impact of apology and compensation on customer perception about service failure and recovery. D 2003 Elsevier Inc. All rights reserved. Keywords: Service; Recovery; Perception; Culture
1. Introduction Service companies have their own kind of scrap heap: customers who will not come back (Reichheld and Sasser, 1990). Research shows that service mistakes/delays are inevitable but dissatisfied customers are not. Good service recovery not only turns angry and frustrated customers into loyal ones, but it also has the potential to create more goodwill than if things have gone smoothly in the first place. Therefore, when things do go wrong, it is critically important to control the customer’s perception of the service encounter (Hart et al., 1990; Taylor, 1994). To do so, it is important to explore how service recovery attempts are viewed by customers since past research shows that failed service encounters and responses to failed service account for around half of all customer switching behavior in service industries (Keaveney, 1995). With increasing globalization, companies are being called to serve customers with divergent needs and expectations shaped by different cultural background and values. Adding to this complexity is the fact that companies often have to deal with such demands simultaneously instead of by geographic segments (for example, Sheraton Hotel * Tel.: +1-404-894-4353; fax: +1-404-894-6030. E-mail address: [email protected] (N.Y. Wong). 0148-2963/$ – see front matter D 2003 Elsevier Inc. All rights reserved. doi:10.1016/S0148-2963(03)00002-X
serving American, Japanese, and German customers in Sydney). Therefore, it would be of interest to both marketing practitioners and researchers to examine differences in the perception of service failure and recovery as well as the subsequent effects on service disconfirmation, performance assessment, postconsumption satisfaction/attitudes, and future intentions in high-involvement service settings. Service industries continue to grow in importance to the United States and global economies while improvements in service quality have not kept pace with its growth (Bitner et al., 1990a). The objective of this study is to understand the influence of cultural values in shaping consumers’ perception of service quality and satisfaction judgments. This also fits in with the growing need for understanding systematic variations in satisfaction across nations (Anderson and Fornell, 1994; Furrer et al., 2001).
2. Service recovery strategies and consumer perceptions Consumer evaluations of service encounters have been found to significantly influence their subsequent satisfaction or dissatisfaction with a service provider (Parasuraman et al., 1994; Bitner et al., 1990b). According to Levesque and McDougall (2000), service recovery strategies typically consist of three types of actions that are used either singly
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or in combination: (1) apologize (acknowledging the problem); (2) assistance (fixing the problem); and (3) compensation (paying for the costs of the problem). Although much research has been done in service delays and product failures (Dube-Rioux et al., 1988; Folkes, 1984; Taylor, 1994), little is known about how well these strategies travel across different national markets and cultural contexts. Research in cultural psychology has shown that the way we process information, relate to others, and organize our priorities are profoundly shaped by the ‘‘cultural meaning systems’’ (Triandis, 1989). This study examines the effect of compensation on service perception/satisfaction and extends service research cross-culturally to test the feasibility of global service recovery strategies for international service providers. In particular, the study focuses on the following research questions: (1) How do customers in different cultures evaluate different service recovery strategies? (2) How do these evaluations affect satisfaction with the service encounter, repurchase intention, and word of mouth (WOM)? Service recovery strategies refer to the actions that firms undertake to respond to service failures (Gronroos, 1988). Past research have shown that apology, assistance, and compensation are the most typical strategies deployed by service providers (Bitner et al., 1990a; Hart et al., 1990). The effectiveness of these actions has been found to vary depending on the nature of the service failure (outcome vs. process), criticality of the service contexts (defined as importance of the service to the consumer; cf. Ostrom and Iacobucci, 1995), and the correspondence (‘‘fit’’) between failure and recovery (Smith et al., 1999). For example, Smith et al. (1999) find that customers are less satisfied after a process failure (e.g., inattentive service) than after an outcome failure (e.g., unavailable service), irrespective of service contexts (hotels or restaurants), and recovery strategies (apology or compensation). In addition, they also find that customers feel that compensation is more equitable in outcome failures whereas an apology is more effective in process failures. This is because service recovery strategies need to be commensurate with the magnitude of the service failures. On the other hand, Darida et al. (1996) show that in low criticality situations, compensation is a more effective recovery strategy than assistance whereas in high criticality situations, the reverse is true. These findings have been established in North America using both American and Canadian respondents and the objective of the present study is to investigate if the service factors of apology and compensation are perceived differently and yield different outcomes in different national markets.
3. Cultural values and evaluation of critical service factors International research in service recovery has been limited. Nevertheless, the little research that investigated
cultural differences on consumer satisfaction seems to indicate fundamental differences in the way consumers evaluate products and services as well as the way satisfaction/dissatisfaction is expressed (Chiu et al., 1987; Hernandez et al., 1991; Yau, 1988). In the case of service failure, the same service recovery strategy could well be evaluated differently across cultures. This difference in perceptions would have a significant impact on customer satisfaction, repurchase intention, and WOM in different cultural settings. Cultural differences due to implicit theories have been found to influence consumer complaint behavior to service quality dimensions in a broad range of consumption settings (Winsted, 1997; Donthu and Yoo, 1998; Mattila, 1999). One widely adopted framework in understanding cultural differences is based on Hofstede’s (1980) study on the measurement of cultural values. In his study of 53 cultures in 72 countries, Hofstede identified four pertinent dimensions where cultures are likely to differ: power distance, individualism (collectivism), masculinity (femininity), and uncertainty avoidance. Power distance reflects the extent to which the less powerful individuals in society are likely to expect power to be distributed unequally. High power distance is typically high as a culture becomes closer to a caste system. Individualism and its opposite, collectivism, describe the degree to which individuals are integrated into social ingroups. Masculinity and its opposite, femininity, describe the extent to which gender roles are strictly defined in society. Finally, uncertainty avoidance indicates the extent to which a culture programs its members to feel either comfortable or uncomfortable in unstructured situations (cf. Hofsteede and Bond, 1988). In a service encounter, high power distance would increase the social position between the customer and service provider. This will in turn increase the service expectation of the customers, especially in the manner (e.g., courtesy, deference) in which the services are delivered. In the event of a service failure, the service gap is perceived to be wider and would require greater effort from the service provider to bridge the gap. Therefore, power distance is expected to exert a negative influence on the positive impact of service recovery actions. In individualist cultures, people have membership in many in-groups (e.g., family, peer-groups, coworkers, clubs), where much of the behaviors are more likely to concern goals of the individual since the demands from various in-groups are more diffused. As a result, distinction between in- and out-groups is less defined, which decreases the social distance between customer and server. Therefore, the service gap is perceived to be narrower and it will likely increase the incremental improvement of service recovery actions. Therefore, individualism is expected to have a positive impact on the improvement in satisfaction with the service recovery action. On the other hand, in masculine societies, people have higher expectations of service and attach great value to good
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service. In the service context, masculinity is likely to enhance the role distinctions between customer and server. Therefore, masculinity is expected to increase the ‘‘disconfirmation’’ gap by raising the service expectation and ‘‘widens’’ the incremental improvement of service recovery actions in terms of service disconfirmation. Finally, high uncertainty avoidance will likely have the most significant impact on repurchase intention, regardless of service recovery strategy. This is because individuals would seek to minimize the potential for service failures in the future, despite successful service recovery in improving satisfaction and positive WOM.
4. Method A survey method is employed to investigate the influence of apology vs. compensation on perception of service recovery strategies cross-culturally. This approach has several advantages: reduction of biases from memory lapses, consistency of service failure and recovery situations in different samples, and elimination of difficulties associated with field observations or enactment of service encounters (Smith et al., 1999). The consumption scenario to be evaluated by respondents must fulfill the following criteria: (1) the occurrence of service failure of a consumption event; (2) a plausible outcome for compensation; and (3) a familiar social activity that respondents have experience in undertaking. Similar to past research that employs experimental methodology (Folkes, 1984; Bitner, 1990; Smith et al., 1999; Levesque and McDougall, 2000), it allows for the manipulation of service recovery attempts and for data collection crossculturally. The study tests the hypotheses in a 3 (country: United States vs. Australia vs. Singapore) 2 (compensation vs. apology) between-subjects design. Respondents in each country are assigned randomly to one of the two conditions. The country samples are selected because they are similarly developed in terms of service industry and socioeconomic indicators but differently distributed across the relevant cultural dimensions (www.asiandemographics.com, Census 2000). Although the United States and Australia are very similar in terms of Hofstede’s dimensions of individualism, masculinity, and power distance, these two countries are also different in terms of uncertainty avoidance. Therefore, one would expect to find differences between Australians and Americans’ responses in the relationships between uncertainty avoidance and repurchase intentions. Two versions of the study booklets are prepared, identical with the exception of compensation vs. apology. The experimental scenario describes two persons going out to dinner on a special occasion that has been planned in advance, with careful selection of a restaurant. The special night is ruined when their orders are misplaced and the waiter has gone off work. They are either given a free meal
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(compensation only) by the restaurant or received profuse apologies (apology only) for the service failure. 4.1. Data collection Respondents are undergraduate business students from three different universities in United States (n = 253), Australia (n = 192), and Singapore (n = 71). All students participate in the study for a small amount of course credit. They are given one of two versions of the study booklet at random. They are instructed to read the scenario and imagine that they are the people in that situation. After reading the story, respondents give ratings to measures of service disconfirmation, performance assessment, satisfaction, and future intentions. The samples are similar in terms of age (Australia 22, Singapore 21, and United States 23), frequency of eating out at restaurants (Australia 1.47 times, Singapore 1.15 times, and United States 2.11 times in a typical week), and the dollar amount spent on restaurant meals (low $20s for Australia and Singapore and almost $20 for United States). 4.2. Measures Two performance assessment measures (‘‘Service at this restaurant is very poor’’ and ‘‘This incident is the reason that your mood is ruined for the evening’’) are included to evaluate and to affirm that a service failure had occurred in both conditions. Therefore, lower scores represent better assessment. Three measures of service disconfirmation (‘‘Compared to what I expected the restaurant to be like, benefits I enjoyed were. . .’’; ‘‘Overall, the restaurant was. . .’’) are used to measure respondents’ perceptions of service quality. Contrary to performance assessment, higher scores here represent lower disconfirmation. Service disconfirmation is measured using five-point scale as opposed to the seven-point scales used throughout the study for purpose of consistency with the original scales in past study (Westbrook, 1987). All items are measured using the seven-point semantic differential scale (Bitner, 1990b). Satisfaction is measured by three 7-point semantic differential items (Bitner, 1990b; Oliver and DeSarbo, 1988) to assess overall satisfaction with the server, the restaurant, and the dining experience. Future behaviors are measured by positive WOM (‘‘Are you likely to recommend the restaurant to others?’’) and repurchase intention (‘‘Are you likely to go back to the restaurant in the future?’’).
5. Analysis and results Using guidelines suggested by Steenkamp and Baumgartner (1998), the measurement equivalence of the key measurement variables are tested using confirmatory factor analysis. To conduct means comparisons across country samples, scalar invariance of these measures needs to be
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Table 1 Tests of the measurement equivalence of the key measurement variables c2
Model
Test
1
Configural invariance Metric invariance (full) Scalar invariance (full) Scalar invariance (partial)
2
3
4
df
CFI
TLI
RMSEA
39.23
21
.99
.96
.069
44.39
25
.99
.97
.065
189.76
55
.91
.90
.120
71.58
44
.98
.97
.058
established (i.e., the cross-country differences in the means of the observed items can be attributed to differences in the means of the underlying constructs). Overall, the CFA tests show that the measures achieve partial scalar invariance. The results of the tests of measurement equivalence are listed in Table 1. Discriminant validity is the extent to which a measure is novel and differs from measures of other constructs (Churchill, 1979). Chi-square difference tests are conducted between the chi-square statistic associated with the unconstrained model [apology only: c2(21) = 34.77, CFI=.99; TLI=.96, RMSEA=.084; compensation only: c2 (21) = 17.74, CFI = 1.00; TLI = 1.00, RMSEA=.00] against the chi-square of a series of alternative models in which the factor correlations were constrained to unity (Anderson and Gerbing, 1988). In each case, the constrained model exhibited a statistically significant ( P < .01) increase in chi-square, indicating that the constructs all display a reasonable degree of cross-cultural discriminant validity.
6. Service recovery perceptions and cultural dimensions The CFA models in Table 1 demonstrate partial scalar equivalence, and latent factor means can therefore be estimated by fixing the latent means of one country sample (i.e., United States) to be zero. Table 2 shows these latent means by the different conditions (apology and compensation). Singapore is higher than both the United States and Australia in terms of power distance (Hofsteede and Bond, 1988). Therefore, one should expect Singapore to have lower latent means on satisfaction, positive WOM and repurchase intention than both the United States and Australia. With the exception of satisfaction, Singapore shows lower latent means than both the American and Australian samples in the apology condition ( .03 < .00 < .27; .19 < .00 < .07). In the compensation condition, Singapore also shows lower latent means than the American but not the Australian respondents ( .67 < .00 < .65; .58 < .00 < .86; .22 < .00 < .71). Although Singapore has the highest latent mean in satisfaction, it is possible that apology is particularly effective in improving satisfaction in high power distance culture as it is more public and conveys more respect in restoring ‘‘face’’ (Mattila, 1999; Yau, 1988). Overall, most of the differences are not statistically significant; therefore, there is only directional support for this cultural dimension. Both the United States and Australia are ranked much higher than Singapore in terms of individualism; therefore, one would expect to find both the American and Australian samples to show higher latent means than Singapore in satisfaction, positive WOM, and repurchase intention. With the exception of satisfaction, United States has higher latent means in positive WOM and repurchase intention than Singapore in the apology condition (.00 > .03; .00> .19) while it is higher in all three outcomes in the com-
Table 2 Latent means by country and service recovery condition Service disconfirmation
Service assessment
Satisfaction
Positive WOM
Repurchase intention
Apology Singapore United States Australia
.14 (0.53)a .00 .50 (3.50)
.08 (0.41) .00 .09 (0.58)
.70 (1.25) .00 .38 (0.83)
.03 (0.11) .00 .27 (1.24)
.19 (0.66) .00 .07 (0.31)
Compensation Singapore United States Australia
.10 (0.64) .00 .11 (0.81)
.70 (2.80) .00 .75 (4.01)
.67 (0.94) .00 .65 (1.32)
.58 (2.09) .00 .86 (3.84)
.22 (0.78) .00 .71 (3.05)
Ranking of cultural dimensions Country Singapore United States Australia a b
Power distance 13 38 41
b
Individualism
Masculinity
Uncertainty avoidance
39 – 41 1 2
28 15 16
53 43 37
t values in parentheses. Rank numbers: 1 = highest; 53 = lowest (Hofsteede and Bond, 1988).
N.Y. Wong / Journal of Business Research 57 (2004) 957–963
pensation condition (.00> .67; .00> .58; .00> .22). Australia also shows higher latent means in positive WOM and repurchase intention than Singapore in the apology condition ( .03 < .27; .19 < .07) but not in the compensation condition. Although Australia is also high on individualism, it shows even higher latent means in satisfaction, positive WOM, and repurchase intention compared to the United States (.38>.00; .27>.00; .07>.00) in the apology condition and significantly lower latent means in the compensation condition ( .65 < .00; .86 < .00; .71 < .00). Again, there is only directional support for this cultural dimension between Singapore and the American samples but not the Australian sample. Masculinity is expected to raise the service expectation and hence increases the level of disconfirmation in the case of service failure. Both the United States and Australia have higher ranks in masculinity than Singapore and one should expect these samples to show higher latent means for service disconfirmation and lower latent means for performance assessment as compared to Singapore. In the apology condition, only Australia shows a higher latent mean in service disconfirmation and a lower latent mean in service assessment than Singapore (.50>.14; .09 < .08). In the compensation condition, United States also shows a higher latent mean in service disconfirmation and a lower latent mean in service assessment than Singapore (.00> .10; .00 < .70). Although Australia shows a higher latent mean in service disconfirmation than Singapore (.11> .10), it also shows a higher latent mean in service assessment than Singapore (.75>.70). Therefore, there is only partial support for this cultural dimension. It appears that the Australian sample is sensitive to compensation and that in general, these cultural differences become more pronounced in the condition where compensation is provided. Finally, uncertainty avoidance is expected to have a negative effect on repurchase intention. In this case, Australia is higher in uncertainty avoidance than the United States and Singapore but it only shows a lower repurchase intention in the compensation condition ( .71 < .00 < .22) whereas it shows the highest repurchase intention in the apology condition (.07>.00> .19). Therefore, uncertainty avoidance only seems to have the hypothesized effect on repurchase intention in the compensation condition but not the apology condition.
7. Discussion 7.1. Summary The results suggest that in general, offers of compensation and apology have potentially different effects in different cultural contexts. In general, cultural dimensions of power distance, individualism, masculinity, and uncertainty avoidance seem to affect service disconfirmation, service assessment, satisfaction, positive WOM, and repurchase
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intention between the American and Singaporean respondents (7 out of 10 latent mean comparisons). These latent mean differences are in the hypothesized directions as predicted by cultural theory but only two achieved statistical significance. Therefore, there is only directional support for these differences. Although Australia is very close to the United States in ranking along these cultural dimensions, the latent means comparisons are completely different from what would be predicted by cultural theory. Australia is actually more similar in response pattern to Singapore than the United States. Although the cross-country differences are only directional, an interesting pattern emerges in comparing the latent mean differences between countries by condition. First, it appears that compensation is important in improving satisfaction, positive WOM, and repurchase intention for the American respondents but not for the Singaporean and Australian respondents. Second, it also seems that while compensation may be effective in improving service assessment and reducing service disconfirmation, these improvements do not translate into higher satisfaction, positive WOM, and repurchase intention for the Singaporean and Australian respondents. A plausible explanation is that both the Australian and Singaporean respondents are sensitive to the informational cues that are embedded in the compensation offered and incorporate this information in their service perception and assessment. However, this information is not incorporated into the outcome measures in terms of satisfaction, positive WOM, and repurchase intention, and to that extent, is consistent with the cultural hypothesis of context dependence (Bond and Hwang, 1986; Markus and Kitayama, 1991; Yau, 1988). It is likely that compensation as a service recovery effort is interpreted within the service delivery context, which is judged independently of the consumption experience. Offers of apology also lead to a higher satisfaction improvement in the Singaporean and Australian samples than the American sample. However, this increase in satisfaction does not translate into improvements in positive WOM or repurchase intention for the Singapore sample whereas it seems to have a positive impact for the Australian sample. It is possible that in the absence of compensation, the Australian respondents are more likely to incorporate the service recovery effort within the context of the consumption experience and view this as a single transaction with the service provider. In other words, compensation could serve as an external attribution for the service failure in markets that are not familiar with such practices and have different service expectations (for example, it is uncommon to tip for service in Singapore.) 7.2. Implications A key managerial implication of this study is that service recovery actions do work. In all cultural contexts, both apology and compensation seems to improve customers’
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service disconfirmation and their performance assessment about service quality. However, the favorable improvement in positive WOM and repurchase intention from compensation is only significant for the American respondents but not for their Australian and Singaporean counterparts. A possible explanation is that Americans have the most developed service industries and service expectations are much higher than in the other two countries. This is also reflected in the ‘‘tipping for service’’ culture in restaurants as compared to the other countries. Therefore, in the event of a service failure, a commensurate and tangible compensation is also viewed to be more equitable and received more favorably. An interesting finding from this study is that in high power distance cultures such as Singapore, apology may be more effective than compensation. Results from this study combined with previous studies (e.g., Furrer et al., 2001; Mattila, 1999; Winsted, 1997) further highlight the need to incorporate cultural factors into future service research. In addition, this study also shows that compensation works better in low power distance and high individualism cultures. However, the effects are not uniform. For example, apology actually leads to more positive results in satisfaction, positive WOM, and repurchase intention in the Australian sample than compensation. Although compensation seems to reduce service disconfirmation and improves service assessment for the Australian sample, it does not seem to lead to improvements in satisfaction, positive WOM, and repurchase intention. Therefore, universal service recovery strategy may not be viable for global service providers. Global firms need to evaluate the level of maturity and expectations of each country’s service industry and adapt its service recovery strategy accordingly. Consumer research to date has been based on a universalistic model of customer satisfaction. A key imperative today is the ‘‘reinterpretation’’ of models and theories from the perspectives of different cultural and social realities. The increasing globalization of the world economy necessitates the development of consumer behavior models that are robust and culturally unbiased. The present study integrates past findings in consumer research and specifically tests the effects of different cultural dimensions (power distance, individualism, masculinity, and uncertainty avoidance) on perception of service recovery strategies and the subsequent effects on satisfaction, repurchase intention, and positive WOM in familiar service settings. The main objective is to formulate a general model on culture’s influence in shaping consumers’ perception of service quality and consumer satisfaction judgments. The collectivist’s cultural orientation toward interdependence suggests that the tenets of relationship marketing would be important in providing key factors in customer retention and positive WOM. The Asian belief in guanxi and network of interpersonal relationships suggest that cultivating trust and maintaining favors may be far more significant in customer retention than compensation, an approach that may be more effective in a Western, trans-
action-based marketplace. Findings from this study suggest that although a global strategy maybe construed differently, similar results could still be obtained, albeit to different degrees of effectiveness. A limitation of the current study is the use of student sample in all three countries. However, the students’ level of affluence and familiarity with the consumption experience should add to the validity of their responses to the fictional situations. Another limitation is to use single item measures for repurchase intention, and positive WOM. However, it is a practical constraint that may be difficult to overcome due to the nature of the service encounter context (Smith et al., 1999; Levesque and McDougall, 2000). Future research in further examining the interrelationships between service recovery strategies and cultural dimensions in other countries will be worthwhile in developing effective global service recovery programs as well as advancing existing knowledge in customer satisfaction research.
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The role of culture in the perception of service recovery Nancy Y. Wong* Department of Marketing, Dupree College of Management, Georgia Institute of Technology, 755 Ferst Drive, Atlanta, GA 30332-0520, USA Received 14 August 2001; accepted 18 November 2002
Abstract In international service settings, customers’ evaluations of service encounters are influenced by their evaluations of the service failure and recovery contexts, which are shaped by their cultural orientation. Knowledge of how critical service factors are perceived by customers from different cultural background is important in the design and implementation of global service strategy. Service recovery, in the form of compensation or apology, is tested in three cross-national samples. Compensation is found to improve customers’ assessment of the service encounter in all three countries, but positive effects on repurchase intention and word of mouth (WOM) are only found for the American sample and not for the Singaporean and Australian samples. Apology is found to improve satisfaction in Singapore and Australia but not in the United States. Culture’s influence on the evaluation process is examined to account for the differential impact of apology and compensation on customer perception about service failure and recovery. D 2003 Elsevier Inc. All rights reserved. Keywords: Service; Recovery; Perception; Culture
1. Introduction Service companies have their own kind of scrap heap: customers who will not come back (Reichheld and Sasser, 1990). Research shows that service mistakes/delays are inevitable but dissatisfied customers are not. Good service recovery not only turns angry and frustrated customers into loyal ones, but it also has the potential to create more goodwill than if things have gone smoothly in the first place. Therefore, when things do go wrong, it is critically important to control the customer’s perception of the service encounter (Hart et al., 1990; Taylor, 1994). To do so, it is important to explore how service recovery attempts are viewed by customers since past research shows that failed service encounters and responses to failed service account for around half of all customer switching behavior in service industries (Keaveney, 1995). With increasing globalization, companies are being called to serve customers with divergent needs and expectations shaped by different cultural background and values. Adding to this complexity is the fact that companies often have to deal with such demands simultaneously instead of by geographic segments (for example, Sheraton Hotel * Tel.: +1-404-894-4353; fax: +1-404-894-6030. E-mail address: [email protected] (N.Y. Wong). 0148-2963/$ – see front matter D 2003 Elsevier Inc. All rights reserved. doi:10.1016/S0148-2963(03)00002-X
serving American, Japanese, and German customers in Sydney). Therefore, it would be of interest to both marketing practitioners and researchers to examine differences in the perception of service failure and recovery as well as the subsequent effects on service disconfirmation, performance assessment, postconsumption satisfaction/attitudes, and future intentions in high-involvement service settings. Service industries continue to grow in importance to the United States and global economies while improvements in service quality have not kept pace with its growth (Bitner et al., 1990a). The objective of this study is to understand the influence of cultural values in shaping consumers’ perception of service quality and satisfaction judgments. This also fits in with the growing need for understanding systematic variations in satisfaction across nations (Anderson and Fornell, 1994; Furrer et al., 2001).
2. Service recovery strategies and consumer perceptions Consumer evaluations of service encounters have been found to significantly influence their subsequent satisfaction or dissatisfaction with a service provider (Parasuraman et al., 1994; Bitner et al., 1990b). According to Levesque and McDougall (2000), service recovery strategies typically consist of three types of actions that are used either singly
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or in combination: (1) apologize (acknowledging the problem); (2) assistance (fixing the problem); and (3) compensation (paying for the costs of the problem). Although much research has been done in service delays and product failures (Dube-Rioux et al., 1988; Folkes, 1984; Taylor, 1994), little is known about how well these strategies travel across different national markets and cultural contexts. Research in cultural psychology has shown that the way we process information, relate to others, and organize our priorities are profoundly shaped by the ‘‘cultural meaning systems’’ (Triandis, 1989). This study examines the effect of compensation on service perception/satisfaction and extends service research cross-culturally to test the feasibility of global service recovery strategies for international service providers. In particular, the study focuses on the following research questions: (1) How do customers in different cultures evaluate different service recovery strategies? (2) How do these evaluations affect satisfaction with the service encounter, repurchase intention, and word of mouth (WOM)? Service recovery strategies refer to the actions that firms undertake to respond to service failures (Gronroos, 1988). Past research have shown that apology, assistance, and compensation are the most typical strategies deployed by service providers (Bitner et al., 1990a; Hart et al., 1990). The effectiveness of these actions has been found to vary depending on the nature of the service failure (outcome vs. process), criticality of the service contexts (defined as importance of the service to the consumer; cf. Ostrom and Iacobucci, 1995), and the correspondence (‘‘fit’’) between failure and recovery (Smith et al., 1999). For example, Smith et al. (1999) find that customers are less satisfied after a process failure (e.g., inattentive service) than after an outcome failure (e.g., unavailable service), irrespective of service contexts (hotels or restaurants), and recovery strategies (apology or compensation). In addition, they also find that customers feel that compensation is more equitable in outcome failures whereas an apology is more effective in process failures. This is because service recovery strategies need to be commensurate with the magnitude of the service failures. On the other hand, Darida et al. (1996) show that in low criticality situations, compensation is a more effective recovery strategy than assistance whereas in high criticality situations, the reverse is true. These findings have been established in North America using both American and Canadian respondents and the objective of the present study is to investigate if the service factors of apology and compensation are perceived differently and yield different outcomes in different national markets.
3. Cultural values and evaluation of critical service factors International research in service recovery has been limited. Nevertheless, the little research that investigated
cultural differences on consumer satisfaction seems to indicate fundamental differences in the way consumers evaluate products and services as well as the way satisfaction/dissatisfaction is expressed (Chiu et al., 1987; Hernandez et al., 1991; Yau, 1988). In the case of service failure, the same service recovery strategy could well be evaluated differently across cultures. This difference in perceptions would have a significant impact on customer satisfaction, repurchase intention, and WOM in different cultural settings. Cultural differences due to implicit theories have been found to influence consumer complaint behavior to service quality dimensions in a broad range of consumption settings (Winsted, 1997; Donthu and Yoo, 1998; Mattila, 1999). One widely adopted framework in understanding cultural differences is based on Hofstede’s (1980) study on the measurement of cultural values. In his study of 53 cultures in 72 countries, Hofstede identified four pertinent dimensions where cultures are likely to differ: power distance, individualism (collectivism), masculinity (femininity), and uncertainty avoidance. Power distance reflects the extent to which the less powerful individuals in society are likely to expect power to be distributed unequally. High power distance is typically high as a culture becomes closer to a caste system. Individualism and its opposite, collectivism, describe the degree to which individuals are integrated into social ingroups. Masculinity and its opposite, femininity, describe the extent to which gender roles are strictly defined in society. Finally, uncertainty avoidance indicates the extent to which a culture programs its members to feel either comfortable or uncomfortable in unstructured situations (cf. Hofsteede and Bond, 1988). In a service encounter, high power distance would increase the social position between the customer and service provider. This will in turn increase the service expectation of the customers, especially in the manner (e.g., courtesy, deference) in which the services are delivered. In the event of a service failure, the service gap is perceived to be wider and would require greater effort from the service provider to bridge the gap. Therefore, power distance is expected to exert a negative influence on the positive impact of service recovery actions. In individualist cultures, people have membership in many in-groups (e.g., family, peer-groups, coworkers, clubs), where much of the behaviors are more likely to concern goals of the individual since the demands from various in-groups are more diffused. As a result, distinction between in- and out-groups is less defined, which decreases the social distance between customer and server. Therefore, the service gap is perceived to be narrower and it will likely increase the incremental improvement of service recovery actions. Therefore, individualism is expected to have a positive impact on the improvement in satisfaction with the service recovery action. On the other hand, in masculine societies, people have higher expectations of service and attach great value to good
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service. In the service context, masculinity is likely to enhance the role distinctions between customer and server. Therefore, masculinity is expected to increase the ‘‘disconfirmation’’ gap by raising the service expectation and ‘‘widens’’ the incremental improvement of service recovery actions in terms of service disconfirmation. Finally, high uncertainty avoidance will likely have the most significant impact on repurchase intention, regardless of service recovery strategy. This is because individuals would seek to minimize the potential for service failures in the future, despite successful service recovery in improving satisfaction and positive WOM.
4. Method A survey method is employed to investigate the influence of apology vs. compensation on perception of service recovery strategies cross-culturally. This approach has several advantages: reduction of biases from memory lapses, consistency of service failure and recovery situations in different samples, and elimination of difficulties associated with field observations or enactment of service encounters (Smith et al., 1999). The consumption scenario to be evaluated by respondents must fulfill the following criteria: (1) the occurrence of service failure of a consumption event; (2) a plausible outcome for compensation; and (3) a familiar social activity that respondents have experience in undertaking. Similar to past research that employs experimental methodology (Folkes, 1984; Bitner, 1990; Smith et al., 1999; Levesque and McDougall, 2000), it allows for the manipulation of service recovery attempts and for data collection crossculturally. The study tests the hypotheses in a 3 (country: United States vs. Australia vs. Singapore) 2 (compensation vs. apology) between-subjects design. Respondents in each country are assigned randomly to one of the two conditions. The country samples are selected because they are similarly developed in terms of service industry and socioeconomic indicators but differently distributed across the relevant cultural dimensions (www.asiandemographics.com, Census 2000). Although the United States and Australia are very similar in terms of Hofstede’s dimensions of individualism, masculinity, and power distance, these two countries are also different in terms of uncertainty avoidance. Therefore, one would expect to find differences between Australians and Americans’ responses in the relationships between uncertainty avoidance and repurchase intentions. Two versions of the study booklets are prepared, identical with the exception of compensation vs. apology. The experimental scenario describes two persons going out to dinner on a special occasion that has been planned in advance, with careful selection of a restaurant. The special night is ruined when their orders are misplaced and the waiter has gone off work. They are either given a free meal
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(compensation only) by the restaurant or received profuse apologies (apology only) for the service failure. 4.1. Data collection Respondents are undergraduate business students from three different universities in United States (n = 253), Australia (n = 192), and Singapore (n = 71). All students participate in the study for a small amount of course credit. They are given one of two versions of the study booklet at random. They are instructed to read the scenario and imagine that they are the people in that situation. After reading the story, respondents give ratings to measures of service disconfirmation, performance assessment, satisfaction, and future intentions. The samples are similar in terms of age (Australia 22, Singapore 21, and United States 23), frequency of eating out at restaurants (Australia 1.47 times, Singapore 1.15 times, and United States 2.11 times in a typical week), and the dollar amount spent on restaurant meals (low $20s for Australia and Singapore and almost $20 for United States). 4.2. Measures Two performance assessment measures (‘‘Service at this restaurant is very poor’’ and ‘‘This incident is the reason that your mood is ruined for the evening’’) are included to evaluate and to affirm that a service failure had occurred in both conditions. Therefore, lower scores represent better assessment. Three measures of service disconfirmation (‘‘Compared to what I expected the restaurant to be like, benefits I enjoyed were. . .’’; ‘‘Overall, the restaurant was. . .’’) are used to measure respondents’ perceptions of service quality. Contrary to performance assessment, higher scores here represent lower disconfirmation. Service disconfirmation is measured using five-point scale as opposed to the seven-point scales used throughout the study for purpose of consistency with the original scales in past study (Westbrook, 1987). All items are measured using the seven-point semantic differential scale (Bitner, 1990b). Satisfaction is measured by three 7-point semantic differential items (Bitner, 1990b; Oliver and DeSarbo, 1988) to assess overall satisfaction with the server, the restaurant, and the dining experience. Future behaviors are measured by positive WOM (‘‘Are you likely to recommend the restaurant to others?’’) and repurchase intention (‘‘Are you likely to go back to the restaurant in the future?’’).
5. Analysis and results Using guidelines suggested by Steenkamp and Baumgartner (1998), the measurement equivalence of the key measurement variables are tested using confirmatory factor analysis. To conduct means comparisons across country samples, scalar invariance of these measures needs to be
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Table 1 Tests of the measurement equivalence of the key measurement variables c2
Model
Test
1
Configural invariance Metric invariance (full) Scalar invariance (full) Scalar invariance (partial)
2
3
4
df
CFI
TLI
RMSEA
39.23
21
.99
.96
.069
44.39
25
.99
.97
.065
189.76
55
.91
.90
.120
71.58
44
.98
.97
.058
established (i.e., the cross-country differences in the means of the observed items can be attributed to differences in the means of the underlying constructs). Overall, the CFA tests show that the measures achieve partial scalar invariance. The results of the tests of measurement equivalence are listed in Table 1. Discriminant validity is the extent to which a measure is novel and differs from measures of other constructs (Churchill, 1979). Chi-square difference tests are conducted between the chi-square statistic associated with the unconstrained model [apology only: c2(21) = 34.77, CFI=.99; TLI=.96, RMSEA=.084; compensation only: c2 (21) = 17.74, CFI = 1.00; TLI = 1.00, RMSEA=.00] against the chi-square of a series of alternative models in which the factor correlations were constrained to unity (Anderson and Gerbing, 1988). In each case, the constrained model exhibited a statistically significant ( P < .01) increase in chi-square, indicating that the constructs all display a reasonable degree of cross-cultural discriminant validity.
6. Service recovery perceptions and cultural dimensions The CFA models in Table 1 demonstrate partial scalar equivalence, and latent factor means can therefore be estimated by fixing the latent means of one country sample (i.e., United States) to be zero. Table 2 shows these latent means by the different conditions (apology and compensation). Singapore is higher than both the United States and Australia in terms of power distance (Hofsteede and Bond, 1988). Therefore, one should expect Singapore to have lower latent means on satisfaction, positive WOM and repurchase intention than both the United States and Australia. With the exception of satisfaction, Singapore shows lower latent means than both the American and Australian samples in the apology condition ( .03 < .00 < .27; .19 < .00 < .07). In the compensation condition, Singapore also shows lower latent means than the American but not the Australian respondents ( .67 < .00 < .65; .58 < .00 < .86; .22 < .00 < .71). Although Singapore has the highest latent mean in satisfaction, it is possible that apology is particularly effective in improving satisfaction in high power distance culture as it is more public and conveys more respect in restoring ‘‘face’’ (Mattila, 1999; Yau, 1988). Overall, most of the differences are not statistically significant; therefore, there is only directional support for this cultural dimension. Both the United States and Australia are ranked much higher than Singapore in terms of individualism; therefore, one would expect to find both the American and Australian samples to show higher latent means than Singapore in satisfaction, positive WOM, and repurchase intention. With the exception of satisfaction, United States has higher latent means in positive WOM and repurchase intention than Singapore in the apology condition (.00 > .03; .00> .19) while it is higher in all three outcomes in the com-
Table 2 Latent means by country and service recovery condition Service disconfirmation
Service assessment
Satisfaction
Positive WOM
Repurchase intention
Apology Singapore United States Australia
.14 (0.53)a .00 .50 (3.50)
.08 (0.41) .00 .09 (0.58)
.70 (1.25) .00 .38 (0.83)
.03 (0.11) .00 .27 (1.24)
.19 (0.66) .00 .07 (0.31)
Compensation Singapore United States Australia
.10 (0.64) .00 .11 (0.81)
.70 (2.80) .00 .75 (4.01)
.67 (0.94) .00 .65 (1.32)
.58 (2.09) .00 .86 (3.84)
.22 (0.78) .00 .71 (3.05)
Ranking of cultural dimensions Country Singapore United States Australia a b
Power distance 13 38 41
b
Individualism
Masculinity
Uncertainty avoidance
39 – 41 1 2
28 15 16
53 43 37
t values in parentheses. Rank numbers: 1 = highest; 53 = lowest (Hofsteede and Bond, 1988).
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pensation condition (.00> .67; .00> .58; .00> .22). Australia also shows higher latent means in positive WOM and repurchase intention than Singapore in the apology condition ( .03 < .27; .19 < .07) but not in the compensation condition. Although Australia is also high on individualism, it shows even higher latent means in satisfaction, positive WOM, and repurchase intention compared to the United States (.38>.00; .27>.00; .07>.00) in the apology condition and significantly lower latent means in the compensation condition ( .65 < .00; .86 < .00; .71 < .00). Again, there is only directional support for this cultural dimension between Singapore and the American samples but not the Australian sample. Masculinity is expected to raise the service expectation and hence increases the level of disconfirmation in the case of service failure. Both the United States and Australia have higher ranks in masculinity than Singapore and one should expect these samples to show higher latent means for service disconfirmation and lower latent means for performance assessment as compared to Singapore. In the apology condition, only Australia shows a higher latent mean in service disconfirmation and a lower latent mean in service assessment than Singapore (.50>.14; .09 < .08). In the compensation condition, United States also shows a higher latent mean in service disconfirmation and a lower latent mean in service assessment than Singapore (.00> .10; .00 < .70). Although Australia shows a higher latent mean in service disconfirmation than Singapore (.11> .10), it also shows a higher latent mean in service assessment than Singapore (.75>.70). Therefore, there is only partial support for this cultural dimension. It appears that the Australian sample is sensitive to compensation and that in general, these cultural differences become more pronounced in the condition where compensation is provided. Finally, uncertainty avoidance is expected to have a negative effect on repurchase intention. In this case, Australia is higher in uncertainty avoidance than the United States and Singapore but it only shows a lower repurchase intention in the compensation condition ( .71 < .00 < .22) whereas it shows the highest repurchase intention in the apology condition (.07>.00> .19). Therefore, uncertainty avoidance only seems to have the hypothesized effect on repurchase intention in the compensation condition but not the apology condition.
7. Discussion 7.1. Summary The results suggest that in general, offers of compensation and apology have potentially different effects in different cultural contexts. In general, cultural dimensions of power distance, individualism, masculinity, and uncertainty avoidance seem to affect service disconfirmation, service assessment, satisfaction, positive WOM, and repurchase
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intention between the American and Singaporean respondents (7 out of 10 latent mean comparisons). These latent mean differences are in the hypothesized directions as predicted by cultural theory but only two achieved statistical significance. Therefore, there is only directional support for these differences. Although Australia is very close to the United States in ranking along these cultural dimensions, the latent means comparisons are completely different from what would be predicted by cultural theory. Australia is actually more similar in response pattern to Singapore than the United States. Although the cross-country differences are only directional, an interesting pattern emerges in comparing the latent mean differences between countries by condition. First, it appears that compensation is important in improving satisfaction, positive WOM, and repurchase intention for the American respondents but not for the Singaporean and Australian respondents. Second, it also seems that while compensation may be effective in improving service assessment and reducing service disconfirmation, these improvements do not translate into higher satisfaction, positive WOM, and repurchase intention for the Singaporean and Australian respondents. A plausible explanation is that both the Australian and Singaporean respondents are sensitive to the informational cues that are embedded in the compensation offered and incorporate this information in their service perception and assessment. However, this information is not incorporated into the outcome measures in terms of satisfaction, positive WOM, and repurchase intention, and to that extent, is consistent with the cultural hypothesis of context dependence (Bond and Hwang, 1986; Markus and Kitayama, 1991; Yau, 1988). It is likely that compensation as a service recovery effort is interpreted within the service delivery context, which is judged independently of the consumption experience. Offers of apology also lead to a higher satisfaction improvement in the Singaporean and Australian samples than the American sample. However, this increase in satisfaction does not translate into improvements in positive WOM or repurchase intention for the Singapore sample whereas it seems to have a positive impact for the Australian sample. It is possible that in the absence of compensation, the Australian respondents are more likely to incorporate the service recovery effort within the context of the consumption experience and view this as a single transaction with the service provider. In other words, compensation could serve as an external attribution for the service failure in markets that are not familiar with such practices and have different service expectations (for example, it is uncommon to tip for service in Singapore.) 7.2. Implications A key managerial implication of this study is that service recovery actions do work. In all cultural contexts, both apology and compensation seems to improve customers’
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service disconfirmation and their performance assessment about service quality. However, the favorable improvement in positive WOM and repurchase intention from compensation is only significant for the American respondents but not for their Australian and Singaporean counterparts. A possible explanation is that Americans have the most developed service industries and service expectations are much higher than in the other two countries. This is also reflected in the ‘‘tipping for service’’ culture in restaurants as compared to the other countries. Therefore, in the event of a service failure, a commensurate and tangible compensation is also viewed to be more equitable and received more favorably. An interesting finding from this study is that in high power distance cultures such as Singapore, apology may be more effective than compensation. Results from this study combined with previous studies (e.g., Furrer et al., 2001; Mattila, 1999; Winsted, 1997) further highlight the need to incorporate cultural factors into future service research. In addition, this study also shows that compensation works better in low power distance and high individualism cultures. However, the effects are not uniform. For example, apology actually leads to more positive results in satisfaction, positive WOM, and repurchase intention in the Australian sample than compensation. Although compensation seems to reduce service disconfirmation and improves service assessment for the Australian sample, it does not seem to lead to improvements in satisfaction, positive WOM, and repurchase intention. Therefore, universal service recovery strategy may not be viable for global service providers. Global firms need to evaluate the level of maturity and expectations of each country’s service industry and adapt its service recovery strategy accordingly. Consumer research to date has been based on a universalistic model of customer satisfaction. A key imperative today is the ‘‘reinterpretation’’ of models and theories from the perspectives of different cultural and social realities. The increasing globalization of the world economy necessitates the development of consumer behavior models that are robust and culturally unbiased. The present study integrates past findings in consumer research and specifically tests the effects of different cultural dimensions (power distance, individualism, masculinity, and uncertainty avoidance) on perception of service recovery strategies and the subsequent effects on satisfaction, repurchase intention, and positive WOM in familiar service settings. The main objective is to formulate a general model on culture’s influence in shaping consumers’ perception of service quality and consumer satisfaction judgments. The collectivist’s cultural orientation toward interdependence suggests that the tenets of relationship marketing would be important in providing key factors in customer retention and positive WOM. The Asian belief in guanxi and network of interpersonal relationships suggest that cultivating trust and maintaining favors may be far more significant in customer retention than compensation, an approach that may be more effective in a Western, trans-
action-based marketplace. Findings from this study suggest that although a global strategy maybe construed differently, similar results could still be obtained, albeit to different degrees of effectiveness. A limitation of the current study is the use of student sample in all three countries. However, the students’ level of affluence and familiarity with the consumption experience should add to the validity of their responses to the fictional situations. Another limitation is to use single item measures for repurchase intention, and positive WOM. However, it is a practical constraint that may be difficult to overcome due to the nature of the service encounter context (Smith et al., 1999; Levesque and McDougall, 2000). Future research in further examining the interrelationships between service recovery strategies and cultural dimensions in other countries will be worthwhile in developing effective global service recovery programs as well as advancing existing knowledge in customer satisfaction research.
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