Abstract
The importance of service failure and service recovery has long been well documented in the literature. However, a large body of prior research focused on perceived justice of service recovery and its effects on post-recovery responses of customers. This article applies signaling theory and tests the roles of proactive service recovery process and compensation in signaling the service provider’s motivation and ability for future service improvement. Given that responses to service recovery efforts could vary depending on individual characteristics, this study applies regulatory focus theory to frame service compensation and characterize consumers’ individual differences. In particular, this study hypothesizes an interaction effect between the regulatory focus of compensation and consumer’s chronic regulatory focus on customers’ expectations regarding the provider’s motivation and ability for future service improvement. Using a 2 x 3 x 2 scenario experimental design, this study collected data from 488 subjects. The results provide support for the direct and interaction effects of proactive service recovery process and compensation on signaling the provider’s motivation and ability for future improvement. Furthermore, in support of our hypotheses with respect to regulatory-focus-fitness effect, the results show that consumers of high promotion focus respond more positively to promotion-focused compensation while consumers of high prevention focus are affected by prevention-focused compensation to a greater extent.