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1. ASSOCIATION FOR CONSUMER RESEARCH
Labovitz School of Business & Economics, University of Minnesota Duluth, 11 E. Superior Street, Suite 210, Duluth, MN 55802
Perceptions of Fairness and Customer Satisfaction Following Service Failure and Recovery
Constant Beugre, Delaware State University, USA
Nanda K. Viswanathan, Delaware State University, USA
Perceptions of fairness and customer satisfaction are examined for distributive service recovery and interactional service recovery
strategies. The service recovery strategies are examined in relationship to the type of service failure. Types of service failures
examined are distributive service failure and interactional service failure. Results show that distributive service recovery strategies are
more effective than interactional service recovery strategies when the service failure is distributive. When service failures are
interactional, both distributive service recovery and interactional service recovery strategies are effective.
[to cite]:
Constant Beugre and Nanda K. Viswanathan (2006) ,"Perceptions of Fairness and Customer Satisfaction Following Service
Failure and Recovery", in LA - Latin American Advances in Consumer Research Volume 1, eds. Silvia Gonzalez and David
Luna, Duluth, MN : Association for Consumer Research, Pages: 10-14.
[url]:
http://www.acrwebsite.org/volumes/1000001/la/v1/LA-01
[copyright notice]:
This work is copyrighted by The Association for Consumer Research. For permission to copy or use this work in whole or in
part, please contact the Copyright Clearance Center at http://www.copyright.com/.

2. 10 Latin American Advances in Consumer Research
Volume 1, © 2006
Perceptions of Fairness And Customer Satisfaction Following Service Failure And Recovery
Constant Beugre, Delaware State University, USA
Nanda K. Viswanathan, Delaware State University, USA
ABSTRACT
Perceptions of fairness and customer satisfaction are exam-
ined for distributive service recovery and interactional service
recoverystrategies.Theservicerecoverystrategiesareexaminedin
relationship to the type of service failure. Types of service failures
examined are distributive service failure and interactional service
failure. Results show that distributive service recovery strategies
are more effective than interactional service recovery strategies
when the service failure is distributive. When service failures are
interactional, both distributive service recovery and interactional
service recovery strategies are effective.
LITERATURE REVIEW
Companies strive to delight customers by providing high
quality products and services. Despite such efforts, companies are
not always able to delight customers. Sometimes, service failures
occur and customers express negative emotions and some even
engage in complaint behaviors (McColl-Kennedy & Sparks 2003).
Service failure represents a negative experience, both for the
customer and the service provider. To reduce the negative impact
of service failure, companies often develop and implement recov-
ery strategies.
Although the increasing literature on service failure and re-
covery presents some insights for scholars and service managers as
well, it tends to consider service failure as a uniform concept.
However, it is fair to acknowledge that when a company provides
aservice,theremaybetwoelements:outcomes(gettingtheproduct
or the service) and process (how one is treated during the service
encounter). Making this distinction is important because service
delivery implies two types of experience. The first experience may
be related to the outcome of the service and the second to the
process. Thus, when people talk about service failure, their experi-
ence may include the outcome received as well as the process
underlying the delivery of the outcome.
With this distinction in mind, we intend to assess the impact of
servicefailureandrecoveryoncustomerreactions.Specifically,we
focus on customer perceptions of fairness after a service failure and
recovery. Indeed, researchers have examined the impact of service
failure and recovery on perceptions of justice and customer satis-
faction (Andreassen 2001; Maxham & Netemeyer 2003; Smith &
Bolton 1998). Most of these studies concur that customers are more
likely to continue doing business with a company if they are
satisfied with service recovery (Andreassen 2001; Smith & Bolton,
1998).
In analyzing customer perceptions of justice, scholars often
distinguished three forms of justice: distributive justice (Adams
1965), procedural justice (Lind & Tyler, 1988; Thibaut & Walker
1975), and interactional justice (Bies & Moag 1986). Distributive
justice refers to perceptions of outcome fairness (Adams 1985),
whereas procedural justice focuses on the fairness of decisions
underlying the outcome distribution (Thibaut & Walker 1975).
Interactional justice refers to the quality of interpersonal treatment
people receive during the enactment of organizational procedures
(Bies & Moag 1986).
Despite a growing body of literature on the impact of service
failure and recovery on customer perceptions of fairness, the
relationship between the type of service failure and the type of
service recovery (we argue that an effective service recovery
strategy is contingent on the type of service failure) has rarely been
investigated. The purpose of the present study is to fill this void by
examining the impact of service recovery on customer perceptions
of fairness. In so doing, the study differentiates itself from previous
studies by examining specific types of service recovery, specific
types of service failure, and particular forms of fairness.
The present study adds to the extant literature on service
recovery and justice in two ways. First, it explores the relationship
between the type of service failure and the type of service recovery.
Recovering after service failure is an important strategy for compa-
nies to solve customer complaints and ensure customer retention.
Failure to properly recover from a service failure may be costly for
organizations. Second, understanding what type of service recov-
ery corresponds to a specific service breakdown may help organi-
zations design strategies to bounce back from service failures.
Service recovery refers to “actions of a service provider to
mitigateand/orrepairthedamagetoacustomerthatresultsfromthe
provider’s failure to deliver a service as is designed” (Johnson &
Hewa 1997, 467). In this study, we used two types of recovery,
distributiverecoveryandinteractionalrecovery.Thesetwotypesof
recovery are likely to occur in face-to-face service delivery situa-
tions. We refer to a service breakdown leading to the loss of a
tangible outcome as distributive failure. Distributive failure occurs
when a customer does not get the product or service expected.
Within a service recovery context, distributive justice is usually
definedaswhatthecustomerreceivesasanoutcomeoftherecovery
process (McColl-Kennedy & Sparks 2003). A sense of equity
would be restored when the customer receives the desired product
or service or its substitute.
Thus, we argue that distributive failure can best be compen-
sated by distributive recovery. Distributive recovery occurs when
the organization or its representative provides a disgruntled cus-
tomer a tangible outcome after a service breakdown. For instance,
a customer dining at a restaurant finds the soup a little salty and
informs the waitress. To compensate for this service failure—
distributive failure, the waitress changes the soup with another one
to the customer’s taste. Distributive justice after a service failure
may positively influence perceptions of fairness and customer
satisfaction (Smith, Bolton, & Wagner 1999). Thus, we formulated
the following hypothesis.
H1. When distributive failure occurs, distributive recovery
would have a more favorable impact on perceptions of
distributive justice, overall customer satisfaction, and
satisfaction with the recovery process than interactional
recovery.
The same may hold true for interactional failure. Interactional
failure occurs when the organization or its representative does not
treat a customer with respect and dignity. The target appears as the
target of the organization’s mistreatment and may raise a feeling of
moral outrage. In this case, the customer may expect an apology
from the offender. Only an apology can reduce the negative impact
of interactional failure. “When a service failure occurs, the inequity
oftheexchangeupsetstherelationshipbetweentheservicefirmand
its customers. The first step in restoring equity, from a service
firm’s point of view, is to acknowledge wrongdoing and apologize.
By apologizing, the firm expresses regret that the consumer did not

3. Latin American Advances in Consumer Research (Volume 1) / 11
derivethearrangedbenefit(Boshoff&Leong1998).Thus,thetype
ofservicerecoverycorrespondingtointeractionalfailureisinterac-
tional recovery. In interactional recovery, the organization or its
representative apologizes to the customer or provides an explana-
tion to ease the customer’s discontent. Following the previous
example, an interactional failure would occur if the waitress ap-
peared rude to the customer; and interactional recovery would
occur when the waitress apologizes to the customer. We anticipate
that interactional recovery is likely to compensate for interactional
failure. Interactional justice is positively related to satisfaction
(Maxham & Neteyemer 2003). Thus, we formulated the following
hypothesis.
H2. When interactional failure occurs, interactional recovery
would have a more favorable impact on perceptions of
interactional justice, overall customer satisfaction, and
satisfaction with the recovery process than distributive
recovery.
METHOD
Participants:
The study was conducted on a sample of 111 undergraduate
business and psychology students enrolled in a Northeastern uni-
versity in the United States. The study was conducted during class
time and students received partial credit for participating in the
study.
Experimental Design:
The study used a 2X2 between-subjects factorial design. The
factors are Type of service failure (Distributive or Interactive) and
Type of service recovery (Distributive or Interactive).
Procedure:
Thetwoindependentvariablesweretypeofservicefailureand
typeofservicerecovery. Thedependentvariableswereperceptions
ofdistributivejustice,perceptionsofinteractionaljustice,customer
satisfaction with the recovery, and overall customer satisfaction.
The study used a scenario-based methodology. Such a methodol-
ogyisappropriateforstudyingservicefailureandrecoverybecause
it is almost impossible (even unethical) for a company to purpose-
fullyprovidepoorservicetocustomersandattempttorectifyit.The
scenario was built around service in a restaurant since students are
familiar with restaurant service. We constructed four scenarios
corresponding to specific types of service failure and recovery.
Independent variable manipulations:
Type of service recovery and type of service failure were
manipulated by changing the scenario descriptions as follows:
Distributive failure: “ … The food was salty and contained
ingredients you were allergic to.”
Interactional failure:”…..You observed that the waitress was
rude when taking your order.”
Distributive recovery: “……. The waitress changed the food
and offered you a free desert.”
Interactional recovery: “……The waitress apologized with a
smile.”
Dependent variable measurements:
Each scenario was followed by a 14-item, seven point, seman-
tic differentialscale measuring distributive justice (4 items), inter-
actional justice (4 items), overall customer satisfaction (3 items),
customer satisfaction with recovery (3 items). All items were
derived from Maxham and Netemeyer (2003) and modified for the
scenario in this study. For example, a scale used to measure overall
customer satisfaction in this study included “I am satisfied with my
overall experience with the restaurant.” Participants were asked to
read the scenario and answer the 14-item scale.
RESULTS
AMANOVA was performed on the data. The data for all four
dependent variables are presented in figure 1. Interactions between
type of service failure and type of service recovery were significant
for all four dependent variables: Distributive justice (F(1,108) =
6.26, p<.05), interactional justice (F(1,108) = 8.0, p<.01), cus-
tomer satisfaction with the recovery (F(1,108) = 7.61, p<.01), and
overall satisfaction (F(1,108) = 5.99, p<.05).For those interactions
that were significant, t-tests based on pooled variance was con-
ducted for differences between means.
H1 was supported for perceptions of distributive justice,
perceptionsofinteractionaljustice,andsatisfactionwiththeservice
recovery. In case of distributive failure, distributive service recov-
ery led to more positive perceptions of distributive justice (t=3.55,
p< .01), interactional justice (t=3.03, p< .01), enhanced satisfaction
with the recovery (t=4.03, p< .01), and more overall satisfaction
(t=2.79. p< .01) than an interactional service recovery. The means
for all four dependent variables are summarized in table 1.
H2 was not supported for any of the four dependent variables.
In the case of interactional failure, interactional recovery did not
lead to more positive perceptions of distributive justice or percep-
tions of interactional justice, enhanced satisfaction with the recov-
ery, or enhanced overall satisfaction.
DISCUSSION
The support for H1 indicates that when subjects were faced
withdistributivefailure,distributiverecoveryhasastrongerimpact
on customer perceptions of justice and satisfaction than interac-
tional recovery. When there was a problem with the food in the
restaurant customers were more satisfied when the food was re-
placed than by a mere apology. The lack of support for H2 indicates
that when subjects were faced with interactive failure, interactive
recovery did not have a more positive impact on customer percep-
tions of justice and satisfaction than distributive recovery. When
the waitress was rude, an apology was no more effective than the
offer of a free dessert in enhancing customer satisfaction and
perceptions of justice.
While this study is exploratory in nature, the results suggest
that distributive recovery strategies may work well in the case of
both distributive failure and interactional failures. However, inter-
actional recovery strategies work well only in the case of interac-
tional failures. Possible explanations for this result may be that a
distributive recovery (free dessert) consequent to either a distribu-
tive service failure or an interactional service failure can favorably
influence a customer’s perceptions of distributive justice and inter-
actional justice. However an interactional recovery (an apology)
consequent to either a distributive service failure or an interactional
service failure can favorably influence a customer’s perception of
interactional justice but not have an impact on the customer’s
perceptions of distributive justice. An apology cannot restore the
outcome (good quality food) when the customer has been served
poor quality food (distributive failure). However, the offer of a free
dessert can restore the customer’s emotional state that was upset by
rudeness (interactional failure).
LIMITATIONS
This study presents some limitations worth mentioning. First,
the study used a scenario-based methodology to examine service

4. 12 / Perceptions of Fairness And Customer Satisfaction Following Service Failure And Recovery
Interactional Justice
3
4
5
6
D R IR
DF
IF
Distributive Justice
3
4
5
6
D R IR
DF
IF
Recovery Satisfaction
3
4
5
6
D R IR
DF
IF
Overall Satisfaction
3
4
5
6
D R IR
DF
IF
FIGURE 1
Interactions of Type of Failure*Type of Recovery
DF: Distributive Failure, DR: Distributive Recovery, IF: Interactional Failure, IR: Interactional Recovery

5. Latin American Advances in Consumer Research (Volume 1) / 13
TABLE 1
Cell Means (Type of Failure*Type of Recovery)
1
H
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s
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3
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9
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9
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*
failure and recovery. This may result in customer perceptions
different from an actual service failure. Thus, intentions not actual
behaviors are measured. This limits the generalizability of the
study. However, since people tend to often act on the premises of
theirintentions,webelievethatthemethodologyusedhelpscapture
a reality of service failure and recovery. Second, the study suggests
that the effectiveness of a service recovery strategy is contingent on
the type of service failure. Although such a conclusion is advancing
our understanding of the dynamics of service failure and recovery,
the theoretical basis for this result needs further conceptual clarifi-
cation. Despite these limitations, the present study bears lessons for
management practice and further research.
IMPLICATIONS FOR PRACTICE
The results are important since the cost of strategies based on
distributiverecoveryarelikelytobemoreexpensivethanstrategies
based on interactional recovery. The training and operational needs
for the two kinds of recovery are also different. The replacement
and offer of free food in a restaurant will require different opera-
tional procedures than the issuance of an apology by the waiter. By
understanding the links between specific types of service failure
and service recovery, managers may be able to design appropriate
service recovery measures. Our results found that distributive
recovery was pivotal in ensuring customer perceptions of fairness,
satisfaction with the recovery attempt, and overall satisfaction. It is
therefore important for managers to provide tangible outcomes to
disgruntled customers. In the case of a service encounter, the
primary motivation of the customer may be to receive an outcome,
here the food at a restaurant. When a service breakdown occurs,
compensating for an outcome tends to have a more positive effect
than a mere apology.
IMPLICATIONS FOR RESEARCH
Two lines of research may be gleaned from our study. First,
future research may be extended to the field. Researchers may use
critical incident techniques to assess the relationship between
service failure and service recovery. For instance, researchers may
use a sample of non student customers and assess their negative
experiences and reactions during a service breakdown and recov-
ery. Such studies may help capture actual behaviors that customers
display during a service breakdown and recovery.
A second research avenue may be the importance of each type
of service recovery and variables that may moderate the relation-
ship. Are customers more likely to view distributive recovery as
more important than interactional recovery? In other words, are
customers more interested in getting tangible outcomes than being
treated with respect and dignity during a service encounter? Is the
relationshipbetweentypeofrecoveryandtypeoffailuredependent
on the level of product involvement of the customer? Addressing
such issues will improve our understanding of customer behavior.
Although previous studies have integrated fairness concepts in
studying service recovery, they have not addressed the primacy of
service recovery on customer reactions. It is our hope that the
present study will spur future empirical as well as conceptual
analyses on the relationship between the type of service failure and
the type of service recovery.
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