Overview
An appropriate response to negative reviews concerning a service failure is influential can lead to the restoration of the business’s reputation and increase in consumers’ loyalty by 20%. Nevertheless, less than 4% of negative reviews receive a management response. Also, responding to negative reviews is not enough by itself, and the way a business responds to negative reviews is salient should it want to gain the best possible recovery result. The two main prompts of restaurant service failure are technical (e.g., raw or cold food) and functional (e.g., rude servers, long waiting times) issues. Therefore, different service failures call for various service recovery efforts.
Question
How does different recovery strategies in response to technical and functional service failures affect customer recovery satisfaction, company reputation, and customer purchase intention?
Team
Number of Team Members: 3
My Role: Principal Researcher
Method and Analysis
Research Method: Quantitative
Research Design: Experimental design with 12 scenarios
Data Collection:
Instrument: Survey via Qualtrics
Initial Review: 5 subject-matter experts on social media reviews
Pilot study: 148 participants
Main study: 264 participants
Data Analysis:
MANCOVA
Key Insights
1- The impact of compensation and no response exceeds that of an apology in influencing customer satisfaction with management responses.
2- Responding to negative reviews—whether through compensation or an apology—consistently increases customers’ purchase intentions.
3- Management response strategy is positively related to the customers’ perceived reputation of the restaurant.
4- Customer satisfaction with management recovery efforts is the same for both scenarios of bad food-good service (BFGS) and bad food-bad service (BFBS).
5- Customer satisfaction with recovery efforts differs between scenarios of good food-good service (GFGS) and good food-bad service (GFBS).
6- Customers show higher purchase intention in scenarios of good food-bad service (GFBS) compared to bad food-good service (BFGS) and bad food-bad service (BFBS).
Recommendations
Effective management responses to negative reviews establish a two-way communication channel, enhancing customer satisfaction, preserving the company’s reputation, and increasing the likelihood of customer repurchases.
The quality of food (technical quality) significantly outweighs service quality in the dining experience. In cases of poor food quality, recovery efforts may yield limited impact. However, when food quality is strong but service is lacking, effective management responses can still turn the experience around. Prioritize addressing functional failures in these scenarios to retain customer loyalty.
To have a customer satisfied with recovery efforts, management should not apologize and instead, should either offer compensation or do not respond at all. The reason that management could be better off not responding could be due to the “negative bandwagon effect following the conversation” and the assumption that the firm is taking the fault for failure. Nevertheless, satisfaction is not an end in itself, and the ultimate purpose of companies is to win the customers back to continue their business with them. Therefore, restaurants should respond to negative reviews but as there is no difference between apology and compensation in respect to customer purchase intention and service companies’ reputation, apology suffices, and companies do not need to “overkill” the service recovery strategy.
Impact
Restaurant industry is a $1.1 trillion industry. Approximately 25% of diners worldwide rely on consumer reviews on platforms like OpenTable, Yelp, and TripAdvisor. Surveys suggest that a single negative review can deter 22% of potential customers from visiting a restaurant, and this percentage increases to a staggering 59% after reading three negative reviews. Responding to reviews helps build trust and credibility within the community, driving more foot traffic to restaurants. However, many businesses fail to respond to these reviews, missing a valuable opportunity to provide context and assure potential clients that such experiences don't happen regularly in their business.