How Much Compensation Should a Firm Offer for a Flawed Service? An Examination of the Nonlinear Effects of Compensation on Satisfaction
Gelbrich, Gäthke and Grégoire examine the nonlinear effect of compensation on customer satisfaction to find the best compensation after a flawed service. Building on service-dominant logic, they argue that the shape of the effect depends on how customers handle the flaw, either rejecting or accepting the flawed value proposition. Two experiments manipulate eleven compensation levels, from none to double the price, and the two handling tactics. Both studies support the logic that the shape of the compensation effect depends on the tactic.
Gelbrich, Gäthke and Grégoire examine the nonlinear effect of compensation on customer satisfaction to find the best compensation after a flawed service. Building on service-dominant logic, they argue that the shape of the effect depends on how customers handle the flaw, either rejecting or accepting the flawed value proposition. Two experiments manipulate eleven compensation levels, from none to double the price, and the two handling tactics. Both studies support the logic that the shape of the compensation effect depends on the tactic.
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Gelbrich, K., Gäthke, J., & Grégoire, Y. (2015). How Much Compensation Should a Firm Offer for a Flawed Service? An Examination of the Nonlinear Effects of Compensation on Satisfaction. Journal of Service Research, 18(1), 107-123. doi:10.1177/1094670514543149