Show you care: initiating co-creation in service recovery

Customers are no longer passive receivers of service offerings from companies, but rather value creators themselves. Companies realize that involving customers in service production and co-production is a cost-saving strategy and an effective way to satisfy customers. Co-production expands to co-design of new services as well as to co-recovery, which allows companies and their customers to work together to find a solution in the event of a service failure.
The justice theory, which is rooted in social psychology, has been widely used to explain individuals’ reactions to a variety of conflict situations. In a service recovery situation, customers have to confront what they perceive as an unfair outcome or treatment from a service company. Therefore, customers judge the company’s recovery effort through the “lens” of justice.

The idea of involving customers in the recovery process is to offer customers a certain degree of perceived control and empowerment in a service failure situation. Customers feel a greater sense of control and more responsibility when they are a part of decision-making process to work out a solution after a service failure. Customers perceive a higher degree of justice or fairness when they can influence both how a problem is solved and the actual outcome, than when being presented by a ready-made solution from the service company.

So involving customers in service recovery seems like a good strategy, doesn’t it? Not always! When customers see their co-creative effort as doing the job for the company, co-recovery is harmful. Customers expect the company to provide a larger portion of the joint effort when addressing the customers’ loss and any inconvenience caused by a service failure, especially when the company is responsible for it.

How can we make co-recovery positive for our customers? The key is to let customers feel that the company has done more, so that the joint effort shared between the company and the customer is fair in the customers’ eyes. Here, employees play a crucial role: they must ensure the customer recognizes their effort. A simple and effective way is for company employees to initiate co-recovery with their customers. Such an initiative indicates that the service company is willing to help and that it respects the customers’ opinions. However, if it is the other way around, the customers will perceive that the employees are not keen to help and that they put in less effort toward solving the problem. In other words, the effort demonstrated by the employees influences how customers view co-recovery.

In general, it is a good idea to proactively involve customers swiftly after a service failure. At the same time, effectiveness of the service recovery efforts also depends on how the customers are involved and how they perceive their own and the employees’ effort in the recovery process. In our study, we make a connection between employees’ initiation, perceived effort, and co-recovery effect. When service recovery is initiated by employees, customers perceive that a company makes a greater effort in service recovery; therefore they view the co-recovery as a fair and positive joint work.

So what can service companies do to make their customers happy if a service fails? Service companies can invite their customers to co-create a feasible solution without costly compensations. Service companies can, without much cost, influence perceived effort in the eyes of the customer by taking the initiative in service recovery when a problem occurs. For example, companies can offer customers a few possible solutions to the problem. Customers appreciate if they are given options for a resolution; it also gives them a stronger perception of fairness about the outcome.

Our research suggests that managers should empower and train their employees, especially frontline employees, to equip them with the knowledge and skills to handle service recovery proactively whenever possible. It is not enough to simply wait for customers to ask for help because the customer will perceive that the company is not exerting the effort. Customer-centric recovery management by proactive employees can increase the effectiveness of recovery and will result not only in happier customers, but also in increased customer repurchase behaviour.


Yingzi Xu

Dr. Yingzi Xu is Senior Lecturer of Marketing at Auckland University of Technology in New Zealand. Her research interests include customer satisfaction, service recovery, and customer switching behaviour in service research. She has published articles in international journals such as Journal of Business Research, Journal of Service Management, Managing Service Quality, and the Service Industries Journal.

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