Effectiveness of offline and online rewards in restoring satisfaction and trust

Abstract

Purpose: This paper aims to compare the relative importance of tangible compensation across the offline and online service mediums, and assess tangible compensation as a trust recovery tactic. Methodology: This study is based on a 3 (compensation level: 20%, 50%, 100%) × 2 (compensation type: refund, coupon) × 2 (service medium: offline, online) scenario-based experimental design. Findings: The offline and online customers exhibit different satisfaction for the respective values of both the immediate and delayed compensation types. Moreover, offline customers exhibit more trust in the firm when they receive a refund, whereas their online counterparts demonstrate a higher trust when provided with a coupon. Practical implications: For a service failure such as the one presented in the experimental study’s scenario, a lower (higher) value coupon will generate more (less) satisfaction compared to providing the same value as a refund. Firms will be better off by providing partial compensation in the form of a coupon, rather than a refund. Originality: Unlike most studies of service recovery, this research takes into account the perceived differences of various tangible compensations to provide a comparison of offline and online customers’ recovery preferences. Furthermore, the previous studies have not focused on trust restoration and assessed causes and effects of trust based on trust at one point in time i.e. trust after recovery. While this study has included restored trust as a variable in the conceptual model.