Hypotheses

It has been indicated in section 2.3 above that much marketing research has examined the effects of distributive justice. There is considerable evidence that supports equity evaluations’

influence on customer satisfaction (Harris et al., 2006; Oliver & DeSarbo, 1988; Oliver &

Swan, 1989), repurchase intentions (Blodgett et al., 1997; Harris et al., 2006), and word-of-mouth (Blodgett et al., 1997). This suggests that distributive justice is positively related to customer satisfaction with recovery efforts. In other words, when customers receive

more compensation or a higher level of compensation, customers will be more satisfied with the outcome. Therefore, it was hypothesized that compensation level is positively related to satisfaction with service recovery evaluation and repurchase intention. In addition, since satisfaction with recovery is positively related to overall firm satisfaction (Maxham &

Netemeyer, 2002), it was assumed that compensation level would also be positively related to overall firm satisfaction.

H1: Distributive justice (compensation level) will have a positive effect on (a) overall firm satisfaction, (b) satisfaction with recovery, and (c) repurchase intention.

About recovery customization, prior research has showed that higher levels of service customization during personal interaction could result in higher satisfaction and a memorable service experience from a customer’s perspective (Bettencourt & Gwinner, 1996; Bitner et al., 1990). Moreover, Surprenant & Solomon (1987) also indicated that service offering adaptation had positive effects on customer evaluations of employee helpfulness and satisfaction with employee friendliness. Although increasing attention has been paid to service encounters, no research examines customization issues in the area of service recovery. Since service customization has positive impact on customer evaluation of a service experience, it is assumed that recovery customization also has positive impact on recovery evaluation of satisfaction. Since customers perceived higher value for customized products, it has also been assumed that customers who received customized recovery would perceive higher value and

have higher repurchase intention.

H2: Recovery customization will have a positive effect on (a) overall firm satisfaction, (b) satisfaction with recovery, and (c) repurchase intention.

It was indicated in section 2.3 above that distributive justice, often represented as compensation, is positively related to satisfaction (Kau & Loh, 2006; Maxham & Netemeyer, 2002; Tax et al., 1998) and repurchase intention (Blodgett et al., 1997; Tax et al., 1998).

Furthermore, customization related studies also show that higher levels of service customization during personal interaction could result in higher satisfaction and a memorable service experience from a customer’s perspective (Bettencourt & Gwinner, 1996; Bitner et al., 1990). Hence, it is expected that when customer evaluates the process of service recovery, there is interaction between compensation level and recovery customization. It is hypothesized that recovery customization would enhance the positive effect of compensation level on recovery evaluation, satisfaction and repurchase intention.

H3: The effect of compensation level on (a) overall firm satisfaction, (b) satisfaction with recovery, (c) repurchase intention will be moderated by recovery customization.

When a customized recovery is offered, the compensation level of the recovery will have greater impact on overall firm satisfaction/satisfaction with recovery/repurchase intention.

A further interesting issue is whether recovery customization offsets the negative effect of low compensation level on customer satisfaction and repurchase intention. Although low compensation level is assumed to result in lower satisfaction and repurchase intention, customized recovery might increase customer satisfaction and repurchase intention to a higher level. Similarly, even though high compensation level could induce higher customer satisfaction and repurchase intention, a lack of customization might reduce customer satisfaction and repurchase intentions to a lower level, which might be almost the same as the recovery which was customized with low compensation level. It is therefore suggested that there will be no significant differences of customer satisfaction and repurchase intentions between a recovery which was not customized with high compensation level and a recovery which was customized with low compensation level.

H4: When a recovery is customized with low level of compensation, (a) overall firm satisfaction, (b) satisfaction with recovery, and (c) repurchase intention will not differ significantly from when a recovery is not customized with high level of compensation.

Last, about the issue of gender in service recovery research, it has been indicated in section 2.5 that male tend to be more task oriented and female tend to be socially or process oriented. Furthermore, Kiran et al. (2007) found that women often assess service recovery qualitatively and evaluate satisfaction of service recovery in terms of process-based aspects of

recovery. They care much more about whether service providers are concerned about what happen to them (McColl-Kennedy et al., 2003). On the other hand, men tend to asses service recovery quantitatively and evaluate satisfaction of service recovery in terms of outcome-based aspects of recovery (Kiran et al., 2007). Consequently, the poor handling of a recovery process will negatively affect women’s satisfaction of service recovery much more, whereas a poor recovery outcome will negatively affect men’s satisfaction of service recovery much more. Since customization is the process which shows greater concern about customers and also place more emphases on the customized process, it is expected that recovery customization would have stronger positive effects on female customer satisfaction and repurchase intention than on that of males, irrespective of the compensation level. On the other hand, since compensation level is one of the recovery forms which represents recovery outcome, it is assumed that compensation level would have stronger positive effects on male customer satisfaction and repurchase intention than on that of female customers, irrespective of whether the recovery is customized or not.

H5: For male customers, compensation level will have greater positive effect on (a) overall firm satisfaction, (b) satisfaction with recovery, and (c) repurchase intention than female customers regardless of recovery customization.

H6: For female customers, recovery customization will have greater positive effect on (a) overall firm satisfaction, (b) satisfaction with recovery, and (c) repurchase intention than male customers regardless of compensation level.