ABSTRACT
This chapter critically reviews conceptualizations and empirical evidence in support of customer satisfaction, service failure, and service recovery and their role in hospitality and tourism management. One of the most basic principles in hospitality marketing is that organizational performance is enhanced by satisfying customers. Satisfaction is a major outcome of marketing activity and it links decision-making processes and consumption with post-purchase phenomena, such as attitude change, complaining behavior, word-of-mouth, repeat purchase and brand loyalty (e.g., Oliver, 1980). Although hospitality and tourism organizations may consider customer satisfaction as a major goal, not all service experiences are satisfactory from the customer's perspective (Ennew and Shoefer, 2003). Service failures can, and often do, occur. One reason for these failures is the labor-intensive nature of the hospitality industry, which inevitably leads to more heterogeneous outcomes compared to goods production processes (Kotler et al., 2006). Service performance variability and failures also arise from the inseparability of service production and consumption. Given the relatively high frequency of service failures, service recovery has been identified as one of the key ingredients for achieving customer loyalty (e.g., Tax and Brown, 2000). As a result, developing an effective service recovery policy has become an important focus of many customer retention strategies (Smith et al., 1999). Service recovery strategies involve actions taken by service providers to respond to service failures (Grönroos, 2000). Both what is done (compensation) and how it is done (employee interaction with the customer) influence customer perceptions of service recovery (e.g., Levesque and McDougall, 2000).
