Journal of Retailing and Consumer Services 54 (2020) 102058

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Journal of Retailing and Consumer Services

journal homepage: http://www.elsevier.com/locate/jretconser

The journey from customer participation in service failure to co-creation in

service recovery
Ramin Bagherzadeh a, *, Monika Rawal b, Shuqin Wei c, Jose Luis Saavedra Torres d
a
Ithaca College, 953 Danby Road Ithaca, NY, 14850, USA
b
Else School of Management, Millsaps College, 1701 N State St, Jackson, MS, 39210, USA
c
Brad D. Smith Schools of Business, Marshall University, 1 John Marshall Dr., Huntington, WV, 25755, USA
d
Haile/US Bank College of Business, Northern Kentucky University, Highland Heights, Kentucky, 41099, USA

A R T I C L E I N F O A B S T R A C T

Keywords: Customer participation is growing into a widespread phenomenon in the service context. Despite the inherent
Co-creation significance of customer expectations to service failures in the high-participation service context, scant research
Customer participation exists on studying the links among customer participation, customer expectation of service recovery, and service
Satisfaction
outcomes (e.g., word-of-mouth or WOM). Even more pressing is the lack of research on the type of service re­
Service failure
Service recovery
covery that can countervail the inflated customer expectation of service recovery and restore service outcomes.
Word-of-mouth This research demonstrates that high contribution of customers in the beginning of service provision procedure
leads to high recovery expectations and low satisfaction. The results also support that co-created service recovery
(CCS-R), as contrasted to firm and customer recoveries, has a greater positive effect on satisfaction. Further, the
contrasting impacts of each service recovery type on positive and negative WOM are presented. An experiment
was conducted using service failure and recovery scenarios. Regression analysis was used to test the hypotheses.
The current research has some important implications for scholars and managers who wish to effectively recover
failed high-participation service encounters.

1. Introduction expectations in customers’ evaluation of service encounters (Zeithaml

“Failure is so important. We speak about success all the time. It is the
ability to resist failure or use failure that often leads to greater suc­
cess. I’ve met people who don’t want to try for fear of failing.”
- J.K. Rowling
Research on service failures remains one of the most pressing topics
in marketing today, and rightfully so. According to Glasly’s 2018
Customer Service Expectations Survey, 92% of participants mentioned
that they would not repurchase from a firm after three or fewer service
failures. Among those, 26% would stop purchasing after their first ser­
vice failure experience (Forbes, 2018). All companies are likely to
stumble at some point in time, and even excellent service providers
sometimes face service failures. While companies cannot guarantee
100% error-free service delivery, they can ensure that the service fail­
ures will be recovered in accordance with customer expectations.
Indeed, early service literature has highlighted the integral role of
et al., 1993). Researchers have also emphasized the complexity of ex­
pectations of services by customers; for instance, service expectations
critically depend on how much customers believe they have been
involved in the design of the service and/or the delivery process (i.e., the
degree of customer participation) (Dong and Sivakumar, 2017; Zeithaml
et al., 1993). For instance, in hospitality and tourism services, it has been
shown when customers are more engaged in co-creating services, they
are more likely to expect higher service quality (Chathoth et al., 2016).
Hence, it can be claimed that customer expectation is particularly crit­
ical in service encounters that involve high customer participation. The
importance of customer expectations is further amplified when
high-participation service encounters fail (Heidenreich et al., 2015;
Roggeveen et al., 2012). Despite the inherent significance of customer
expectations to service failures in the high-participation service context,
there is little research on how customer participation is tied to customer
expectation of service recovery, except the recent work by Heidenreich
et al. (2015). According to Heidenreich et al. (2015), experiencing a

* Corresponding author.
E-mail addresses: bagherzadeh.ramin@gmail.com (R. Bagherzadeh), rawalm@millsaps.edu (M. Rawal), weish@marshall.edu (S. Wei), saavedratj1@nku.edu
(J.L. Saavedra Torres).

https://doi.org/10.1016/j.jretconser.2020.102058
Received 12 June 2019; Received in revised form 23 December 2019; Accepted 22 January 2020
Available online 6 February 2020
0969-6989/© 2020 Elsevier Ltd. All rights reserved.
R. Bagherzadeh et al.
service failure in a high-partcipation (vs. a low-participation) context
generates greater negative disconfirmation of expectations. It is possible
that after customers sacrifice their time and efforts, including other re­
sources, to contribute in the design and delivery of a service only to find
out that the service fails, their expectation of service recovery may be
inflated, which negatively influences service outcomes. However, how
to mitigate the negative impacts of inflated expectations on service
outcomes remains relatively unknown (Heidenreich et al., 2015; Suga­
than et al., 2017). In particular, what service recovery strategies can
effectively countervail the elevated customer expectation of service re­
covery and restore service outcomes?
According to recent service research findings, treating customers as
passive recipients of service recovery does not allow customers to cope
with an augmented sense of control that they naturally desire after a
service failure (Guo et al., 2016). On the contrary, engaging customers to
participate in service recovery as active contributors provides them with
a heightened sense of control (Guo et al., 2016). Extending this line of
logic, it is reasonable to inquire if the company should further engage
customers to be active participants in service recovery, following a
failed, high-participation service provision. Consistent with the
service-dominant logic, today’s customers try to maximize value by
engaging and interacting more with the company at different stages of
the process from service delivery to service recovery (Vargo and Lusch,
2004). They act as “active players” rather than “passive audiences”
across the entire service chain (Prahalad and Ramaswamy, 2000).
Companies are also learning more about customers’ wants and needs by
collaborating with them to co-create value for these customers, sug­
gesting the importance of participation in the service industry (Chan
et al., 2010).
There is more research on successful customer participation than
failed customer participation (Dong and Sivakumar, 2017). For
example, previous research has found that customer participation can
benefit customers by increasing service quality (Xie et al., 2008) and
firms by improving operating efficiencies and customer satisfaction
(Dong and Sivakumar, 2017). However, as previously discussed,
customer participation may act as a double-edged sword when services
fail (Heidenreich et al., 2015; Wei et al., 2019). Despite what is known
about service failures, critics have argued that minimal knowledge exists
regarding customer participation in service failure episodes (namely,
co-created service failures) (Park and Ha, 2016; Wei et al., 2019). With a
growing number of customers sacrificing more of their time, money, and
effort by participating in creating their own service delivery (Chan et al.,
2010), greater expectations are ascribed to the company providing
service, the experience, and the encounter as a whole (Hess et al., 2003).
Inherently, in case of a failed co-created encounter, there is a greater
need to understand if customer participation will impede or aid recovery
expectations, satisfaction, and service outcomes. Given that more and
more companies encourage customers to co-create services and that
failures are inevitable, understanding how to regain customer satisfac­
tion and how to create positive behavioral intentions in context to
co-created service failure (CCS–F) is vital.
To fill the research gaps, the current study attempts to investigate
which service recovery strategy has the greatest impact while recovering
CCS-F. Dong et al. (2008) classified service recovery into three types:
firm, customer, and joint recovery. Firm recovery happens when cus­
tomers do not participate and service recovery is solely offered by the
firms. In contrast, customer recovery occurs when only customers put in
the efforts to fix the problem. In a joint or co-created service recovery
(CCS-R), firms collaborate with the customer to complete the recovery
process (Dong et al., 2008). Recent service research has started to pay
attention to the idea of CCS-R. For example, Haz�ee et al. (2017) obtained
favorable outcomes of CCS-R, such as enhanced repurchase intention.
However, the effectiveness of CCS-R is not consistently shown in the
literature (Hess et al., 2003). We suspect that one reason is a lack of
consideration of customer participation level in the initial service de­
livery process and the resultant recovery expectations. Thus, unlike
2
Journal of Retailing and Consumer Services 54 (2020) 102058
previous research studies that either focus on the impacts of customer
participation in the initial service delivery (e.g., Heidenreich et al.,
2015; Sugathan et al., 2017), or the effects of customer participation
during service recovery (e.g., Dong et al., 2008; Park and Ha, 2016;
Roggeveen et al., 2012; Xu et al., 2014), our study comprehensively
investigates customer participation at both service touch points.
Accordingly, the subsequent questions are asked in this research:
1. Do customers with higher participation in the initial service delivery
have higher expectations for service recovery and as a result, lower
satisfaction?
2. How do different recovery strategies (joint/co-created, firm, and
customer recovery) moderate the relationship between service re­
covery expectation and satisfaction, which in turn influences WOM?
The findings of this research provide significant repercussions for
academics and managers alike. First, by collecting data from the same
participants before and after offering a service recovery, this study
shows how satisfaction and WOM (positive and negative) change when
customers have put in time and efforts to participate in the initial service
delivery followed by a service failure and then a service recovery is
offered to them. Second, by considering the initial customer participa­
tion level, this study empirically tests the effectiveness of different ser­
vice recovery strategies. Thus, practitioners can choose the most
appropriate recovery strategy based on how much effort and time, along
with other resources, customers have already put in initially to co-create
the service.
A scenario-based approach (online hotel booking) was used, which
captured co-created service failure and three types of service recovery.
Satisfaction and negative and positive WOM were measured after par­
ticipants were exposed to the scenario-based manipulation. Confirma­
tory factor analysis (CFA) was used to assess the model fit and construct
validity, and regression analysis was conducted to test the hypotheses.
2. Conceptual framework and hypothesis development
2.1. Customer participation
Customer participation refers to a behavior that involves customers’
extent of providing information and making recommendations in order
to become a part of decision making (Chan et al., 2010). In the service
context, individuals are not recognized as simple providers of informa­
tion, but referred to as co-producers who create values along with actual
producers (Vargo and Lusch, 2004). Vargo and Lusch (2004) define
services as “the application of specialized competences (knowledge and
skills) through deeds, processes, and performances for the benefit of
another entity or the entity itself” (p. 326). According to
service-dominant logic, these resources should be integrated to co-create
value for customers, with firm and customer identified as the resource
integrators (Vargo and Lusch, 2004, 2008). Co-production emphasizes
customers taking extra efforts in the service encounter beyond just
transactions (Zhao et al., 2018). Uzkurt (2009) claims that participating
in a service process is a form of customer contribution to boost service
quality, leading to customer satisfaction. Moreover, customers get more
familiar with the service offering when they participate in the process,
which in turn reduces uncertainty about services received (Jia and
Wang, 2016; Fellesson and Salomonson, 2016).
Research has shown satisfaction as a significant consequence of
customer participation (Chan et al., 2010; Dabholkar and Sheng, 2012).
Little research has been done showing how customers deal with a failure
after they have already participated in the initial service delivery pro­
cess (Heidenreich et al., 2015; Sugathan et al., 2017). More empirical
studies are needed in this area (Dong et al., 2008; Dong and Sivakumar,
2017). To evaluate the service quality, customers refer to their expec­
tations (Parasuraman et al., 1988). After a service failure happens, the
customers expect to undergo a service recovery.
R. Bagherzadeh et al. Journal of Retailing and Consumer Services 54 (2020) 102058

2.2. Service recovery Table 1

Key service recovery studies.
Service recovery refers to the efforts and tasks performed by a Study Dependent Variables Recovery Recovery
company and its employees to restore what customers lost in the service Type Dimension
delivery (Hess et al., 2003). Compensations including discounts, re­ Bitner (1990) Satisfaction, Perceived quality, Firm recovery Outcome
funds, gifts and coupons, free service for a specific time, explanations of Behavioral intentions
the failure, empathy, and apologies are examples of recovery efforts
(Jung and Seock, 2017). Maxham and Netemeyer (2002) state that Hess et al. Failure attribution, Service Firm recovery Outcome
(2003) recovery expectation,
different facets of justice (distributive, procedural, and interactional) Satisfaction after recovery
shape the service recovery perception. Interactional justice refers to the
perceived fairness of the company’s interactions with the customer who Maxham III Expectation of recovery, Firm recovery Outcome
complained. Procedural justice contains how the company handles the and Failure severity, Attribution of
Netemeyer blame, Satisfaction, Word of
situation and tries to fix the problem. Distributive justice involves the
(2002) mouth, Recommendation,
extent to which customers perceive the outcome as fair. Customers Repurchase intention
evaluate what they have received based on these three facets of justice
(Maxham and Netemeyer, 2002). A meta-analysis done by Orsingher Smith et al. Distributive, Procedural, and Firm recovery Outcome
et al. (2010) shows that these three facets of justice are the main ante­ (1999) Interactional justice,
Satisfaction
cedents of satisfaction. Hence, satisfaction can be derived from cus­
tomers’ service recovery evaluations. Swanson and Service quality, Satisfaction Firm recovery Outcome
Service recovery has two components, namely outcome and process. Kelley (lower or higher than and Process
The outcome dimension, also known as the technical dimension, is the (2001) expected), Word of mouth,
Repurchase intention
tangible dimension which is related to “what is done.” In contrast, the
process dimension, also known as the functional dimension, is related to Harris et al. Satisfaction, Future intentions Firm recovery Outcome
“how it is done” (Dong et al., 2008). Literature has shown the positive (2006)
impact of service recovery outcome on satisfaction, WOM, and
repurchase intention (e.g. Chen et al., 2018; Gohary et al., 2016a,b; Dong et al. Customer satisfaction with Firm, joint, Process
(2008) recovery, Customers’ role and customer
Wirtz and Mattila, 2004). However, little research has investigated the
clarity, Ability, Perceived recovery
effectiveness of the process aspect of service recovery on customer value, Intention for future co-
satisfaction and their WOM, especially when customers play a role in the creation
process of co-creating the service recovery (CCS-R) (Dong et al., 2008).
Roggeveen Satisfaction, Repurchase Firm and joint Outcome
Table 1 provides more insights on the research stream of the two di­
et al. (2012) intention, Equity recovery and Process
mensions of service recovery.
Since customers are inclined to actively participate in service de­
livery, they would also tend to be a part of the service recovery process. Zhu et al. Customer-recovery effort, Customer Process
This is due to attribution theory (Weiner, 2008), which proposes that (2013) Customer-recovery strategy, recovery
Switch to employee assistance
customers assign causes to events, and in this case due to their partici­
pation in initial service delivery along with the service provider, the
customers attempt to redress the situation by being a part of the recovery not take the responsibility for finding a new flight, and the customers
process. have to find a new ticket themselves.
In this research, customer participation in service recovery is defined
as the extent to which customers participate in the recovery process and 2.2.3. Joint (co-created) recovery
consider their preferences after they have experienced a service failure. Joint recovery happens when in the service recovery process, the
Customer participation is classified as follows: firm recovery, customer firm works with customers to find a solution together (Dong et al.,
recovery, and joint recovery (Dong et al., 2008). 2008). The firm may ask about customers’ preferences to find the best
option, and customers actively cooperate in the process to maximize the
2.2.1. Firm recovery gains of service recovery. Joint recovery is also called co-created service
Firm recovery happens when the firm offers to have its employees recovery (CCS-R), as employees and customers participate in order to
deliver the whole process of service recovery (Dong et al., 2008). The create the best option together (Andreu et al., 2010). In the flight
process may or may not require customer presence; employees take the cancelation example, an airline employee interacts and works with the
sole action of the recovery and offer customers a final solution to fix the customer to find the best new flight based on the customer’s desires (e.
problem. For example, in airline services, when a customer’s flight is g., the date/time preferred, the number of stops preferred, etc.).
canceled, a firm recovery may involve the sole actions from an employee As discussed earlier, in case of service failures, customers expect to
to find and offer the customer a new flight without any interaction with receive a service recovery. A more important question is how the
the customer. Most service recovery studies focus on firm recovery (Hess expectation for service recovery is shaped in the initial service delivery
et al., 2003). When customers are offered effective firm recovery (a situation by the amount of customer participation. Customers’ service
solution that addresses their problem), their satisfaction will be recovery expectation refers to a customer’s assessment about the
increased (Harris et al., 2006). Moreover, firm recovery that involves appropriateness of the remuneration offered by a company post service
offering compensations to recover what customers have lost can failure (Hess et al., 2003). Recovery expectations of customers tend to
enhance customer satisfaction (Wirtz and Mattila, 2004). increase when facing a service failure. Previous research suggests that
highly committed customers who are more involved with the service
2.2.2. Customer recovery have higher service recovery expectations following a service failure
Customer recovery occurs when the firm responsible for failure does than do less committed customers (Kelley and Davis, 1994). Equity
not get involved and the recovery process is done entirely by the cus­ judgment is the basis of customers’ expectations of how the appropriate
tomers as the sole actors (Zhu et al., 2013). In this situation, the firm level of service recovery should be offered (Hess et al., 2003). Equity
does not offer any service recovery and customers have to find a solution theory states that the balance of input and output is judged; since a
themselves. In the flight cancelation example, an airline company does

3
R. Bagherzadeh et al.
failure causes a misbalance between of what customers invest and what
they receive, customers’ expectation to receive a fair service recovery
increases (Oliver and Swan, 1989). Extending this line of logic, as cus­
tomers put more time, effort, and other resources in participating in
service delivery, they have higher expectations of service recovery.
H1. Customer participation is positively related to service recovery
expectation following a service failure, such that high customer partic­
ipation leads to high service recovery expectation.
2.3. Expectancy-disconfirmation theory
This research is rooted in expectancy-disconfirmation theory, which
has been widely used in the marketing literature (Esbjerg et al., 2012;
Oliver, 1980; Srivastava and Kaul, 2014). In the service context,
perception or judgment of service quality depends on different levels of
expectations. Van Ryzin (2013) explains the gap or resulting difference
between expectations and performance as disconfirmation, “which can
be either positive (with performance exceeding expectations) or nega­
tive (with performance falling short of expectations).” It is expected that
positive disconfirmation produces high satisfaction, and on the contrary,
negative disconfirmation yields low satisfaction.
When a service failure occurs, negative disconfirmation takes place.
Thus, customers’ expectation to receive a service recovery is high, and as
a result, their satisfaction is low. Contrarily, when customers receive
proper service recovery, positive disconfirmation will be developed,
leading to improved satisfaction. Hence, in responding to a service
malfunction, as the level of service recovery expectation escalates, the
satisfaction of the customer decreases:
H2. Service recovery expectation is negatively related to satisfaction
following a service failure, such that high service recovery expectation
leads to low satisfaction.
Furthermore, after a service failure takes place, the customers who
are more (vs. less) involved during the process of service delivery
experience greater dissatisfaction with the service and the organization
(Heidenreich et al., 2015; Koc et al., 2017). We believe that this
heightened dissatisfaction will lead to customers’ higher intention to
spread negative WOM and lower intention to disseminate positive WOM
(H3 and H4).
H3. Satisfaction is negatively related to negative word-of-mouth
following a service failure, such that lower satisfaction leads to higher
negative word-of-mouth.
H4. Satisfaction is positively related to positive word-of-mouth
following a service failure, such that lower satisfaction leads to lower
positive word-of-mouth.
In addition to exploring customers’ reactions to failures in the high-
participation service context, we investigate various types of service
recovery strategies based on attribution theory, to shed light on how
customer satisfaction can be improved and how firms can decrease
negative WOM or even enhance positive WOM. Maxham and Netemeyer
(2002) suggested that in studying WOM, satisfaction with service re­
covery is a stronger predictor of positive WOM. Orsingher et al. (2010)
state that when a company offers an effective service recovery to solve
the problem, customers who get satisfied with the recovery tend to
spread their positive WOM and have less tendency to engage with
negative WOM. Attribution theory states that individuals have a ten­
dency to interpret various situations/events and assign causes to those
events or behaviors (Weiner, 2008). In service context, attribution the­
ory involves interpreting the causes of service failure so as to identify the
source to put the blame on (Pacheco et al., 2018). This theory proposes
that a customer’s expectation of service recovery is influenced by the
perceived cause of the service failure (Koc et al., 2017).
As previously discussed, customers who participate more in the
original service delivery, after experiencing a failure, have high service
4
Journal of Retailing and Consumer Services 54 (2020) 102058
recovery expectations. As a result, their satisfaction becomes low. To
restore the lost satisfaction, firms offer service recovery (firm, customer,
or co-created) to their customers. Most service recovery studies focus on
firm recovery (Hess et al., 2003) where employees take complete re­
sponsibility of the failure and take action to provide the final solution to
the customers. Due to attribution theory, when customers are offered
firm recovery, which shows that the firm is taking ownership of the
failure, customers’ satisfaction will be increased (Harris et al., 2006).
Moreover, firm recovery that involves offering compensations to recover
what customers have lost can enhance customer satisfaction, which in
turn can lead to high positive WOM (Wirtz and Mattila, 2004). On the
contrary, as satisfaction with service recovery relates to post-recovery
behaviors (Gohary et al., 2016a,b; Park and Ha, 2016), the moder­
ating effect of firm service recovery on customer expectation and
satisfaction will lead to low negative WOM. Thus, the following hy­
potheses are proposed:
H5. Firm service recovery moderates the relationship between
customer recovery expectations and satisfaction, such that it weakens
the negative relationship between customer recovery expectations and
satisfaction, which in turn leads to (a) low negative WOM and (b) high
positive WOM.
In case of customer recovery, where the firm does not offer any
service recovery, the customers work on their own to find a solution
themselves. Based on expectancy-disconfirmation theory, since the
customer expectations are not met by the service recovery, the outcome
of customer recovery would be negative disconfirmation. Such negative
disconfirmation may be augmented in the context of customer recovery
since the burden to fix the problem is all placed on the customer (Dong
et al., 2016). Furthermore, based on attribution theory, customers would
attribute the cause of the failure to the combined efforts of the firm and
themselves, but take more credit for their own work during service re­
covery (Dong et al., 2016; Van Vaerenbergh and Orsingher, 2016;
Weiner, 2008). Thus, it is reasonable to propose that the negative rela­
tionship between customer recovery expectations and satisfaction will
be strengthened, in turn leading to high negative WOM (H6a) and low
positive WOM (H6b).
H6. Customer service recovery moderates the relationship between
customer recovery expectations and satisfaction, such that it strengthens
the negative relationship between customer recovery expectations and
satisfaction, which in turn leads to (a) high negative WOM and (b) low
positive WOM.
Co-creation in service recovery (CCS-R) represents a joint collabo­
ration between the customer and the service provider in order to design
the service recovery content (Roggeveen et al., 2012). According to
service dominant logic, firms and customers collaborate by sharing their
recourses to co-create value. In the process of exchanging the resources
and co-creating the value, customers are active participants (Vargo and
Lusch, 2004). Also, customers are willing to co-create the recovery as it
leads them to have more control over the process, which helps them
boost their social self-esteem in their customer-firm relationship. (Guo
et al., 2016). The purpose of CCS-R is to maximize the value for both
customers and firms. Customers will receive a recovery that is closer to
their needs and expectations while firms take the advantage of this joint
process by increasing customer satisfaction and decreasing negative
WOM. Va �zquez-Casielles et al. (2017) propose two service recovery
processes in order to influence customer attitude and behavior posi­
tively. First, the service recovery process requires an ‘operational vision,
’ which is a transactional activity of the firm. Second, the service re­
covery process needs a ‘strategic vision,’ which focuses on finding and
fixing the problem and avoiding any future failures. For this purpose, an
interaction should happen between firms and customers through
co-creation activities. Co-creation in service recovery is needed for the
integration of customers’ and firms’ recourses such as tools, skills, and
knowledge to complete the joint process as effectively as possible (Vargo
R. Bagherzadeh et al.
and Lusch, 2004).
The outcome of this type of service would be positive disconfirma­
tion, as the recovery effort likely exceeds customer expectations. Be­
sides, according to attribution theory, since customers would perceive
both the firm and themselves to be responsible for the service failure due
to their joint participation in the initial service delivery, the joint re­
covery would seem to be reasonable to the customers.
Table 1 provides a summary of key studies on service recovery. As
the table shows, little research has been done studying all three types of
service recovery, especially the effect of joint or CCS-R on satisfaction
(Zhu et al., 2013).
Prior research has demonstrated the positive effect of co-creation in
service recovery (Gohary et al., 2016a,b). Roggeveen et al. (2012) show
customers are less willing to accept compensation when they co-create
service recovery. Customer satisfaction will be increased if firms offer
CCS-R as it is considered a fairer outcome (Cheung and To, 2016).
Customers have a positive evaluation on their own work, therefore, they
will be more satisfied if they participate in the recovery process and
receive a favorable outcome (Fellesson and Salomonson, 2016). Also,
customers are willing to co-create the recovery as this gives them more
control over the process, which can help them boost their social
self-esteem in the customer-firm relationship (Guo et al., 2016).
In addition, customers find the CCS-R to be more favorable, as they
believe that the firm has put in more efforts to find a solution (Park and
Ha, 2016). Xu et al. (2014) found that customers’ perceptions toward
the initiator of the process of CCS-R are different. Their results show that
when a firm initiates the CCS-R, customers’ perception of justice,
satisfaction, and intention to repurchase is greater, as compared to when
a customer initiates CCS-R. Haz�ee et al. (2017) show that CCS-R yields
the most favorable outcomes, which result in customers developing a
more positive behavior toward the service recovery. Therefore, we
expect that CCS-R has a positive impact on satisfaction, leading to high
positive WOM. Comparing all three service recovery strategies, since
firm recovery is considered as positive actions by the firm as well, it also
has positive influence on satisfaction, but we expect that the positive
impact of firm recovery is smaller than that of CCS-R. However, in
customer recovery, since customers find a solution themselves, they tend
not to consider that a positive recovery. Therefore, we hypothesize the
following. Fig. 1 shows our conceptual model.
H7. Co-created service recovery moderates the relationship between
customer recovery expectations and satisfaction, such that it weakens
the negative relationship between customer recovery expectations and
satisfaction, which in turn leads to (a) low negative WOM and (b) high
positive WOM.
3. Methodology
3.1. Design and procedure
A scenario-based approach was used due to its benefits over a recall-
based method for studying service failure and recovery. For example,
asking participants to recall past failure and recovery experiences may
Fig. 1. The conceptual model.
5
Journal of Retailing and Consumer Services 54 (2020) 102058
enhance “response bias due to memory lapse or rationalization” (Hess
et al., 2003, p. 134). In contrast, a scenario-based approach allows the
researcher to control “unmanageable variables” such as memory decay
and flaws. The service context used in the scenarios is online hotel
booking because most customers deal with it routinely. Thus, the failure
that happens for this service is realistic and common. Moreover, online
hotel booking context reflects a service that customers can participate in
the service delivery and co-create the service recovery process as well.
Therefore, the results are generalizable to most services with this
characteristic.
First, all participants were requested to read a scenario that describes
their customer participation in the process of booking a hotel room on
the Internet for their upcoming trip. Then, they were told that a service
failure occurs, which entails the loss of their room reservation (Xu et al.,
2014). After being exposed to the service failure scenario, all the par­
ticipants rated customer participation during initial service delivery,
customer expectation of service recovery, customer satisfaction, and
positive and negative WOM. Next, the participants were randomly
assigned to one of the three recovery conditions: firm recovery,
joint/co-created recovery, or customer recovery. The recovery scenarios
were adopted from Dong et al. (2008) (see Appendix A). Then, partici­
pants were asked again to provide ratings for customer satisfaction,
positive and negative WOM, and demographic questions. All the mea­
sures were adapted from previously established scales (see Table 2).
A sample of 184 undergraduate students in a Midwest university in
the United States participated in the study in which 54.9% were male.
The manipulation of service recovery was examined by the following
question: “To what extent did the hotel/you/the hotel and you
contribute to the resolution of the problem?” on a five-point scale (from
“Not at all” to “A great deal).” The difference across three conditions of
recovery was significant, F (2, 30) ¼ 6.836, p < 0.01. The average rating
for firm recovery was 3.18, for co-creation recovery was 4.09, and for
customer recovery was 4.54. The average rating for each service re­
covery condition was high, demonstrating the appropriateness of our
manipulation.
3.2. Results
3.2.1. Confirmatory factor analysis (CFA)
The measurement model and construct validity was assessed via
CFA. According to the results, the measurement model has acceptable fit
(χ2 ¼ 303.944, df ¼ 129, p < .001; RMSEA ¼ 0.08; CFI ¼ 0.956; GFI ¼
0.853; TLI ¼ 0.942). As exhibited in Table 3, all factor loadings were
significant (p < .01) and higher than 0.5, demonstrating acceptable
convergent validity. Moreover, average variance extracted (AVE) for all
items were above 0.5, the AVE value for each of the variables is greater
than its corresponding squared interconstruct correlation, and each item
has composite reliability of higher than 0.7, further demonstrating
convergent validity (see Table 3). Finally, all correlations except one
(the path between customer participation and satisfaction) were sig­
nificant, showing that discriminant validity was met.
R. Bagherzadeh et al. Journal of Retailing and Consumer Services 54 (2020) 102058

Table 2 Table 3
Measurement items, factor loadings, composite reliabilities, AVEs. Descriptive statistics: Means, standard deviations, AVEs, and correlations.
Constructs and Items Factor Composite AVE 1 2 3 4 5
Loading Reliability
1.Customer Participation in Service .523
Customer Participation in Service .702 .523 Delivery
Delivery (Chan et al., 2010) 2.Customers’ Service Recovery .478 .653
Expectations
3.Customer Satisfaction -.127 -.283 .936
4. Negative WOM .243 .368 -.675 .809
5. Positive WOM -.192 -.282 .912 -.714 .852
I spent a lot of time sharing information .572 5.338 5.830 2.580 4.706 2.818
about my needs and opinions while Mean
booking my hotel reservation. Standard Deviation 1.218 1.137 1.970 1.887 1.759
I put a lot of effort into expressing my .675
personal needs during booking my hotel Notes: AVEs are provided in diagonal and inter-construct correlations are pro­
reservation. vided in sub-diagonal.
I had a high level of participation when .804
booking my hotel reservation.
positive WOM. The fit for the structural model is acceptable [χ2 ¼
I was very much involved in deciding how .816
the services should be provided.
407.881, df ¼ 148, p < 0.01; CFI ¼ 0.935; GFI ¼ 0.813; TLI ¼ 0.924;
Customers’ Service Recovery .817 .653 RMSEA ¼ 0.09]. Table 4 presents the hypothesis testing results. Ac­
Expectations (Hess et al., 2003) cording to the results, customer participation in service delivery
following a service failure is positively related to customers’ service
recovery expectations, supporting H1 (β ¼ 0.488, t ¼ 5.222, p < .001).
I expect the hotel to do everything in its .668 H2, which states that customers’ service recovery expectations is
power to solve the problem. negatively related to satisfaction before offering service recovery is
I don’t expect the hotel to exert much effort .843 supported (β ¼ 0.311, t ¼ 3.689, p < .001). The results support H3 by
to solve the problem. (R) the finding of a negative relationship between satisfaction before service
I expect the hotel to offer me an available .896
room.
recovery and negative WOM (β ¼ .656, t ¼ 10.465, p < .001).
Customer Satisfaction (Chan et al., 2010) .975 .939 Finally, H4 is supported, showing satisfaction before service recovery is
positively related to positive WOM (β ¼ 0.918, t ¼ 20.069, p < .001).

3.2.3. Moderation effect of service recovery type on satisfaction and WOM

I am satisfied with the services provided by
the hotel.
The service of this hotel meets my
expectations.
Overall, I am satisfied with the service
provided by this hotel.
Negative Word-of-Mouth (Goyette et al.,
2010)
I intend to say negative things about this
hotel to others.
I intend to speak unflatteringly of this hotel
to others.
I intend to discourage friends and relatives
to do business with this hotel.
Positive Word-of-Mouth (Liu et al., 2001)
.987
In order to compare the consumer behavior before and after the
.937 service recovery actions, we conducted a MANOVA test, which included
experimental condition (participation) as independent variable and
.982 satisfaction, negative WOM, and positive WOM before and after the
.908 .809
service recovery as a dependent variable. Results show a significant
change in the dependent variables after the service recovery action takes
place. Customer satisfaction increases with the service recovery (Mbefore
¼ 2.579 vs Mafter ¼ 4.099, t ¼ 9.218, p < .001) as well as positive WOM
(Mbefore ¼ 2.818 vs Mafter ¼ 3.729, t ¼ 6.825, p < .001). On the con­
.852
trary, results show that negative WOM decreases with the service re­
.882 covery (Mbefore ¼ 4.099 vs Mafter ¼ 2.579, t ¼ 6.987, p < .001).
In addition, an ANOVA test was conducted to analyze the individual
.962 effects of each experimental condition on the service recovery (firm, co-
.985 .852
creation, and customer) on satisfaction. Results showed that there is a
significant difference between the means of service recovery for the
three conditions (F(2,181) ¼ 8.666, p < .001). Also, a detailed com­
parison between experimental conditions revealed that co-creation re­
covery presents the higher mean among the three conditions (Mco-creation

I intend to recommend this hotel to others. .919

Table 4
I intend to speak of this hotels’ good sides. .837
Structural parameters estimates.
I intend to be proud to say to others that I .911
am this hotel’s customer. Estimate S.E. t-Value
I intend to strongly recommend people get .963
Customer Customers’ .488 .062 5.222***
services from this hotel.
Participation → Service Recovery
I intend to mostly say positive things about .959
Expectations
this hotel to others.
I intend to speak favorably of this hotel to .945
Customers’ Customer -.311 .186 3.689***
others.
Service → Satisfaction
Notes: All items were measured using seven-point scales anchored by 1 ¼ Recovery
“strongly disagree” and 7 ¼ “strongly agree”. Expectations

Customer → Negative WOM -.656 .058 10.465***

3.2.2. Direct effects before recovery Satisfaction
Since the measurement model has an acceptable fit, SEM was con­
ducted next to test H1-H4, the direct effects of customer participation on Customer Positive WOM .918 .040 20.069***
Satisfaction
customers’ service recovery expectations, satisfaction, and negative/
→

***p < .001.

6
R. Bagherzadeh et al.
¼ 4.694 vs Mfirm ¼ 4.237 vs Mcustomer ¼ 3.372), and the results of the
Levene’s test indicated unequal variances (F(2,181) ¼ 3.291, p < .05).
The results for the effect of each experimental condition on satisfaction,
negative WOM, and positive WOM before and after the service recovery
are shown in Table 5.
3.2.4. Moderated mediation effect of service recovery type on satisfaction
and WOM
To test H5–H7, two regression analyses were conducted to analyze
the Moderated Mediation effect of service recovery type on satisfaction
and WOM using Model 7 in PROCESS macro (Hayes, 2009). The results
for the moderated mediation test are shown in Table 6. The first
regression analysis included the moderating impact of service recovery
over the mediation role of satisfaction between customer recovery ex­
pectations and negative WOM. As expected, results suggest a full
mediation of satisfaction between customer recovery expectations and
negative WOM (direct effect: t ¼ 0.455, LLCI ¼ 0.189 and ULCI ¼
0.067), and a positive impact of service recovery type on the model of
satisfaction (F(3, 180) ¼ 4.42, p < .05). Also, outcomes showed that firm
recovery and co-creation recovery significantly mitigate the negative
impacts of service expectations on satisfaction and consequently
reducing the negative WOM. Therefore, H5a and H7a are supported.
However, unexpectedly, customer recovery had no effect on the medi­
ation process of satisfaction customer recovery expectations and nega­
tive WOM (LLCI ¼ 0.111 and ULCI ¼ 0.147). This suggests that,
contrary to what we hypothesized, customer recovery does not amplify
the impact that service recovery expectation has on satisfaction; hence,
H6a is not supported.
The second regression analysis contains the moderating impact of
service recovery over the mediation process of satisfaction between
customer recovery expectations and positive WOM. Results suggest a
full mediation of satisfaction between customer recovery expectations
and positive WOM (direct effect: t ¼ 0.098, p < .05, LLCI ¼ 0.231
and ULCI ¼ 0.034), and a positive impact of service recovery type on
the overall model of satisfaction (F ¼ 4.42, p < .05). As anticipated, both
firm recovery and co-created recovery had a significant impact on the
mediation process of satisfaction between customer recovery expecta­
tions and positive WOM. These results provide support for H5b and H7b.
Similar to the outcomes of the first regression, results show no evidence
that customer recovery had effect on the mediation process of satisfac­
tion between customer recovery expectations and positive WOM (LLCI
¼ 0.479 and ULCI ¼ 0.132). Hence, H6b is not supported.
The differential effects of the dimensions of service recovery on
satisfaction, negative and positive WOM before and after the service
recovery are visually illustrated in Figs. 2–4. In general, co-created re­
covery works more effectively than firm recovery, which is followed by
customer recovery.
4. General discussion and implications
In this research, we have shed light on co-created service recovery
(CCS-R), which is under-studied in the service literature. Our research
Table 5
Comparison among satisfaction, negative word-of-mouth, and positive word-of-
mouth before and after service recovery.
IV Before Service After Service Recovery
Recovery
Firm Co-creating Customer
Recovery Recovery Recovery
Customer 2.579 4.237* 4.694* 3.372*
satisfaction
Negative WOM 4.076 3.544* 3.299* 4.098 n.s.
Positive WOM 2.818 3.644* 4.058* 3.467*
*p < .05.
n.s.: Not Significant.
7
Journal of Retailing and Consumer Services 54 (2020) 102058
helps advance the dialogue concerning how customers’ satisfaction and
intentional behaviors will be when a service failure occurs after cus­
tomers have actively participated in the initial service delivery. Our
findings also reveal interesting insights on the differential effects of
different types of service recovery on satisfaction and negative and
positive WOM. Our findings indicate that when customers initially
contribute to in a service delivery, they have greater expectation of
service recovery and lower satisfaction as a result. They also highly
intend to spread negative WOM. However, when they are offered a
service recovery, their level of satisfaction will be improved. As pre­
dicted, CCS-R yields greater positive impact on satisfaction than firm
recovery does. However, unexpectedly, our findings demonstrate that a
customer service recovery is still better than having no recovery at all
when it comes to improving customer satisfaction.
This unexpected yet interesting finding may be explained by the
service context chosen for the current study. While high-contact services
(e.g., financial services, tax services) have greater customer-induced
uncertainty and thus heterogenous customer expectation, low-contact
services (e.g., self-help services, automatic teller machines) have little
customer-induced uncertainty and thus homogeneous customer expec­
tation (Ling-Yee Li et al., 2017; Wei et al., 2019). The service context of
our study, online hotel booking, can be considered as a low-contact
service process, and accordingly, customers have homogenous service
expectations. The homogenous (as opposed to heterogenous) service
expectation may cause the customers to feel that correcting the mistake
himself/herself is the next normal thing to do. That is, customers with
homogenous expectations may see a customer recovery as the norm
rather than a burden. Therefore, a customer recovery is still better than
having no recovery at all in terms of customer satisfaction.
4.1. Theoretical implications
The outcomes of this study add to the service literature by showing
that when the level of customer co-creation in service delivery is high,
customers have greater service recovery expectations after a service
failure, and CCS-R is found to be the most effective to countervail the
higher expectations and improve service outcomes. The results are
consistent with the past research, which shows that favorability of CCS-
R (Haz�ee et al., 2017). However, unlike previous research, we consider
both co-creation in service delivery and co-creation in service recovery
simultaneously.
Another theoretical contribution of this research is its focus on
process-based service recovery. We join a limited stream of research in
the call for more empirical research on process-based (vs. outcome-
based) service recovery (e.g. Dong et al., 2008). Although previous
studies have focused on outcome-based service recovery (i.e, Gohary
et al., 2016a,b), we advance the literature by showing the significance of
CCS-R, a process-oriented recovery. In fact, our findings demonstrate
that customer satisfaction can increase with the presence of co-created
recovery efforts, despite the high amount of effort and time customers
incurred to participate in the service delivery.
4.2. Managerial implications
This research contains key implications for managers. First, co-
created service recovery produces positive outcomes such as higher
levels of customer satisfaction, higher willingness to provide positive
WOM, and lower disposition to offer negative WOM. However, the key
factor to achieve those outcomes is the customer’s level of expectation of
service recovery. It is important for the companies to recognize that
customers who have initially participated in the service delivery will
likely have higher expectation of service recovery when service failure
occurs. Hence, it is imperative to match the recovery action with the
initial amount of customer participation.
Building on the previous recommendation, the primary goal for
marketing management should be to develop organizational capabilities
R. Bagherzadeh et al. Journal of Retailing and Consumer Services 54 (2020) 102058

Table 6
The indirect effects of customer recovery expectations on word-of-mouth via satisfaction moderated by service recovery.
IV DV a1 a3 b c’ w (Recovery) Effect CI (L-U)
n.s.
Customer’s recovery expectations Negative WOM -.451* .085* -.587** -.455 Firm .217** .002 .252
Co-created .167**
Customer .118 n.s.

n.s.
Positive WOM -.451* .085* .684** -.098 Firm -.253** -.383 -.026
Co-created -.195**
Customer -.136 n.s.

a1: Effect of IV on M.
a3: Effect of interaction between IV and Won M.
b: Effect of M on DV.
c0 : Direct effect of IV on DV.
w: Values of moderator.
CI (L–U): Lower and upper 95% confidence interval with 5000 bootstrap samples for the index of moderated mediation. n po.05 nn po.06.
*p < .05.
**p < .02.
n.s.: Not significant.

Fig. 2. The level of satisfaction before and after offering different types of Fig. 4. The level of positive word-of-mouth before and after offering different
service recovery. types of service recovery.

higher expectation of service recovery. Specifically, if a customer has

Fig. 3. The level of negative word-of-mouth before and after offering different
types of service recovery.
to identify customer profiles, to measure levels of customer participa­
tion, and to deliver co-created service recovery accordingly in order to
generate positive outcomes for the firm. Therefore, it is critical to
emphasize that firms will benefit from incorporating co-created service
recovery procedures at three different levels: (a) Firms must integrate
current customers profiles, with respect to their initial level of partici­
pation, into the customer relationship management/operational system,
so that the frontline employees can identify fast and efficiently the type
of customers they are dealing with in occurrence of a service failure. (b)
Firms must design specific co-created service recovery scripts based on
the level of customers’ initial level of participation to countervail their
already actively contributed in the initial service delivery process, the
most effective recovery for that customer would be co-created service
recovery, as opposed to a firm recovery or a customer recovery. Finally,
(c) firms must invest resources on the training of the frontline employees
because both the above recommendations, that is using a customer
profile with their participation levels and selecting and delivering the
appropriate co-created service recovery script, rely heavily on the
frontline employees’ knowledge and courtesy (also described as assur­
ance by Zeithaml et al., 1993).
Second, as the results of this research suggest, co-created recoveries
are more effective than firm recoveries, which in turn are more effective
than customer recoveries. These findings present a roadmap for firms
that want to develop more sophisticated service recovery options such as
co-created recovery. There can be three levels of service recovery
offered to the customers when a service failure occurs. The first level is
relying on the customer recovery. If a firm does not have any other
option, customer recovery is still better than having no recovery at all.
Thus, practitioners are encouraged to offer an apology and clarification
of the failure to the customers and then provide enough instructions and
support so the customer can carry out the service recovery herself/
himself. This can be particularly crucial for Internet-based services, as
customers usually do not have direct interactions with physical service
providers and yet need a solution in a speedy manner. The second level
of recovery that a firm can offer is firm recovery. This level of recovery
needs investment in resources and training from the firms to evaluate
their knowledge and skills to determine their recovery potential. Only
when a firm has acquired the necessary expertise to deliver successful
firm recovery, then the firm can embark to offer co-created recovery

8
R. Bagherzadeh et al. Journal of Retailing and Consumer Services 54 (2020) 102058

solutions (third level). Given that the scope of this study did not include
an analysis of the impact of the failure co-created recovery, previous
research has suggested that a well-established recovery system (i.e.,
equipment, techniques, procedures) is the right managerial decision to
counterbalance the adverse effects of service failures (Heidenreich et al.,
2015).
4.3. Limitations and future research
This study is not free of limitations. First, we used college students as
our sample. Although using college student sample can increase internal
validity of the results due to the greater control of extraneous variables,
the findings may face the issue of generalizability. Future studies may
use field data to see if the findings can be replicated. Second, a cross-
sectional approach was used in this study. However, recent service
research has shown that satisfaction judgments shift over time,
depending on the time between service completion and evaluation (Pizzi
et al., 2015). For example, a near-past service experience is evaluated in
terms of concrete attributes (e.g., details of the experience), whereas a
distant-past service experience is evaluated in terms of abstract attri­
butes (e.g., goals of the experience) (Pizzi et al., 2015). This suggests
that the time delay between service failure and service recovery, which
is ignored in our study, may have a significant moderating effect on the
relationships investigated within our conceptual model. Future research
is encouraged to explore the potential temporal effects that exist be­
tween customer participation at two service touch points (service failure
and recovery). Using a longitudinal study in the future, to show how
different types of service recovery, especially, CCS-R, affect long-term
relationships customers have with the firm, would be enlightening
(Dong et al., 2008). Third, the quality of service recovery was not
measured. For example, it was mentioned in the service recovery sce­
narios that after an hour an available room was found at a hotel five
blocks away; however, participants’ perception toward the time and the
distance of the new hotel was not captured. Fourth, the sample used in
the study was students from a Midwest university in the United States
meaning that most of them belong to the same culture. As a result, the
findings of the effectiveness of different service recovery techniques on
satisfaction and WOM may be affected by such cultural factors. Hence,
the study should be replicated in other settings to investigate the po­
tential effect of cultural differences on service failure situation and
different service recoveries. Moreover, besides satisfaction and pos­
itive/negative WOM, future research is encouraged to use other
relationship-oriented variables as outcome variables (e.g., customer
loyalty, intention to co-create in the future, etc.). It would be interesting
to see if CCS-R (as opposed to firm and customer recoveries) also has the
greatest positive impact on relationship-oriented outcomes. Finally, in
future research, customer participation in the initial service delivery
process can be divided into high vs. low participation to examine the
differences and effects of each level of participation on customer re­
covery expectations.
Acknowledgements
We would like to thank Dr. Nwamaka Anaza (Southern Illinois
University Carbondale) who greatly assisted us in this research.

Appendix A

Customer participation in service delivery following a failure scenario

You planned a trip to New Orleans for Mardi Gras during your Spring break. You chose a hotel in the downtown area
from where you could easily attend the event. During the booking process, an agent was assigned to chat with you to ask
about all your preferences and give you some guidance. After interacting with the agent and entering all your
preferences, as well as all necessary information, you made a reservation for three nights in a standard room through the
hotel’s website.
You were pretty tired upon your arrival at the hotel in the evening. However, when you checked in, the hotel employee
at the front desk told you that the hotel had no record of your reservation, and there were no vacant rooms available.
You showed the employee the auto-reply confirmation of your reservation. The employee explained this could be an
error caused when web site maintenance was carried out recently and they were unable to give you a room.
Firm service recovery scenario
The employee at the front desk apologized and suggested that you wait in the lobby, while he look for availability in
some other hotels nearby. After an hour, the employee called you to the front desk and explains that he was able to find a
room in a hotel five blocks away.
Co-created service recovery scenario
The employee at the front desk apologized and suggested that you stand with him so that both of you would look for
availability in some other hotels nearby. The employee asked you about your preferences and both of you finally found a
room available at a nearby hotel five blocks away.
Customer service recovery scenario
The employee at the front desk apologized and said it is out of their control. You did not give and decided to look for
availability in some other nearby hotels nearby yourself. After an hour, you were able to find a room in a hotel five
blocks away.

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