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The impact of corporate social responsibility (CSR) and customer trust on the restoration of loyalty after service failure
and recovery
Beomjoon Choi Suna La
Article information:
To cite this document:
Beomjoon Choi Suna La , (2013),"The impact of corporate social responsibility (CSR) and customer trust on the restoration of loyalty after
service failure and recovery", Journal of Services Marketing, Vol. 27 Iss 3 pp. 223 - 233
Permanent link to this document:
http://dx.doi.org/10.1108/08876041311330717
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Suna La
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223
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H1.
Theoretical background
Recovery satisfaction, customer trust, and loyalty
Service recovery refers to firm actions intended as a response
to service failure (Gronroos, 1988). Because a companys
response has the potential to strengthen the relationship
between itself and the customers (e.g. through the service
recovery paradox) or to aggravate the situation, service
recovery encounters are considered critical moments of
truth that determine customer relationships (Smith and
Bolton, 1998), and well-executed service recovery remedies
are essential to recovery satisfaction (Fornell and Wernerfelt,
1987). Recovery satisfaction, which also refers to satisfaction
with complaint handling (Orsingher et al. 2010; Tax et al.
1998), is the customers evaluation of how well a service
provider handled a service failure. Recovery satisfaction is
critical in that it helps maintain relationships with customers
(Fornell and Wernerfelt, 1987).
Trust, which is one of key constructs associated with service
recovery (La and Choi, 2011), is defined as a willingness to
rely on an exchange partner in whom one has confidence
(Moorman et al. 1993). Further, Coulter and Coulter (2002)
conceptualize trust in a service provider as the perception of
that service providers confidentiality, honesty, integrity, and
high ethical standards. Trust is particularly important in
service contexts because characteristics of service such as
intangibility and heterogeneity make it difficult to select and
evaluate service providers (Liljander and Roos, 2002; Singh
and Sirdeshmukh, 2000). Customer trust, which refers to
trust customers have toward a firm, is formed based on prior
H2.
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225
Research methodology
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Measures
Based on the previous literature, we selected measurement
items that we deemed appropriate for the present study. We
utilized measurement items used in the existing literature to
create a sound basis for specifying the constructs to be
measured. Either the exact measurement items presented in
previous research were used, or they were adjusted as
necessary to measure the latent constructs. All measures used
for the study are shown in Table I. The participants were
asked to respond using a nine-point Likert scale ranging from
1 (strongly disagree) to 9 (strongly agree).
The sample
The survey was completed by 371 undergraduate business
students from a mid-sized west coast university; the students
participated in the study for extra credit. A self-completed
questionnaire was used. The participants were asked to recall
their most recent experience with service failure and recovery in
the past 12 months. They were asked to write down the firms
name and when the service failure occurred to enhance recall
accuracy. They were also asked to describe the actual service
failure and recovery attempt and to fill out a questionnaire
related to both events. The majority of sample was 55.2 percent
male, with a mean age of 25 years (SD 5:1).
The service types reported on include restaurants, cable
services, financial services, airline services, lodging services,
and retailers (including online retailers). The variety of service
types was expected to enhance the applicability of the results
to most service categories.
Hypotheses testing
Structural equation modeling (SEM) was conducted to test
the hypothesized relationships. The model fit indices are
acceptable. The structural model has a statistically significant
chi-square value (x2 132:276, df 49, p 0:000). The
data for all other relevant fit indices are also within an
acceptable range (CFI 0:986, TLI 0:980, NF 0:978,
RMSR 0:020, RMSEA 0:070). Therefore, we concluded
that the proposed model fits the data well. The estimated path
coefficients are shown in Figure 1.
Table IV illustrates the results of the hypothesis test. The
estimated standardized structural coefficients for the
hypothesized associations among the constructs and their
Measure items
References
Recovery satisfaction
Customer trust
Loyalty
When choosing the same product category, I considered the company as my first
choice (v10)
I will continue to visit the company in the future (v11)
I intend to visit the company, even if other alternatives are available (v12)
226
Factor
loading
t-values
Recovery satisfaction
V1
V2
V3
0.981
0.943
0.944
Customer Trust
V4
V5
V6
Loyalty
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Construct
Composite
reliabilitya
Average variance
extracted (AVE)b
26.09
24.220
24.276
0.970
0.914
0.932
0.950
0.937
23.715
24.522
23.911
0.972
0.886
V7
V8
V9
0.927
0.939
0.828
19.373
23.844
23.329
0.927
0.809
V10
V11
V12
0.922
0.956
0.889
23.177
24.740
21.759
0.945
0.851
Recovery satisfaction
0.810
0.717
0.712
(0.020)
(0.028)
(0.028)
Customer trust
0.656
0.893
0.914
(0.014)
(0.011)
Perceived CSR
0.514
0.797
0.861
(0.017)
Loyalty
0.507
0.835
0.741
Notes: CSR Ethical-legal corporate social responsibility; Intercorrelations are presented in the lower triangle of the matrix. Standard errors appear in
parentheses. Squared Correlations are given in the upper triangle of the matrix
227
Hypothesis
Standardized coefficient
t-value
Results
H1
H2
H3
H4
H5
0.343
0.702
0.716
0.647
0.235
9.165 *
10.055 *
15.368 *
14.414 *
3.428 *
Accepted
Accepted
Accepted
Accepted
Accepted
Notes: * p , 0:01
Model specifications
Model 1
Model 2
Model 3
x2
df
CFI
GFI
95.399
15.000
92.34
25
8
24
Comparison base
0.997
3.059(1)a
0.985
0.987
0.985
0.946
0.949
Notes: a The results of the difference between Model 1 and Model 3. The
difference was not significant at p 0:05
Full mediation
Model 2
Model 3
0.711 *
0.811 *
0.984 *
2 0.090
0.805 *
0.912 *
Table VII SEM results for mediation effect of customer trust on the
relationship between perceived CSR and loyalty
Model specifications
Model 1
Model 2
Model 3
x2
df
CFI
GFI
81.637
19.176
72.410
25
8
24
Comparison base
0.987
0.995
0.989
0.955
0.983
0.960
9.227 * *(1)a
Table VIII SEM results for mediation effect of customer trust on the
relationship between perceived CSR and loyalty
Model 1
Perceived CSR ! CT
CT ! Loyalty
Perceived CSR ! Loyalty
Full mediation
Model 2
Model 3
0.862 *
0 .893 *
0.724 *
0.214 *
0.901 *
0.922 *
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Managerial implications
First, managers may need to be aware of perceived CSR as a
key variable in restoring customer loyalty. Customer
satisfaction with service recovery is known to lead to various
outcomes, including enhanced cumulative satisfaction,
loyalty, and positive word-of-mouth. In addition to these
relationship outcome variables, the results of the present
research suggest that customer satisfaction with service
recovery efforts has a significant impact on perception of
CSR and that perceived CSR, in turn, enhances customer
loyalty to firms (Gundlach and Murphy, 1993; Roman,
2003). Previous research reported that CSR influence
consumer product responses (Brown, 1998; Brown and
Dacin, 1997), customer-company identification (Sen and
Bhattacharya, 2001), customers product attitude (Berens
et al., 2005), and even a firms market value (Luo and
Bhattacharya, 2006).
Our results further suggest that perceived CSR has a direct
and indirect positive effect on loyalty; perceived CSR has a
direct impact on loyalty, but it also has an indirect influence
on loyalty through customer trust. The essential role of
perceived CSR as identified in the present research indicates
that managers should recognize the influence of perceived
CSR and monitor service recovery encounters to ensure that
the recovery process improves the customer perceptions of
firm CSR. Managers often face tough choices in allocating
company resources and in prioritizing strategic initiatives after
service failure. Our findings that CSR contributes to loyalty
suggest that managers can obtain substantial benefits by
integrating CSR initiatives with service recovery strategies.
It is also noteworthy that recovery satisfaction does not
directly lead to loyalty but instead indirectly influences loyalty
through customer trust and/or perceived CSR. Previous
research has indicated that satisfaction with a service provider
leads to increased customer loyalty. Several researchers state
that satisfaction with service encounters greater perceived
service quality, which in turn leads to heightened loyalty
(Bitner, 1995). On the other hand, the present study indicates
that recovery satisfaction may not lead to the restoration of
loyalty unless service recovery attempts ensure a higher level
of customer trust and perceived CSR. In other words,
building customer trust and enhancing consumers perceived
CSR are important intermediate step in converting recovery
satisfaction into customer loyalty. Therefore, in designing and
implementing service recovery strategies, managers should
carefully plan and manage that service recovery encounters
increase not only recovery satisfaction itself, but also enhance
customer trust and perceived CSR.
References
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Further reading
Bolton, R.N. and Drew, J.H. (1992), Drew Mitigating the
effect of service encounters, Marketing Letters, Vol. 3 No. 1,
pp. 57-70.
Spreng, R.A., Harrell, G.D. and Mackoy, R.D. (1987),
Service recovery: impact of satisfaction and intentions,
Journal of Services Marketing, Vol. 9 No. 1, pp. 15-23.
Zeithaml, V.A., Berry, L.L. and Parasuraman, A. (1996),
The behavioral consequences of service quality, Journal
of Marketing, Vol. 60, April, pp. 31-46.
Corresponding author
Beomjoon Choi can be contacted at: bchoi@csus.edu
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research undertaken and its results to get the full benefits of the
material present.
233
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