Although many companies have entered the world of e-commerce in the past few years, very few have been able to attain competitive advantage. In fact, a significant number of online companies have gone bankrupt ± a phenomenon often referred to in the popular press as the dotcom bust. Unrealistic expectations and use of the wrong business model have often been mentioned as the major reasons for these companies' failures (Budzynski, 2001). The present study, however, examines certain aspects of the online shopping experience from a consumer's perspective. Specifically, this study focuses on how consumers react to service failures and which initiatives by the online shop can enhance service recovery.
The author Sohel Ahmad is an Assistant Professor in the Department of Management, St Cloud State University, St Cloud, Minnesota, USA Keywords Shopping, Guarantees, Complaints, Customer loyalty, Online computing Abstract This study attempts to understand certain aspects of the online shopping experience from a consumer's perspective. In particular, this study investigates the interaction between service failure and online shops' readiness for service recovery and the resulting impact on customer defection. The findings of the present study suggest that some online shops have severely breached a few fundamental business principles, resulting in lost customers. Specifically, this study finds that failure to institute adequate complaint management and service recovery systems contributed to customer defection. Hence, service recovery and customer retention need to be given due importance during the service design phase, and appropriate management decisions have to be made upfront rather than after service failures occur when it may be too late. Electronic access The research register for this journal is available at http://www.emeraldinsight.com/researchregisters The current issue and full text archive of this journal is available at http://www.emeraldinsight.com/0960-4529.htm
A framework of service recovery
Figure 1 presents a simplified overview of service encounters and their possible outcomes. As shown, online shops, like traditional (offline) businesses, are expected to deliver certain products and/or services to customers. Consumers are satisfied as long as online shops are able to meet or exceed services rendered compared to consumers' expectations. While marketing shapes customers' expectations, operations form the service delivery system so that these expectations can be met. Thus, the need for coordination between marketing and operations cannot be overemphasized. A service delivery system fails when it cannot deliver service as promised. In such a situation, the fail point needs to be documented and the service delivery systems need to be reviewed and modified, if necessary, so as to prevent similar service failures in the future. At the same time, customers should have multiple channels to communicate their concerns. The need for multiple channels of communication is of utmost importance. In a traditional business transaction (offline), a buyer interacts with a seller. In the event of service failure, the seller can quickly take necessary measures for service recovery. However, during online shopping, a buyer interacts with a mediating environment (Wolfinbarger and Gilly, 2001) that may not detect service failure. Therefore, buyers should be given several means to voice 19
Managing Service Quality Volume 12 . Number 1 . 2002 . pp. 19±29 # MCB UP Limited . ISSN 0960-4529 DOI 10.1108/09604520210415362
Service failures and customer defection
Managing Service Quality Volume 12 . Number 1 . 2002 . 19±29
Figure 1 A framework of service recovery
their concerns quickly and easily. Once complaints are heard, the customer recovery activities need to be invoked with the...