The role of relationship on time and monetary compensation

Service failures are inevitable in the service industry. In this study, the author suggests that companies that only provide monetary compensation for service failures are following a risky recovery strategy. Instead, service managers should consider the offered compensation’s fit with customer relationship type. The author proposes and empirically tests several hypotheses about service failures and how customers in communal relationship with service firms prefer time compensation (saving time), while customers in exchange relationships prefer monetary compensation (saving money). The results are evidence that properly matching relationship type (i.e. communal and exchange) with compensation type (i.e. time and monetary) can help recover customers’ overall satisfaction and restore the customer–service company relationship. The author concludes this article with a discussion of the practical implications and suggest future research directions.