Dissatisfaction: the element of failure or the moment of redemption?

Master Thesis University of Groningen Faculty of Economics and Business

Dissatisfaction: the element of failure or

the moment of redemption?

By Sebastian George Boteanu –S3001458

MSc. Business Administration, Profile Strategic Innovation Management Supervisor: Prof. dr. ir. J.M.L. van Engelen

Co-assessor: Dr. Q.J. Dong

Table of Contents 1. INTRODUCTION ...5 1.1PRACTICAL QUESTION ... 8 1.2PROBLEM IDENTIFIED ... 9 1.3SCIENTIFIC QUESTION ... 11 2. LITERATURE REVIEW ... 14

2.1SATISFACTION-LOYALTY-PROFITABILITY CHAIN ... 14

2.2 EXPECTED VALUE AND PERCEIVED VALUE ... 15

2.3DISSATISFACTION, SERVICE FAILURE AND RECOVERY PROCESS ... 17

2.4PROPOSED FRAMEWORK ... 23

3. METHODOLOGY ... 26

3.1DATA COLLECTION ... 28

3.2METHOD OF ANALYSIS ... 29

4. RESULTS AND ANALYSIS OF THE DATA ... 30

5. DISCUSSION AND CONCLUSION ... 34

5.1PRACTICAL CONCLUSION ... 34

5.2THEORETICAL CONCLUSION ... 35

5.3LIMITATIONS AND FUTURE RESEARCH ... 35

BIBLIOGRAPHY ... 37

Table of Figures

Figure 1 -Summary of the Framework presented by Slater & Narver (1994) ... 6

Figure 2-The Preliminary Causal Framework proposed by van Raaij (2001) ... 6

Figure 3- The Links in the Service-Profit Chain (Heskett et al., 1994) ... 14

Figure 4- Service Recovery Framework (Miller et al., 2000. p.388) ... 19

Figure 5-Overview of the Literature and Research Question ... 21

Figure 6- Customer Satisfaction Cycle ... 25

Figure 7- Adjusted Customer Satisfaction Cycle……...31

Table 1- Main Findings and New Insights ... 33

Acknowledgement

I would like to express my deepest gratitude and appreciation to my supervisor, Professor Jo van Engelen for his amazing support during this research. It was a challenging journey, but with your guidance and your professionalism, we managed to succeed. You were always an excellent motivator and inspired me to give my best and try harder and harder until I achieved my goals. I learned so many valuable things that helped me during the academic research and I am sure that some of those “lessons” are also going to help me in life. It was an honor to meet and collaborate with such an amazing person.

Also, I would like to thank my family for their financial support during these years of study and present my deep appreciation for motivating and supporting me all the time.

Abstract

1. Introduction

As Bill Gates once said “your most unhappy customers are your greatest source of learning”. (Business @ The Speed of Thought, 1999). More and more companies are shifting throughout a client focus strategy nowadays. This is mostly because the business environment is becoming more challenging and customer’s demands are more complex and harder to satisfy.

According to Barki & Pinsonneault, (2001) in today`s complex, dynamic and highly competitive environment, companies need to continuously improve and innovate. The way of achieving that rests mainly in the ability of the managers and employees to be creative and to generate new ideas on how to adapt to this fast-changing era.

One of the most important things that companies should focus on is the customer experience. Understanding customers’ demands is a laborious task because they come from different environments or backgrounds having distinct previous experiences. Consequently, the companies should invest extra time and resources on understanding their customers (Day & Moorman, 2010). Not only it is essential for the companies just to understand what the target market is, but also what are the needs of the customers. It requires experience, knowledge and especially creativity to deliver superior products and services so that the customers can see the offering of the company as a solution for their needs. (Day & Moorman, 2010)

According to Slater & Narver (1994) to obtain superior performance, a company must develop and sustain competitive advantage. The competitive advantage can be achieved by classic means like market power, economies of scale, broad product line etc. The authors emphasize with another way of creating competitive advantage using market-oriented strategies, especially focusing on customers which can be a powerful source of creating competitive advantage.

Figure 1 -Summary of the Framework presented by Slater & Narver (1994)

This framework was developed further by Erik van Raaij in his Ph.D. “The implementation of Market Orientation” (2001). Erik van Raaij (2001) stated in his research that the relationship between quality and satisfaction is open. The author claims that value and loyalty are the elements that make the whole model casual. The connection between quality and satisfaction is realized through the value delivered by the company to its customers and between satisfaction and profitability, loyalty is the element that is needed to make this relationship work. The framework presented by Erik van Raaij (2001) can be observed in the schema below (Fig.2):

Figure 2-The Preliminary Causal Framework proposed by van Raaij (2001)

A different approach was chosen by Parasuraman and Grewel (2000) to study the quality-value-loyalty chain. The authors analyzed the role of technology in the quality-quality-value-loyalty chain based on the triangle model (Company-Employees-Customers) proposed by Kotler (1994) and developed further by Parasuraman (1996). Different from the other scholars, Parasuraman (1996) focused his research on the intangible part that influences customer loyalty, which is the provided service throughout the customer lifecycle. The authors claimed that the price and the product quality can be relatively easy imitated by the competitors, therefore service is the “delicate” asset that can be used by the enterprises to influence customer loyalty.

Zeithaml et al. (1996) also considered service as an important element towards customer loyalty and financial performance. More precisely, the authors analyzed how service quality

consequences and loyalty. The results of the research showed that customer satisfaction leads to loyalty and loyalty leads to financial performance.

After buying a product a very important aspect that the companies should be aware of is dissatisfaction. According to Bloemer et al. (2002), companies should carefully observe the behavior of their customers because it could happen that overall satisfied customers might deflect and affect the profitability of the firm. The reasoning behind this idea presented by Bloemer et al. (2002) is that there are overall satisfied customers who possess certain characteristics that made them latently dissatisfied customers. The researchers emphasize the importance of dealing not only with dissatisfied customers but also with the latently dissatisfied customers.

Since it is almost impossible for a firm to satisfy the whole target market, inevitably there are going to be customers that are not pleased with their products or there are not satisfied with the services provided by the company. (Hart et al., 1990) But what is the impact of dissatisfaction upon customer loyalty? Can however, dissatisfaction immediately after the transaction phase be managed in a certain manner that will “strengthen” the customer-firm relationship and increase the loyalty?

research is proposing to analyze the Provider-Retailer-Consumer chain, therefore additionally to the interviews with managers, there will also be interviews with lead-users representing consumer`s side. The reason why this approach was chosen is to discover and better understand the methods the companies are using to tackle dissatisfaction after the transaction phase and make a comparison with the actual preferences of the customers. The purpose of the in-depth interviews is to provide a more profound understanding of addressed topics and hopefully answer the research question and sub-questions. Lastly, the findings are going to be analyzed and interpreted, followed by the last chapter of the research where, conclusions, limitation and future research are going to be discussed.

1.1 Practical question

The problem on which this research is based was identified in one of the biggest multinationals from the computer hardware and high-tech industry, AsusTek Computer Inc.

Also known as ASUS, the company was founded in 1989 and has its headquarters in Taiwan. The range of products is diversified from desktops, laptops, mobiles phones, tablets to graphic cards, motherboards and networking equipment. ASUS is one of the biggest vendors in the industry and is continuously expanding into new markets. (Yung and Lai, 2012)

The “European headquarters” is situated in Netherlands and while I was working there I identified a problem regarding customer satisfaction. As the slogan suggests (“In Search of Incredible”) the company is continuously trying to improve and to deliver its customers high-quality products and services in order to satisfy their needs. The extremely challenging industry in which the company is operating and because of the big number of competitors, ASUS is trying to be ahead of the competition not only with innovative products, but also with unique services created to deliver and ensure customer’s satisfaction. As a consequence of the extremely challenging business environment, customer satisfaction is one of the most important pivots of the company and this area is continuously trying to be improved.

other hand, if companies are going to solve the problem of dissatisfied customers, it might help to create an additional value to all customers and prospects by providing positive feedback or reviews. (Hennig-Thurau et al., 2004)

ASUS wants to increase customer satisfaction by offering their customers an optimal and fast solution to their problem.

An important example and basically the first moment when customer satisfaction might be damaged is immediately after the transaction (buying the product or service). In that moment the company managed to convince the customers to buy their products or services, but it might not succeed to offer the promised quality by delivering a failing product dead-on-arrival (hereafter DOA), a device that has malfunctioned (does not work properly) or by offering poor services. For this segment of dissatisfied customers, ASUS tries to offer quick support and at customer`s request, money can be refunded. This process is known as compensation and represents one of the tools which are used to deal with dissatisfied customers. Another tool that the company has available to tackle dissatisfaction is offering SWAP units. This process is described as the action of offering to the customer who has a complaint, a device (same or with similar characteristics) in exchange for the one that was reported of having problems.

Therefore ASUS is looking for new strategies to deal with dissatisfaction and increase the overall customer satisfaction. Can ASUS or other companies from the same industry use dissatisfaction and “convert” it into a positive aspect that will enhance loyalty?

As mentioned above the problem was identified at ASUS and they delivered the practical research question. However senior international management prohibited the provision of the data because the faculty could not promptly provide an NDA. This was a major setback for the research, but we decided to study this matter more generally since the problem that ASUS is facing exists on the markets and affects a big number of companies. For a better understanding of the problem, in-depth interviews were conducted with major “players” from the electronic industry and further propositions were formulated for future research.

1.2 Problem identified

create superior customer value. According to Day & Moorman (2010), customer value is one of the four imperatives that a company needs to fulfill in order to have success.

ASUS is a world-wide "player" in the IT and electronics market and they are producing and selling large quantities of diverse products. Inevitably, with a substantial number of products being sold, products failures are going to exist as well. In most cases the products that have malfunctions or do not function. The products that do not function all are also known as dead-on-arrival (DOA) products and in most cases, these products will be returned by the customer in order to be repaired or changed.

The System Product Department (SYS department) is one of the biggest and the most important departments within the company. According to the general manager of SYS department, one of the main priorities of the department is to analyze and try to improve customer satisfaction together with maintaining a close communication with service partners.

When customers are facing a malfunction at one of their products or they are just simply unsatisfied with the performance of the unit, they are going to return the product to the vendor which is going to send the product back to ASUS to be repaired. In this moment the satisfaction of the customers already decreased since the moment of the purchase. From the technical point of view, the problem is going to be solved by the engineers who are going to repair the product and send it back to the customer. At that moment, the technical part is solved and the unit can be returned to the customer, but there is one thing that will remain “unrepaired” and that is customer satisfaction.

One of the main objectives of ASUS is to increase the satisfaction of the customers and find a proper solution to deal with dissatisfaction especially after the transaction phase in the cases where DOA products were claimed. The company is continuously trying to find a new and innovative solution that will ensure that customers will remain loyal to the company. But what are the tools that the company can use to restore satisfaction immediately after the sale when a DOA product was delivered?

As explained above, when the company fails to deliver the promised quality and does not fulfill the customer value it will impact the customer satisfaction and further the performance of the firm.

Erik van Raaij (2001) proposed the following framework Quality → Customer Value → Customer Satisfaction → Loyalty →Performance. The author claims that value is the connecting element between quality and satisfaction and loyalty is creating the “bridge” between satisfaction and performance.

If customer satisfaction is falling upon delivery and the company is not able to satisfy the demand coming from the customers, it will result in a negative score upon one of the existing variables: satisfaction. Therefore if the framework proposed by Erik van Raaij (2001) can be adjusted with the element that might occur if customer satisfaction is not fulfilled (dissatisfaction), the framework will look like this:

Quality → Customer Value → Dissatisfaction → Loyalty →Performance

Dissatisfaction is the result of the negative score upon one of the variables from the chain (satisfaction) due to the poor quality delivered by the company. The question that remains is how to “repair” and maybe even benefit from this recovery process in order to obtain an even greater loyalty and therefore financial performance? How should companies treat dissatisfaction in the first phase of the transaction (after the purchase) in order not to damage customer loyalty? Can companies “convert” dissatisfaction in a positive aspect that maintain or even increase customer satisfaction and loyalty? This research will try to provide a better understanding of the whole process and provide answers for these questions.

1.3 Scientific Question

ability of understanding and satisfying the needs of the customers. As illustrated to a certain extent before, many authors have studied the Quality-Loyalty-Profitability chain but there is a lack of research about how companies can deal with dissatisfaction immediately after the purchase occurred especially when DOA`s product were delivered to the consumers. Moreover there is an absence of evidence about how satisfaction after the recovery process will impact loyalty for high -tech digital market.

From previous literature we have strong evidence that customer satisfaction and loyalty are related and they impact the performance of the firm.

Based on the findings of Dixon et al. (2010), delighting the customers is just the basis of satisfaction but it is not enough to reach loyalty. The findings of the researchers suggest that by reducing the effort the customers have to make to contact the company and get their problem solved will lead to loyalty. The findings of the article also suggest that if companies will focus their effort on this insight (reducing the effort from the customer point of view) it will help to improve the customer service, reduce the service costs and decrease the customer discomfort.

Customers just want a satisfactory solution to their service issue. If companies will focus on reducing the effort the customers have to make for solving their issues then it will increase the likelihood that they will return to the company and they will become more loyal. (Dixon et al. 2010)

Same researchers (Dixon et al. 2010) showed that inefficiency of solving the problem directly will result in an iterative process in which the customer will have to contact repeatedly the company in order to solve the problem. This whole iterative process has a negative impact on customer satisfaction

As is it already known from the literature (Slater and Narver,1994; Zeithaml,1996; Erik van Raaij, 2001) customer satisfaction is crucial for companies and has a significant impact on the performance of the company. Also known from previous researchers, there is a relationship between customer satisfaction and loyalty, but when customer satisfaction is not fulfilled, dissatisfaction will occur.

they are the optimal solution for their needs) that they are worthy and offer the chance of strengthening the company-customer bond.

Therefore this research is proposing to analyze dissatisfaction immediately after the transaction phase in the high tech digital industry when DOA products were delivered to the consumers. Additionally, this research will try to identify the right approach that companies should follow in order to avoid damaging customer satisfaction and loyalty. These aspects led to the following research question:

How dissatisfaction has to be treated in the first phase after the transaction (when the balance between expected and perceived value was violated) in order to maintain or increase customer satisfaction and not damaging customer loyalty?

From the main research questions the following sub-questions arise:

1. What is the effect of existing expected value created by the companies in the pre-purchase phase upon satisfaction and loyalty in the post-pre-purchase phase?

2. How do the service recovery outcomes (speed of recovery, face to face interaction and compensation) influence restoration of satisfaction after the transaction phase (post-purchase)?

3. What do consumers value the most in the post-purchase phase during the service recovery process?

2. Literature review

2.1 Satisfaction-Loyalty-Profitability chain

The customer satisfaction-customer loyalty-profitability chain has been researched and analyzed from multiple points of view. (e.g Hallowell, 1996; Heskett et al., 1994)

According to Hallowell (1996) customer satisfaction, customer loyalty, and profitability are not a one-way road in which one variable is going to influence the following one in the chain, but a two-sided way in which all three variables are related one to another.

Slater and Naver (1994) suggested that a proper market orientation especially focused customer-driven will influence the core capabilities, will help to develop competitive advantage which in this case is represented by customer loyalty and ultimately will influence the business performance measured by profitability and sales growth.

Some researchers (e.g. Dölarslan, 2014; Reichheld & Sasser, 1990) emphasize that internal service quality leads to employee satisfaction. If employees are satisfied they are more productive and more loyal to the firm. In return employee productivity will lead to a value which according to the authors is the basis for customer satisfaction. Customer satisfaction determines customer loyalty which has an impact on profitability and growth.

Another important theory which highlights the importance of the customer loyalty in determining the profit of the company is analyzed by Reichheld and Sasser (1990). The researchers introduced the concept of zero defection. This idea behind this concept is that every customer is important to the company and long-time customers can outperform competition with lower unit costs or high market share. Therefore, every company should strive for “zero defection” and keep all the customers.

Another idea introduced in this research is that customer defection should be a clear signal that the profits are going to decrease. According to the authors, defecting customers can be a very important source of feedback that the company can use to improve. The authors also highlight how important is for the company to try to get back those customers because it`s more profitable to keep the old employees rather than trying to get new ones. (Reichheld & Sasser, 1990)

Dölarslan, (2014) analyzed the effects of perceived value and customer satisfaction on customer loyalty behavior. They monitored loyal behavior based on repurchase intention (RPI), word-of-mouth (WOM) marketing and willingness to pay more (WPM). Their findings show that both customer satisfaction and perceived value directly influence loyalty behavior of customers in the railway industry.

This subchapter provided some useful insights. Firstly it showed that satisfaction-customer loyalty-profitability chain has been deeply researched and analyzed from multiple perspectives. (e.g Hallowell, 1996; Heskett et al., 1994). Secondly, I found out from the literature that satisfaction-customer-loyalty-profitability chain is a two-sided road in which variables are related to each other. (Hallowell 1996) Lastly, this subchapter highlighted the importance of customer loyalty and why is important for companies to strive for defection. (Reichheld and Sasser 1990).

2.2 Expected value and perceived value

Due to the rapid intensification of globalization and competition companies are trying to deliver high-quality services in order to differentiate themselves from the competitors. (Parasuraman et al. 1988). The quality of the service is indubitably one key element which is going to influence customer`s decision-making behavior and the perceived quality.

between consumers' perceptions about the firm and their expectations (Parasuraman et al. 1988). In other words, is the difference between what the customers believe (expect) that a company should offer and what the firm is actually offering.

Tarn (1999) showed that perceived value is an important factor in customer`s evaluation about satisfaction and has an influence on post-purchase behavior. However, the main limitation of this study is that the research was made in just one restaurant, therefore the results cannot be conclusive and are not applicable for the high-tech industry.

A different perspective about perceived value and satisfaction is presented by Sweeney & Soutar (2001) claiming that these terms are distinct. As stated by the researchers, perceived value occurs at different stages of the purchase process (for example pre-purchase) while satisfaction is claimed to be a post-purchase evaluation. Hence, value conceptions can be created by the customers without buying or using a product or service while satisfaction depends on the experience that the customers came across while using the product or service.

Yang and Peterson (2004) analyzed the effects of switching costs on customer loyalty in e-commerce by measuring both customer satisfaction and perceived value variables. The results of the research suggested that companies that strive for customer loyalty should focus mainly on satisfaction and perceived value. The authors state that customer-perceived value results from an evaluation of relative rewards and sacrifices that are associated with the offering of the company. Customers often measure the ratio (expected-perceived value) by creating comparisons in their decision-making situations.

Jiang et al. (2016) studied also the effects of e-service quality on customer-perceived value and customer loyalty. They identified five quality dimensions that influence these two variables and they are: care, reliability, product portfolio, ease of use and security. Both studies, Jiang et al. (2016) and Yang and Peterson (2004) state that customer perceived value has its root in the equity theory which relates that the ratio of the consumer`s outcome/input should be balanced with the service provider`s outcome/input, creating “equity”.

Mainly all these studies have found evidence that perceived value is related with satisfaction and loyalty. However, there is a lack of research on dissatisfaction, therefore this research is going to take into consideration dissatisfaction as one of the variables that influence satisfaction and loyalty. Even if this might seems to be a paradox, this study is trying understanding better if dissatisfaction can be carefully managed in a manner that will help to restore customer satisfaction.

Another aspect that needs to be taken into consideration is that the results of presented studies are applicable for e-commerce retail and Horeca industry (food service industry) and less for the high-tech industry. Furthermore, this study is trying to check if these results on how to retain and satisfy your customers can be applied also to high-tech industry.

To summarize this subchapter, it can be concluded that the balance between expected and perceived value is extremely important for customer satisfaction and customer loyalty. (Jiang et al. 2016 and Yang and Peterson 2004) Perceived value can occur in pre-purchase phases differently from satisfaction which is considered a post-purchase outcome (Sweeney & Soutar 2001). The results of the above presented studied showed that perceived value is related with satisfaction and loyalty, but none of the studies are taking into consideration dissatisfaction as a variable that can help to maintain or increase satisfaction.

2.3 Dissatisfaction, service failure and recovery process

As already stated before, customer satisfaction has a major impact on loyalty and upon profitability. According to Hart et al., (1990) dissatisfaction is a very important aspect that needs to be taken into consideration by the companies since inevitably on the market this phenomenon is very likely to occur.

The main reason is that companies are not able to produce or offer flawless products and services to all their customers and in the same time firms cannot cover and satisfy all the needs that customers have. (Hart et al., 1990) In the case of delivering product/service failure, the recovery process is essential for managers and companies because it can help to repair the “damage” caused to the customers. (McCollough et al. 2000)

superior recovery”.(McCollough et al, 2000, p. 121). However their findings are based only on one industry (airline industry) hence the results cannot be generalizable to all industries

McCollough et al. (2000) also claimed that service failure is the element that drives customer switching behavior and that a successful recovery represents the difference between customer retention and defection. As well explained by Reichheld and Sasser (1990) customer retention is essential for the companies and can improve exponentially the profits if customer retention is carefully managed.

Having a different perspective, Hart et al., (1990), explained that companies are not able to prevent all issues that that could create a discomfort to the customer, but companies should learn to recover from them. The researchers claim that a good recovery can turn angry and dissatisfied customers into loyal ones. Moreover they emphasize that a proper recovery can create more goodwill and strength the company-customer bond than if things would have gone smoothly in the first place. (Hart et al., 1990)

Service recovery has been considered to be an important element that can “repair” the damage/discomfort that the companies have created to its customers. Jong and De Ruyter (2004) claim that service recovery is not a standard process and that the adaptive behavior of the companies represented by employees, managers, etc. is very important for the resolution of the problem.

Service recovery is defined as” [….] those actions that are designed to resolve problems, alter negative attitudes or dissatisfied consumers and to ultimately retain these customers”.(Millet et al., 2000, p.388). It is the second chance that the companies have to provide a positive experience to the customers. (Miller et al., 2000)

However, the main drawback of this research is that they used as a sample a scenario method. This represents a major disadvantage for the research because it`s possible that the respondents might be limited or not being fully able to understand the experience of being a dissatisfied customer, therefore the results cannot be fully accurate. (Wirtz & Mattila, 2004)

A broader analysis of service recovery is offered by Miller et al. (2000). Firstly the researchers emphasize that the important aspect of keeping customers loyal is to ensure them products or services that meet or exceeds their expectations.

Miller et al. (2000) introduced a framework that highlights what are the determinants that influence a successful service recovery divided into 3 phases stage which can be observed below:

Figure 4- Service Recovery Framework(Miller et al., 2000. p.388)

Each customer has certain expectations about the products and services provided by a company. In the case of a failed service delivery from the company`s side, the customer is going to have certain expectations regarding the service recovery process.

An interesting theory that the researchers are highlighting in the immediate recovery phase is about the outcomes that influence the service recovery. They mention that psychological (apology and empathy) and tangible aspects together with the speed of recovery and front line empowerment are going to influence the service recovery quality.

To summarize this subchapter, companies cannot offer flawless products or services to the customers and as a consequence dissatisfaction inevitably will occur. (Hart et al., 1990) Dissatisfaction is the result of company`s incapability of delivering the promised quality of a product or service towards customers and as mentioned by McCollough et al. (2000) service failure drives customers switching behavior. In order to regain customer satisfaction, Wirtz and Mattila (2004), Miller et al. (2000) presented service recovery outcomes that can lead to a successful service recovery. However there is a lack of evidence in the literature about how companies can undertake dissatisfaction immediately after it occurred (after the transaction) especially in the high-tech industry when DOA products were involved in the firm-customer transaction.

The above-presented literature is organized and presented on scheme below together with the main research question. (Fig.5)

Figure 5-Overview of the Literature and Research Question

The literature review provided in-depth ideas and answers regarding expected and perceived value of the customers, dissatisfaction and service recovery and last not but least insights about the satisfaction-loyalty-profitability chain. The literature is sorted out and presented in a graphical overview to be easier to understand, however after the literature review there are still questions that remained unsolved.

1. What is the effect of existing expected value created by the companies in the pre-purchase phase upon satisfaction and loyalty in the post-pre-purchase phase?

According to Sweeney and Soutar (2001), expected and perceived value occur at different stages of the purchase process even before the purchase. For example, customers create treated in the first phase

after the transaction (when the balance between

themselves an expected value by reading reviews online about the product or services offered by the company or by simply talking with other users (word-of-mouth). However sometimes these concepts or ideas that are created in the mind of the customer about the company`s offering might not reflect the reality, therefore the following question remain unsolved: if companies will invest more time and build a proper expected value in the mind of the customers, when dissatisfaction will occur, will it be easier for the companies to retain customers and keep them loyal due to the time invested in the pre-purchase phase?

Both Jiang et al. (2016) and Yang and Peterson (2004) explained that expected and perceived value should be balanced in order to obtain customer satisfaction. However there is no evidence if the potential efforts made by the company of creating the proper expected value will have an impact in the post-purchase phase when dissatisfaction might occur. Moreover the results of Jiang et al. (2016) are applicable for B2C in e-commerce and not to high-tech brick-and-mortar industry.

2. How do the service recovery outcomes (speed of recovery, face to face interaction and compensation) influence restoration of satisfaction after the transaction phase (post-purchase)?

Wirtz and Mattila (2004) have studied the influence of recovery outcomes upon satisfaction. Their findings suggest that offering compensation might not add value or increase satisfaction since the accent should be on the immediate recovery and the apology. Contradictory they found that in the situation in which one of the two outcomes (speed of recovery and apology) are not fulfilled, tangible compensation has a positive impact on satisfaction with the service recovery. However, a major drawback is that authors used a sample scenario for this research. The subjects are limited in their answer and they do not fully experience the dissatisfaction, they have to imagine based on the given scenario. Ultimately this research is focusing on the restaurant industry which is a different area than the high-tech industry.

financial situations since they usually don`t have an income and a tolerance for solutions that could take a longer period to be solved. Another aspect that needs to be taken into consideration is that the research is based on a survey from multiple industries with a majority percentage from industries like restaurant, auto repair, bank and email and a very low percentage from the electronic industry.

As a result of the literature review, there is clear evidence of the lack of scientific publication about how dissatisfaction immediately after the transaction phase has to be treated in the high tech industry (brick and mortar) in order to maintain the customer satisfaction. Furthermore, the review provided insights which were the foundations of the propositions. Consequently, a few in-depth interviews will be made to understand and formulate the propositions in a more accurate way for future research. The propositions and the results of the interviews will add another “brick” to the scientific literature and will be the starting point for additional measures that need to be made by ASUS and other companies from the same branch of industry that are facing the same problem.

2.4 Proposed Framework

The literature review provided a profound examination of the concepts of expected and perceived value, satisfaction-loyalty-profitability chain and dissatisfaction with service recovery. Yet, there are still some questions that remain without an answer due to the absence of scientific literature about dissatisfaction in the post-purchase phase when DOA products were delivered to the consumers.

In this subchapter, a framework is going to be presented together with a set of propositions. Below framework presents the process that begins with the pre-purchase phase where expected value was created and ends with customer loyalty measured by repeated purchase and word-of-mouth.

After the transaction was made, the customer is firstly going to experience the product/service and this phenomenon is known as the moment of perceived value. This can be considered the moment of truth because the customers are going to "measure" if their expectations were fulfilled or not. As showed in below framework (Fig. 6) there are two options which can occur. First, when the expectations of the customers were accomplished (perceived value was approximately equal or higher than the expected value) then satisfaction without a service recovery is going to occur. This means that the company successfully managed to offer the promised products/services to its customers. Furthermore, according to the literature (Reichheld & Sasser, 1990 Hallowell, 1996; Heskett et al., 1994, Erik van Raaij 2001) when customers are satisfied with the offering of the company they are going to become loyal. There are multiple ways in which loyalty can be measured, but this study is going to consider customer loyalty as repeated purchase and word-of-mouth (recommending the product/service to other consumers). The second option is when there is no balance between expected value and perceived value due to the DOA products that were delivered to the customers. Well known from the literature (Parasuraman et al. 1988, Sweeney & Soutar 2001 Jiang et al. 2016 and Yang and Peterson 2004) when there is no balance between expected and perceived value dissatisfaction will occur in customer`s behavior. However, the existing literature is not taking into consideration the moment of dissatisfaction (immediately after the transaction) and also not considering DOA products as the reason behind the unbalanced expected and perceived value in the high-tech industry. As a consequence, this framework and research are going to involve these aspects for a better understanding of the whole process.

The next phase is both important and delicate for the companies. Firms should immediately start the service recovery process to maintain the customers on the company`s side. As explained by Reichheld and Sasser (1990) the companies should try to keep all customers loyal and strive for “zero defections”. There are multiple service recovery outcomes that the companies can use in order to restore customer satisfaction, but this research is going to focus on speed of recovery, face to face interaction and compensation as presented below framework (Fig. 6). After the service recovery is complete, the next phase is when companies achieved customer satisfaction using the service recovery process.

1. If companies manage to create a proper (as close as possible to reality based on the core competencies and capabilities of the company) expected value in the mind of the customers, then in the unfortunate event when dissatisfaction might occur (immediately after sale), it will be easier for the company to “repair” the damage and maintain the satisfaction or even increase it. 2. If the company is unable to solve customer`s problem in time (immediately after the purchase when DOA products are involved in the transaction) by offering something “extra” to the customers to compensate for the inconvenience, the customers will remain loyal to the company 3. Speed of recovery and face to face interaction are the outcomes that are essential to restoring customer satisfaction when it was damaged by the DOA product delivery and will help to maintain loyalty.

3. Methodology

This section illustrates and describes the way the research was organized in order to answer the proposed research question and sub-question. Moreover, it will highlight details about the data collection and about the method of analyzing the interviews.

For this research, a qualitative study was conducted in order to answer the proposed research questions. Initially there was another preferable alternative for the research than the current one. ASUS was the initial option for this research because it could provide broad access to world-wide data regarding addressed topics. However, due to the unfortunate event about the provision of the NDA, the collaboration with ASUS for this research was not possible and I was “forced” by the circumstances to work with an alternative research plan. Fortunately, I managed to find a back-up plan even though it limited my available time for the research.

Another reason why I decided to use this research approach is that from the scientific perspective the addressed topic in the literature is “unclear” and it can be considered an ill-structured problem. According to Simon (1973), an ill-ill-structured problem is a residual concept and he defines this term as “[…] a problem whose structure lacks definition in some respect.”

understanding of this process and to be able to answer the research question, I decided to use this approach.

As a primary source of data, I used in-depth interviews that were conducted with entities that have a major impact on the high-tech industry in the Netherlands but also world-wide. I decided to study the Provider-Retailer-Consumer chain for a better understanding of how companies are dealing with dissatisfaction immediately after the transaction phase and cross-check with the customer`s side if the methods that are used by the firms are appropriate for their needs or not.

According to Strauss and Corbin (1990), there are three major components of qualitative research. The first component represents the data of the research, which according to the researchers it can result from observation, documents, interviews, records, etc. For this research, data was collected by using in-depth interviews and observation. The second component of a qualitative research mentioned by Strauss and Corbin (1990) are the procedures that the researcher can use to interpret and organize the data. The procedures usually consist of conceptualizing and reducing the data, non-statistical sampling, writing memos and

diagramming. The third and the last component is represented by written and verbal reports. During the research memos, diagrams and both verbal and written reports were used in order to

increase the quality and the validity of the study.

3.1 Data collection

In order to collect the data that will provide answers for the research question and hopefully new insights which can be compared afterward with existing literature, semi-structured in-depth interviews were used as a primary method of collecting data. According to Noor (2008), semi-structured interviews offer flexibility and allow approaching respondents differently while covering the same area of data collection. The interviews were conducted with managers from influential entities in the high-tech industry, respectively lead-user customers. First, there were prior meetings with each manager where the topic of the research was broadly discussed in order to get the approval for the interview. After the approval was received, the meeting for the in-depth interview was settled. For a better understanding of how companies from the electronic industry (high-tech) can “repair” satisfaction immediately after the transaction phase, a study upon Provider-Retailer-Consumer chain was conducted. The reason why the consumers were also included is to understand better the difference between what the provider respectively retailer are offering and what customers are actually looking for when it comes to “repairing” satisfaction.

The provider that was chosen represents one of the biggest competitors world-wide in the electronic industry: ASUS. In order to ensure the validity and generality of the data, two retailers were chosen for this research: Europe’s largest retailer for consumer electronics and a small retailer. The reason why this selection was made is to understand how dissatisfaction has to be treated in the post-purchase phase and try to identify if there are similarities between strategies that the large retailer (large scale) and the small retailer (small-medium scale) are using. To maintain the balance of the study, 2 customers that can be categorized as lead-users were selected for the interviews. All interviews were transcribed and written which summed approximately 11.000 words on over 28 pages of single-spaced transcripts. The 5 interviews lasted between 52 and 109 min with an average of 80.2 min.

3.2 Method of Analysis

4. Results and Analysis of the data

In this section, the results of the interviews are going to be discussed. As mentioned before, literature used for this research is divided into three categories: satisfaction-loyalty-profitability chain, perceived and expected value and dissatisfaction with service recovery.

The transcription of the interviews resulted in 21 pages of encrypted data. The interviews provided useful insights regarding the main research question and sub-questions, but also provided new insights that can be the foundation for future research. The results were analyzed based on the relevance of the conceptual model, research question and proposition as follows: approval insights, disapproval insights and new insights. After evaluating the interviews and after analyzing of the data, the results concluded that all 5 interviews provided valuable insights.

The results showed that there are several things that companies should do when dissatisfaction occurs if they want to maintain or even increase customer satisfaction in the situation when the balance between expected and perceived value was violated by the delivery of DOA products to customers.

Firstly, dissatisfaction needs to be treated rapidly so that the customers don`t have the time to “realize” or react negatively towards company`s image. This finding supports the conceptual framework presented in this research and also reinforces the existing literature which highlights the importance of speed of recovery in restoring customer satisfaction.

Secondly, the companies should have direct contact with the customers when dissatisfaction occurs. In this way, the customers can express their thoughts and explain their issues more explicitly. Based on the results direct contact with customers (face to face interaction) facilitates a better understanding of the root cause and provide also a faster solution of the problem. Additionally, when using face to face interaction as a recovery method it is easier to understand the customer. Listening and empathizing with customer`s problem will show that the company is taking their request seriously and it will help to “defuse” the tense situation.

loyalty. To solve this issue and in the attempt of restoring customer satisfaction it is recommended that companies should offer something extra to the customer. Based on the results of the interviews, when the company could not solve customer`s issue in time, after offering something extra, (warranty extension, next services for free, Microsoft Office pack, etc.) 85% of the customer returned for a future purchase which indicates customer loyalty.

Overall the results support the conceptual model of this research and reinforce the existing literature. Additionally, the research revealed new insights that are not in the conceptual model or literature. The interviews showed evidence of a new service recovery outcome that does not appear in the conceptual framework but based on the findings it should be included.

The new service recovery outcome revealed by analyzing the interviews is flexibility. According to the results, 2 of the 3 interviewed mangers consider flexibility an important element in the service recovery process. The managers consider that by being flexible towards customer`s requests in situation of dissatisfaction immediately after the transaction phase it can help the company to regain customer`s trust and restore the satisfaction level. The same concepts are shared by the consumers as well. The results showed that besides speed of recovery and face to face interaction, consumers are looking also for flexibility from company`s side during service recovery process. As a consequence, the presented conceptual model is going to be adjusted, including flexibility as one of the service recovery outcomes that influence restoration of the customer satisfaction in the situation of unbalanced expected and perceived value due to the delivery of DOA products. The new framework can be observed in below schema:

Lastly, the results showed that if companies are involved in the process of building the expected value in the pre-purchase phase it will be easier in the post-purchase phase to restore customer satisfaction if dissatisfaction will occur. The reason is that if companies are directly involved in the process of creating the expected value, they have control of the information that they diffuse to the customers. If companies advertise efficiently what they offer then the expected value should be in balance with the perceived value therefore customers should know exactly what to expect from the product in advance. Additionally this research provided evidence also for the propositions. All interviewed mangers, consider that a proper building of the expected value will reduce the chances of dissatisfied customers and in case dissatisfaction will occur, it will be easier for the companies to repair the balance between expected and perceived value and restore customer satisfaction. Also, two of the three managers interviewed consider that by giving something extra to the customers when the company could not solve the problem in time it will help maintaining or even increasing customer satisfaction and loyalty. The numbers indicate that 85% of the customers returned for a future purchase after receiving something extra from the company`s side and according to the conceptual framework, repeated purchases represent customer loyalty. Another interesting aspect resulted from the interviews is that when the respondents were asked to share their opinion regarding what are the top three qualities that a manager should have, 2 of the 3 interviewed managers mentioned decision-making and vision as a must have quality. This indicates that managers should have an open-minded overview and to be able to make important decisions in key moments, like for instance how to treat a dissatisfied customer.

Speed of recovery and face to face interaction proved to be essential elements when restoring satisfaction after DOA product delivery. This perception is both shared by both managers and customers. Additionally to this, the results showed that flexibility should be also included in the category of “must have” elements during service recovery.

Table 1- Main Findings and New Insights

5. Discussion and Conclusion

Dissatisfaction is a phenomenon that cannot be avoided since companies are not able to predict all the problems, therefore they should learn to recover from them. (Hart et al., 1990) The lack of scientific publication about how dissatisfaction has to be treated immediately after the transaction phase in high-tech industry led to this research. The societal problem was identified at one of the biggest entities from hardware and high-tech industry and it was narrowed down towards a more scientific approach to make the idea researchable. The literature review offered only partial answers to the addressed research questions, so additional research was needed. In-depth interviews were conducted and a conceptual framework was created for a clear evidence of the concepts. The results of the interviews approved the conceptual model and they contributed to the existing literature by revealing new insights. During the interviews all respondents were “on board” with addressed topics and did not show any attempt to hold back information. The respondents understood and recognized the conceptual model, emphasized the importance of creating a balance between expected and perceived value and shared their experience regarding addressed topics therefore, I trust that the responses and the insights obtained are reliable.

The structure of the interview was openly stated offering the respondents the possibility of bringing new ideas, concepts, etc.

5.1 Practical Conclusion

important for a successful customer satisfaction recovery. This research provided a better understanding of the whole system recovery mechanism and managers together with the companies can use these findings as a clarification of their beliefs so that they can perform better when dissatisfaction occurs due to the delivery of DOA products.

5.2 Theoretical Conclusion

The literature provided useful insights about dissatisfaction, service recovery, expected and perceived value and customer loyalty. However the existing literature does not offer a clear perspective of how all these elements are connected to each other and definitely does not take into consideration DOA products as the main reason for dissatisfaction. Moreover, there is no clear evidence how dissatisfaction has to be treated immediately after the transaction phase. This research tried to understand better what is the best approach that companies can use to tackle dissatisfaction in the post-purchase phase. In order to achieve that this research combined the existing findings from the literature and developed a conceptual model with all the elements together. The results supported the conceptual model and additionally revealed a new service recovery outcome that has been proven to be valued by both companies and customers during the service recovery process. The new element revealed by the research is flexibility. Companies should show flexibility in their service recovery process especially when DOA products were delivered and the results showed that customers are also looking for flexibility during service recovery process.

The findings of this research support the existing literature and contributed with additional knowledge. However this subject was not researched enough and additional attention should be given by future research.

5.3 Limitations and Future Research

First of all, the research was based only on several in-depth interviews. Even if all research questions were answered and the interviews were conducted with managers that are strongly engaged in the high-tech industry, a more in-depth analysis should be made. Future research should focus on a bigger coverage of entities from the high-tech industry, by analyzing multiple case studies to increase the generalizability of the findings.

Another aspect is that the present study used a qualitative method of research. This approach provided flexibility and offered a better understanding of the whole conceptual framework. The study revealed new insights that were not in the scientific literature and added another “brick” to the existing literature about dissatisfaction and service recovery. However, future research should use a quantitative approach to study the present findings in more detail. A research can be made over a longer period of time by measuring customer satisfaction before and after the company used service recovery methods. Additionally a measurement of how much does each service recovery outcome impact customer satisfaction and loyalty can be made.

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Appendix

1. Describe the company in a few words: type of business, offering, etc.

2. For how long have you been working in this business industry? 3. Have you ever operated in this field before?

4. Based on your vision and experience upon this industry, what would you consider that are the top three “must-have” qualities that a manager need in order to succeed?

5. Was it easier to manage the 2nd store after you gained the necessary experience from the 1st store? What challenges have you encountered?

Expected Value and Perceived Value

As you probably know, before buying a product or a service, customers most of the time do a “research” (via the internet, talking with other consumers, TV advertising etc.) in order to obtain more information about the product or service. In that moment the information that they obtain through different channels, will help to build some expectations from the product/service which is also known as expected value. (in other words customers have some expectations from the product/service based on what they have read/heard). Perceived value is what they experience after the purchase of the product/service. In order to be satisfied, there should be a balance between expected value and perceived value, basically to get what they expected or even something better.

1. Do you measure in any ways what are the customers expecting from you in advance? (Regarding the products that you offer or regarding the services that you offer)

2b. Do you analyze the results in order to improve your offering towards your consumers? How?

3. Do you match the expected value with perceived value?

4. If there is no balance between expected value and perceived value what are the approaches that the entity is taking in order to restore this balance?

5. If dissatisfaction would occur would be easier for the company to keep the customers satisfied if the company was involved in the creation of the “expected value” and not other parties?

Dissatisfaction and service recovery

Dissatisfaction occurs most of the time when the company is failing to deliver the promised quality products or services to the customers. In order to repair customer satisfaction and gain the customer`s trust again, service recovery is needed. There are different aspects that customers value the most when they are trying to solve their problem like for example speed of recovery (the rapidity of response to their request), face to face interaction (they received face to face interaction and support for their issues, not talking with a robot which will not fully understand their complaint or writing back and forth emails in order to solve their issue) and compensation (receiving something back for their issues; when a product is damaged will they receive their money back, or a similar product etc.)

1. Have you encountered dissatisfied customers? How do you usually approach these delicate aspects?

2. How much time does it take to register customer`s complaints?

3. Do you try to regain their trust and restore their level of satisfaction once dissatisfaction occurred? What are the methods that you are using?

5. In your vision which one is these methods is the most efficient in dealing with dissatisfaction?

6. After using one of the service recovery methods how many consumers remained loyal and made a future purchase or they said that they will recommend the company after they have encountered an issue? (No need for the actual numbers can be estimated like: 1 out of 3; 7 out of 10; half, a quarter)

7. Have you gone beyond the “fair fix” to solve a problem and you have given something extra to the customers for the trouble?’

8. How much dissatisfied (that had an issue with their product/service) customers remained loyal (repeated purchase, or recommend to others) after receiving something “extra” from the company? (e.g. 6 months extended warranty to their product, 2 service repairs for free, an accessory for their device, a Microsoft Windows pack, etc.)

9a. Do you have special agreements with each supplier? (Fiction scenario: with Samsung you assure that customer will receive their product back within 24 hours, with ASUS the customer will receive compensation or a new unit within 5 working days, etc)

9b. If there are special agreements will this affect the way customers receive support for their issues based on the brand that they own?

9c. If there is a difference, do you try to balance this matter making sure that each customer will receive the best service in order to remain loyal?

10. At the end of the solution process who is the person who is going to apologize/interact with the customer?

“Real life experience”

based on the review from internet saying that "this brand will never let you down". However, after 2 days the laptop is not working at all and the customer is very dissatisfied since he had high expectations based on the information that he has been exposed.

Please explain step by step:

-How these types of situations have to be treated?

-How are you going to deal with customers that return their product after a few days of usage? -How are you going to assist him and what is the promised that the company is making? (Will he receive a quick report to his request? Will he receive face to face interaction in order to explain his problem? Will he receive compensation for this product?

-What are the actions that the company is going to make in order to “repair” the satisfaction and make sure he remain loyal to the company? Will he receive something “extra” (warranty, accessory for his device, etc)

-Is the company going to supervise and analyze his behavior after the service recovery? Will they ask for his feedback after the company solved his problem?

Last and the most important question:

Based on the overall discussion, in your option how dissatisfaction has to be treated in the first phase of the transaction (when the balance between EV and PV was violated) in order to maintain or increase customer satisfaction and not damaging customer loyalty? What are the most important elements that a company should follow in order to keep the repair the satisfaction and keep them loyal?