Turning Failures into Opportunities for Value Creation

Product failures are critical incidents in customer relationships. Here, managers often focus on recapturing satisfaction through resolving the problem. It is largely neglected so far that there is a chance to lift secondary satisfaction (i.e., satisfaction after a failure and recovery activities) beyond the pre-failure level. To create such a "leverage effect", pure recovery services have to be expanded to value-added recovery services. Using a quasi experiment and data from real-life car breakdowns this study investigates if value-added (proactive) recovery services have a leverage effect on customer satisfaction. In that case failures could also be viewed as an opportunity for a firm. This paper received the Sheth Foundation Best Paper Award at the AMA Relationship Marketing Summit