Service recovery strategies have been examined for their effectiveness in compensating for the customer’s loss and in restoring customer satisfaction. Current research on service recovery has largely focused on the customer involved. For instance, the most common recovery strategies hotels used for the guest involved are compensatory (e.g., discount), corrective (e.g., correction), and personal response (e.g., apology). Service recovery research suggest that, while corrective responses are viewed by customers as the minimal action, both apology and compensation have been shown to be effective in increasing customer satisfaction (e.g., Goodwin & Ross, 1992). Due to the prevalence of online reviews, our understanding of service failure and recovery must expand beyond the customer involved to include potential customers who are searching online. The difference between the customer involved and the potential customer is that while the focal customer suffered an economic or psychological loss, the potential customer has not. Past studies suggest that this difference may change the attribution tendency of potential customers (e.g., Wan, Chan, & Su, 2011). Consequently, one can expect that potential customers may use different criteria in assessing recovery strategies. For instance, in line with the equity theory which posits that people in general seek fairness in social interactions (Blodgett et al., 1997), potential customers might be more concerned about justice rather than the compensation. From the company’s perspective, in order to recover effectively from a service failure, it must know whether what works for the customer involved would also work for potential customers. The current research provides evidence that potential customers’ reaction to an online review and a hotel reply is contingent on the perceived similarity between this potential customer and the focal guest (i.e., the customer involved in the incident that the review describes), the type of hotel reply (i.e., no reply, apology, and explanation with no apology). Moreover, results suggest that the psychological mechanism that underlies this relationship is not due to negative emotions but a sense of vulnerability.

• Elisa K. Chan(Ecole hôtelière de Lausanne, HES-SO, University of Applied Sciences Western Switzerland, Switzerland)
• Lisa C. Wan(The Chinese University of Hong Kong, China SAR)
• Maggie Y. Chu(Open University of Hong Kong, China SAR)