THE RELATIONSHIP BETWEEN SERVICE RECOVERY AND CUSTOMER SATISFACTION IN ONLINE SHOPPING - A CASE STUDY OF SHOPEE, LAZADA AND TIKI
Khuat Thao Nguyen™ ABSTRACT
E-commerce (EC) market has been growing significantly, however, there has been many existed service failure problems about products quality Service recovery (SR) activities become more and more important to improve customer satisfaction This studies three biggest EC companies in Vietnam including Shopee, Lazada and Tiki, focusing on how customer's fairness perception of SR page can affect on their satisfaction Data used in this study was collected through an online survey which gathered individual evaluation of 350 customers of these three EC websites Based on existing researches that are related to SR, a model is adapted to test the relationship between fairness including three dimensions: Interactive fairness, Outcome fairness, Procedural fairness and Customer satisfaction Data was analyzed by using linear regression ‘The result shows that Interactive fairness and Procedural fairness have a positive effect on customer satisfaction while Outcome fairness does not have significant relationship Regarding empirical implications, this research gives
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some recommendations for EC companies to consider SR as effective tool of strategy, they should focus interactive fairness and procedural fairness to increase customer satisfaction, however, still maintain the outcome fairness
Keywords: Service recovery, customer satisfaction, online shopping 1 INTRODUCTION
When the Internet is rapidly growing, there are more and more people having tendency of shopping online because of saving time and cost Hence, online retailers are increasing significantly accompanied with the increase of using online shopping website such as Shopee, Lazada, Tiki, etc According to the Minister of Information and Communications, Vietnam had approximately 54% Internet penetration rate in 2017, while the global average of 46.5%; which can show that online shopping area is going to be well-positioned to hold the key to success for e-commerce in Viet Nam Currently, most of Vietnamese companies have had compensation policies for consumers in case of service failure These policies have affected in improving customer perceptions lead to the quality of the service is positively transformed However, handling customer complaints or
SR are still considerable issues
Under increasingly intense competitive pressure, understanding how customers feel when they are dissatisfied with products/services and handling these issues or “service recovery” is essential; however,
this problem is not easy for most businesses (Stauss et al., 2005)
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(Luu Trong Tuan, 2017) Although there are some conclusions from
related studies about service quality, there is little research on SR in EC, which should be enlarged
This research aims at finding which factors of SR can affect CS and causes of those effects by comparing return/refund policies of Shopee, Lazada and Tiki This research also can be applied for others online retailers, who have created market of selling products online
2 LITERATURE REVIEW
2.1 Customer satisfaction and e-serqual
Zeithaml et al (2001, 2002) developed the e-SERVQUAL
measure of e-service quality to study how customers judge e-service quality This model was drawn up through a three-stage process involving exploratory focus groups and two phases of empirical data collection and analysis It contains seven dimensions: (1) efficiency,
(2) reliability, (3) fulfillment, (4) privacy, (5) responsiveness, (6) compensation and (7) contact The first four dimensions are classified
as the core service scale, and the latter three dimensions are regarded as
a recovery scale, since they are only salient when online customers have questions or problems Contents of three recovery scale dimensions
are shown below:
e Responsiveness: Compares the capability of e-retailers to give appropriate data to customers when a problem happens, having mechanisms for handling returns, and giving online guarantees
¢ Compensation: Consists receiving money back and returning shipping and handling expenditures
Trang 4186 PRODUCTIVITY AND 0UALITY IN THE ERA 0F DIBITAL TRANSFDRMATIDN Customer Satisfaction (CS)
CS have been defined as an overall evaluation based on the customer's total purchase and consumption experience with a good or service over time (Anderson, Fornell and Mazvancheryl, 2004;
Fornell, 1992)
Previously, many studies have been conducted in the context
of service quality and CS (Ahmed et al., 2010; Arasli et al., 2005; Caruana et al., 2000; Taylor and Baker, 1994; Wang et al., 2003; Zhu et al., 2002) These studies suggest that service quality and CS
are key factors of the service industry If a customer is satisfied with a
service or product after having used it, then the chances increases in
repeating the purchase of that service or product (East, 1997)
Moreover, CS can influent a firm’s market value Firms with satisfied customers tend to enjoy greater customer loyalty (Bolton and Drew, 1991; Oliver, 1980), positive word of mouth (Szymanski and Henard 2001), and a customer's willingness to pay premium prices (Homburg, Koschate and Hoyer, 2005), all of which can increase a firm’s market value Indeed, firms with higher levels of CS can achieve higher levels of cash flows (e.g., Gruca and Rego, 2005; Fornell, 1992; Mittal et al., 2005) and less volatility of future cash flows, thus leading to superior market value (e.g., Anderson, Fornell and Mazvancheryl, 2004; Fornell et al., 2006; Srivastava, Shervani and Fahey, 1998)
2.2 Service recovery
One of the first definitions of “service recovery” was given by Grönroos in 1988, referring to the action taken by a service provider to address a customer complaint regarding a perceived service failure
Trang 5International Conference Proceedings 187 provider does to respond to service failure The objective of recovery is to solve problems in two potential situations: during the service encounter (i.e before a customer complaint) and shortly after the
service encounter if the customer is dissatisfied (Gro”nroos, 2007)
SR in online sector has become more important as part of strategic management in companies because of extremely competition E-commerce often eliminates the human interaction which is often viewed as a vital component of traditional service experience (Forbes et al., 2005; Holloway et al., 2003; Oliver et al., 1898) Thus, service problems might emerge during online retailing
service processes (Forbes et al., 2005; Kelley et al., 1993) Researches
also confirm the importance of SR, and the effect of SR on consumer loyalty (Harris et al., 2006; Maxham et al., 2001; McCollough et al.,
2000; Smith et al., 1999; Wirtz et al., 2004)
2.3 Relationship between E-SR and customer satisfaction
The inseparable and intangible nature of services makes it difficult for service providers to avoid service failures during service delivery Most customers who encountered a service failure anticipate service recovery (Blodgett, Hill and Tax, 1997; Goodwin and Ross, 1992; Holloway and Beatty, 2003) Via effective recovery strategies, service providers can still appease unsatisfied customers to return
them to a state of satisfaction, increase the customer retention rate
(McCollough, Berry and Yadav, 2000) and even foster a long lasting telation with dissatisfied customers (Kelley, Hoffman and Davis,
1993), ultimately making them loyal ones (Boshoff, 1997)
According to Tammo (2014) in a research of online context,
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online setting Successful SR also can enhance customers’ perceptions of the quality of the service and the organization, lead to positive
word-of-mouth (WOM) communication, enhance customer
satisfaction, and build customer relationships and customer loyalty
(Michel, Bowen & Johnston, 2009) Adamson and Matos et al even
noted that effective SR could lead to higher satisfaction level than that without any service problem at all
3 METHODOLOGY
The theory of fairness has been widely used as a principle theoretical framework in service recovery studies to explain whether a customer has been treated fairly after a service failure (Example: Tax
et al., 1998; Smith and Bolton, 1998; Smith et al., 1999; Goodwin and Ross, 1992; Tax and Brown, 1998) Recently, the fairness theory
has been applied in studies in this area (eg., Evandro and Marcos
(2015); Van Vaerenbergh and Orsingher, 2016) because perceived
fairness is a strong driver of customer satisfaction with the recovery
effort (Stefan, 2009) This research model used in this research based
on the literature review part and is partly adapted from model of
Trang 7International Conference Proceedings T88 There are three hypotheses as follow:
Hypothesis 1: There is a significant positive relationship between interactive fairness and a customer’ satisfaction with an e-retailer
Hypothesis 2: There is a significant positive relationship between outcome fairness and a customer’ satisfaction with an e-retailer
Hypothesis 3: There is a significant positive relationship between procedural fairness and a customer's satisfaction with an e-retailer
Quantitative research methodology is used to finding the trend
of customers’ perception about EC companies Besides, qualitative analysis is also used to point out differences among SR policies After using SPSS to analyze the data and policies analysis, three main research questions will be answered, which are:
1 What are the impacts of IK OF and PF on customer satisfaction in retail sector on E-commerce, especially in the case of Shopee, Lazada and Tiki?
2 What are differences among the three companies’ policy, which effect of customer satisfaction on service recovery
experience?
3 How can EC companies improve their performance on
service recovery activities to increase customer satisfaction?
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respondents, who are using the EC in three markets including
Shopee, Lazada and Tiki
In the sample, the difference between men and women of respondents is insignificant The gender proportion is 46.5% male and 53.5% female Regarding age, the sample focus on young people, those who can access and update according to the e-commerce market, with 41.5% under 25, 35.7% between 25 and 40 years, 15.7% between 40 and 55 years and only 7.1% over 55 years old ‘They are also from various working groups, with different monthly income and most of them have income under 12 million VND per
month (89.5%)
Likert Scale 1-5 was used to collect data from participants The recovery dimensions of the survey were incorporated from the
seminal recovery study of Tax, Brown, and Chandrashekaran (1998)
and were slightly changed to apply to an online setting (Collier, 2009) Lastly, the CS scales were adapted from the Tax, Brown, and
Chandrashekaran (1998) and Mathwick (2002) research studies
Cronbach's Alpha of all four components are: CS = 0.733, IF = 0.845, OF = 0.748 and PF = 0.804 respectively, which are more than 0.6 Thus, all items have internal consistency, closely correlated with each other All factors have satisfactory authenticity; the Eigenvalues values are greater than 1, factor loadings are all over the value of 0.5
4, RESULTS AND DISCUSSIONS
Correlation analysis
All correlation is significant at the 0.01 level (2-tailed) Thus,
there exists a positive correlation relationship between the dependent
variable (CS) and each independent variable (IK OF PF) Those
Trang 9International Conference Proceedings 191 are in the range of 0 to +1 Besides, the correlation between the
dependent side CS and the independent variable IF represents the
strongest correlation (0.518), then CS and PF (0.501) and finally CS with OF (0.473) Table 1: Correlation analysis Factor cS IF OF PF CS 1 518** ATS 501 IF 1 710* 718** OF 1 75 PF 1
** Correlation is significant at the 0.01 level (2-tailed) Source: Analysis results from SPSS software Linear regression analysis
Table 2 shows that adjusted R-square value is 29.4%, which
indicates the percentage of variances in CS can be explained by three variables Table 2: Linear regression analysis result ˆẼ ẽ 1ˆ IF 0.295 0.002 | 2.762 OF 0.504 0.294 | 30.681 | 0000 0.066 0.512 | 3.073 PF 0.258 0.010 | 2.580
Note: Dependent variable: Customer satisfaction Source: Analysis results from SPSS software
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the dependent variable So, the value confirms the group of three
factors with statistically significant interaction with amount of purchasing variable
All the VIF (variance inflation factor) values in the table are
smaller than 4 so there is no multi-collinearity phenomenon That means, independent variables are not much related, being able to interpret dependent variables independently
Hypothesis testing
Hypotheses 1 is validated; Standardized coefficients = 0.295 and Sig (or the p-value) = 0.002 much lower than 0.05 There is a positive relationship between IF and CS This factor also has the strongest relationship to CS among three factors
Hypothesis 2 is invalid because Sig = 0.512 that is much more
than 0.05 Thus, it is not enough to conclude OF has a positive
impact to CS although the Standardized coefficients is 0.066 (> 0)
Hypothesis 3 is supported because Standardized coefficients =
0.239 and Sig (or the p-value) = 0.010 much lower than 0.05 Thus,
there is a positive relationship between PF and CS Research context
According to EVBN report, in Vietnam, although EC market
is growing up significantly, it still approaches a little market size of total retail market Currently, the proportion of operating Vietnamese EC market is only less than 5% Besides, a statistic of Vietnam E-Commerce and Digital Economy Agency showed that the highest percentage of customers buying goods more than second
times is from 10 to 30%, which can be reached by 17% total EC
Trang 11International Conference Proceedings 193 lacking proper strategy in creating creditability to increase customers’ retention Hence, understanding costumers clearly and make them satisfy while and after solving their problems is one of the most important thing of EC companies to be believed by costumers
Discussion
Firstly, this research points out that Interactive fairness has a
positive effect on satisfaction of customers This result is appropriate because there are some previous researches have come out with the
same result (eg., Mattila, 2005; Evandro, 2015; Na Young Junga,
2017) Currently, all of three EC companies in Vietnam have provided quite detailed and thorough information of ways to contact them for customer but lack directly interactional activities for increasing customers engagement In the future, these companies need to create new points of policy for higher performance and long- term relationship with customers In a competitive environment, each company should build specific policy for employees to make customers recall and retentive using service
Secondly, this study indicates that outcome fairness factor does
not have significantly affect to CS, which was similar with a research
of Beomjoon Choi (2014) This contrast with some evidences in
the previous literature (Mccoll-Kennedy, 2003; Rathindra, 2007; Ying-Feng, 2011; Muhammad, 2014; Junga, 2017, etc.) It can be
explained by the knowledge of cross-cultural influences on customer perceptions of service failures and service recovery strategies (Mattila, 2004) Currently, Shopee, Lazada and Tiki have provided
for customers the same outcome of return/refund, includes cash and voucher or e-coin, so customers do not have many choices to be
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the OF, because if the customer does not receive the OF, they will be dissatisfied with the companies and have strong effect on WOM Yet,
to increase customer satisfaction in service recovery, EC companies
shout not focus on outcome fairness
Finally, this research indicated that procedural fairness has positive effect on CS This conclusion is supported by many previous
researches (Kau et al., 2006; Rio-Lanza et al., 2007; Muhammad et
al., 2014; Ding, 2016) Now, SR process of Shopee, Lazada and Tiki have some differences each other, which may be affect to customer shopping intention Shortly, all of EC companies should focus on improve SR procedure to have CS
5 CONCLUSION
EC market is a potential retailer market in the future because it can approach the updated technology also marker trend For better performance of EC companies especially on Shopee, Lazada and Tiki, this research is conducted to study about how buyers perceive fairness of SR affects customer satisfaction The major contribution of this research is developing and empirically validating model of how customers perceive fairness about SR affect their satisfaction in context of three EC companies: Shopee, Lazada and Tiki This study has pointed out that interactive fairness and procedural fairness have positive relationships with customer satisfaction while outcome fairness does not have significant relationship Three EC companies are recommended to put the best effort on interactive fairness
and procedural fairness to increase customer satisfaction Besides,
although the outcome fairness does not have remarkable effect on
satisfaction of customer, companies should maintain it to ensure
Trang 13International Conference Proceedings 195 absolute best effort to avoid service failure from happening, however
even the best company in the world experienced service failure It is unavoidable and employees must equip themselves with required skills and knowledge in recovering from the problem The research remains some limitations regarding research context and research sample Future research should apply the model in other contexts for more interesting findings or of customer satisfaction about SR
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