JSSM  Vol.11 No.4 , August 2018
Service Failure, Psychological Contract Violation and Formation of Customer Relationship Crisis—An Empirical Research of the OCT Theme Park
Author(s) Qian Xu1, Kexiang Wu2
ABSTRACT
An increasing amount of tourism enterprises are regarding customer relation crisis management as the core content of customer relationship management, while customer psychological contract during a serving course is the foundation of customer relationship management. According to analysis of relevant literatures, product defect and service failure are fundamental factors inducing customer relationship crisis in a tourism enterprise. Upon the basis, the paper presented that psychological contract violation was a promoting factor deepening customer relationship crisis, and raised relevant hypotheses. A structural equation model was utilized to test the action effect of psychological contract violation on customer relationship crisis. The research indicates that, after occurrence of product defect or service failure, psychological contract violation in a customer aggravates customer relationship crisis. Therefore, a tourism enterprise shall boost emotional relations with a customer during a serving course, enhance customer’s trust, and establish a favorable psychological contract to resolve customer relationship crisis.

1. Background

Customer relationship refers to economic or psychological relation between an enterprise and its customer. In exchange of serving product, service is generally provided by person, while the difficulty of personality difference control makes it an unattainable target of “zero defect” for service [1]. Service failure inevitably causes a loss to customer and affects the customer’s emotional and behavioral reactions [2]. After service failure, most tourism enterprises would take measures to remedy the product and service, reduce customer’s loss to some extent, and reverse customer’s emotion and behavior. Service failure causes both economic and spiritual losses to a customer, and an invisible psychological contract exists behind a sales contract between the customer and the enterprise. However, how transaction trust, relationship and emotion between a service staff and a customer affect customer relationship has not attracted no sufficient attention. The process of transaction between the service enterprise and the customer is a process of the formation and performance of the contract, and the relationship between the enterprise and the customer is not only an economic contract. The psychological contract, which is not clearly expressed by the customer, is also an important part of the contractual relationship between the two parties. When the service of the enterprise cannot reach its promise or the expectation of the customer, the customer psychological contract breach will happen, which leads to the dissatisfaction, complaining and even interrupting the transaction relationship. If the enterprise can take the appropriate service remedial strategy in time when the customer perceiving psychological contract violates, it may reduce the loss caused by the service error and maintain the customer loyalty.

In view of this and based on psychological contract violation, the paper is to explore how a psychological contract after product defect and service failure works on customer relationship and, therefore, to provide decision-making references about how tourism enterprises can effectively prevent and control customer relationship crisis.

2. Research Model Building

Customer relationship is psychological attitude and behavioral manifestation of economic dependence and emotional attachment generated upon the foundation of commitment and trust [3]. If service enterprise fails to satisfy customer in any service aspect or fails to meet customer’s expectation, it is service failure [4], including product defect or service error. Once service failure is beyond a customer’s psychological tolerance, psychological contract violation is generated. The formation of psychological contract is based on mutual trusts [5], Reflecting dynamic psychological balance between an organization and staff [6]. Psychological contract violation refers to the situation that staff fails to understand or perceive some obligations in a psychological contract. The violation leads to customers’ feeling of betrayed and strong emotional reaction, and triggers disappointment, the feeling of unfair, resentment or distrust [7]. After violation of a psychological contract, customer might query the honesty of organization, and most people will hold skeptical attitudes or hostility towards the organization [8]. Later, psychological contract violation has been introduced in marking scenario, demonstrating that, besides an economic contract, a psychological contract exits between an enterprise and a customer [9]. An exchange is not limited to material component, as it covers psychological components; both parties hold perceptions of a reciprocal agreement and form psychological expectation and trust relationships, suggesting that the two parties are confidence in the other involved party’s contractual capacities [10]. It is demonstrated that psychological contract plays a vital role in individual consumption of the service industry [11].

Rousseau and Robinson introduced two dimensions of psychological contract component―transaction contracts and relational contracts. A reciprocity-based psychological contract between an enterprise and a customer is closely related with two-way trusts of mutual commitment [3]. Consistency between return and expectation enhances transaction behavior, and trust is a key factor for keeping good relationships between two parties. Violation of a transaction contract highlights trust crisis. Affected by mutual influences and actions of trust crisis factors and emotion crisis factors, violation of a psychological contract triggers conflict and even an accident, and consequently results in customer relationship crisis, reduced enterprise trust and commitment, termination of relationship with the enterprise, and switching to an competitor [12].

In this paper, the product defects and service failures of the tourism enterprises are regarded as the 2 independent variables affecting customer relationship. The psychological contract violation based on the transaction trust and the relationship emotion is used as the intermediary variable, and the customer relationship crisis is used as the dependent variable. This paper tries to deduce the relationship between the product defects, the service error and the psychological contract breach and the customer relationship crisis. The product defect and the service failure have some influence on the psychological contract violation based on the transaction trust and the relationship emotion to a certain extent, and the psychological contract violation will also produce the customer relationship crisis. At the same time, it will also play a certain role in transaction trust and relationship emotion. These variables are measured by observable results, and the final measurement variables are interpreted to form the research model of this paper. Based on this, this paper puts forward the impact of service failure and psychological contract violation on customer relationship crisis in tourism enterprises. As shown in Figure 1.

3. Research Hypotheses

3.1. Product Defect and Service Error Pose Significantly Positive Influences on Customer Relationship Crisis

Customer relationship of a tourism enterprise is determined by valid value exchange of service products. Out of self-interest utilitarian motivation, an enterprise and a customer are for acquisition of individual interests [13]. Quality of product and service supports a tourism enterprise’s relationship with customers, and the two parties realize value enhancement via reciprocal exchange [14]. Due

Figure 1. Model for influence of tourism enterprise’s service error and psychological contract violation on customer relationship.

to intangibility, non-storability and concurrent occurrences of service delivery and customer consumption, customer is inclined to feel high uncertainty when receiving a product and service [15]. Meanwhile, owing to individualization and variability of customer demands, customers are different for their perception of service products, causing ill match of enterprise’s commitment and customer’s expectation. When a tourism enterprise fails to meet customer’s expectation when delivering a service product, a failure error is generated [16]. A failure error causes loss to a customer, possibly induces emotional reaction, and becomes a principal agent of consumer’s complaint [17]. Product defect and failure error pose significantly positive influences on customer relationship crisis. Therefore, we proposed the following hypotheses H1.

H1a: Product defect poses positive influence on customer relationship crisis.

H1b: Service error poses significant influence on customer relationship crisis.

3.2. After Product Defect and Service Error, Psychological Contract Violation Significantly Affects Customer Relationship Crisis

Relations between a customer and an enterprise are not compulsory, and the customer relationship formed between a customer and an enterprise is based by a mutually committed and trust psychological contract. Deery and Iverson indicated that, other than features of economic transaction, relations between a customer and an enterprise are also featured by emotional exchange, and people carry out emotional investment in trust-based relations [18]. According to Rousseau, relational contract focuses more on social emotional connections, goes after satisfaction of emotional demands other than economic return, [19] and is manifested as cognition of transactional parties’ values, match of transaction intention and emotional affiliation, namely cognition consistency-based emotional attachment. When an enterprise fails or does not complete fulfil its promise, a customer will feel betrayed or emotionally hurt [20], A customer will have corresponding emotional response for his/her interest demands; after occurrence of product defect or service error, psychological contract violation negatively affects generation of customer relationship, and accelerates customer relationship crisis [21]. Therefore, we raised the hypotheses H2.

H2a: Psychological contract violation plays a significantly intermediate role between enterprise’s product defect and customer relationship crisis.

H2b: Psychological contract violation plays a significantly intermediate role between enterprise’s service error and customer relationship crisis.

H2c: Psychological contract violation significantly affects product defect, service error and customer relationship crisis.

3.3. Interaction of Transaction Trust Crisis and Relational/Emotional Crisis Enhances Customer Relationship Crisis

Factors influencing occurrence of customer relationship occurrence are complicated. During service interaction, transaction trust crisis and relational/emotional crisis interact with each other to accelerate occurrence of customer relationship crisis. Therefore, we proposed the following hypotheses.

H3a: Transaction trust crisis factor significantly affects relational/emotional crisis factor.

H3b: Relational/emotional crisis factor significantly affects transactional trust crisis factor.

4. Method and Empirical Analysis

4.1. Variable Measurement

Questions in the questionnaire are sourced from relatively mature scales in domestic and foreign literatures. To make measurement of the variable be more reliable, semantic expressions were properly modified by integrating features of tourism enterprises and research purpose of the program.

The observed and measured variable of enterprise’s product defect is based on the scale program of Paul A. Pavlou and David Gefen and developed by integrating features of tourism enterprises, such as poor product quality, product price fraud, poor environmental sanitation, unsafe service facility and product introduction distortion.

Regarding the observed and measured variable of service error, a total of 3 categories and 10 sub-items concerning service error concluded for catering industries in Seiders and Berry [22], Mary Jo Bitner, Bernard M. Booms [23], K. Douglas Hoffman and Scott W. Kelley [24] [25] [26] were extracted for the measurement, including slow service delivery, non-standard employee behavior, quarrel between employee and customer, poor service attitude, unsatisfied reasonable demand, broken promise etc.

According to the scale developed by Robinson and Morrison, the transaction trust crisis factor is summarized as measurements including promotion of poor product, much higher product price than commodity quality, frequent problems of product quality, non-confidence with enterprise’s service promise and so on.

In addition, we referred to the 12 expectation items summarized by Herriot for relational contract and integrate features of tourism enterprises to conclude 6 measurement items for relational/emotional crisis factor, including deficiency of service sincerity, service staff’s indifference to me, absence of rudimentary respect, unequal treatment, poor staff attitude and disapproving staff look, and service staff’s perfunctory attitude towards me.

Concerning the dependent variable of customer relationship crisis, the measurement items include 4 sub-items concluded by domestic and foreign scholars for manifestations of customer relationship crisis―direct complaint, customer’s claim for compensation, compensation claim via a third party, and public relation crisis.

4.2. Questionnaire Design

A questionnaire was designed according to above measurement items of the variables and construction of the scale for tourism product of the OCT Theme Park and crisis factors, and included two parts, the first, measurements of product defect, service error, psychological contract violation and customer relationship crisis, total 26 items and the anther is investigator’s basic information, (gender, age, educational background, occupation and monthly income). For investigation validity and data difference, all measurement items in the theoretical hypothesis mode were processed with Likert 7-ratings scale, namely, 1 - 7 points for “strongly disagree”, “disagree”, “almost disagree”, “neither disagree nor agree”, “almost agree”, “agree” and “strongly agree” respectively. Table 1 shows:

4.3. Research Sample

The research objects were 3 theme parks, the Window of the World, the Happy Valley and the Folk Customs Village in Shenzhen City, Guangdong Province. The OCT receives nearly 50 million tourists every year, and the accumulative tourist amount was nearly 0.4 billion, ranking the first in Asia. The OCT has been rated as one of the world’s top 4 theme park groups for consecutive 5 years; the Happy Valley is the only one winning the title of China famous brand in domestic theme park industry, and has been constructed and opened in 7 cities to establish “a Happy Valley group” and will be the most competitive theme park group in China. The research time was March to June 2018. We distributed 600 questionnaires, 567 (94.5%) of which were collected, including 544 (90.7%) valid questionnaires. The research samples included 290 (53.3%) females and 254 (46.7%) males. Regarding age composition of the research samples, investigators of 18-25YR accounted for a major part (208 cases, 32.8%), while the amounts of 26-35YR, 50-60YR, below-18YR and above-61YR cases were 152 (27.9%), 84, 38 and 12 respectively. For occupation, the samples were rated from a high amount to a low amount as enterprise employees, civil servants, students, teachers,

Table 1. Summary of measurement items.

lawyers and freelances. Investigators with senior high school education or higher academic background accounted for 93.7% of the total case, and 310 cases (57%) were undergraduates, demonstrating that the interviewees could well understand the content of the questionnaire. With respect to income, a total of 126 cases (23.2%) had a monthly income of 2000 - 6000 RMB, while 245 (45%) and 61 cases had monthly incomes of 6000 - 10,000 RMB and above 10,000 RMB respectively. Table 2 and Table 3 are an analysis of the specific situation of the interviewees:

4.4. Reliability and Validity Tests

It can be viewed from Table 4 that the reliability (Cronbachά) of the total scale is 0.863, while the reliabilities (Cronbachά) of all measured variables are above

Table 2. Sex analysis of interviewees.

Table 3. An analysis of the age of the interviewees.

Table 4. Reliability analysis table.

0.7, suggesting relatively high internal consistency of the whole scale. It is indicated that all items of the scales measures same dimensions. The content validity is, to some extent, guaranteed. It accords with conditions required for the following structural equation modeling.

According to the KMO and Bartlett spherical tests of the scale in Table 5, the KMO value of the total scale is 0.803, and the significance of Bartlett spherical test is P = 0.000, suggesting compatibility for factor analysis.

4.5. Test of Goodness for Fit

Before confirmatory factor analysis of the investigation data, fitted values of the model indexes shall be computed. In the paper, Chi-square value, degree of freedom (DOF), ratio of chi-square value to DOF, RMSEA, GFI, AGFI, NFI, TLI and CFI were selected for fit measure of the model. The computed values are presented in Table 6.

In the paper, the χ2/df is 1.97, which is below 3; the GFI is 0.909, suggesting good fitting effect; the AGFI is 0.875, which is above 0.8; the NFI is 0.897, which is below 0.9 but above 0.8; the CFI is 0.907, which is above 0.9; the RMSEA is

Table 5. KMO and Bartlett test.

Table 6. Table of indexes for model fit measure.

0.076, which is below 0.08 but above 0.07, an acceptable value. Above data all suggests good fitting of the model.

4.6. Structural Equation Analysis

Analysis result of the structural model is shown as Table 7, and the result of the model-based hypothesis testing suggests that the investigation data basically supports hypotheses of the structural model. Namely, all hypotheses were established, and the fitting between the model and data were good.

1) Enterprise product defect significantly affects customer relationship crisis (β = 0.294); and service error affects customer relationship crisis significantly (β = 0.607). It is suggested that any element of product defect or service error might change customer’s positive attitude towards the enterprise, and might possibly trigger customer relationship crisis.

2) Psychological contract violation is positively and significantly correlated with product defect (β = 0.274), service error (β = 0.441) and customer relationship crisis. Occurrence of psychological contract violation enhances a customer’s negative emotions towards the enterprise, reduces the customer’s trust and cognition of the enterprise, and might even evolve into an accident. Psychological

Table 7. Hypothesis verification.

contract violation plays a significant intermediate role between product defect/service error and customer relationship crisis (β = 0.157).

3) Trust crisis factor of a transaction contract poses significant impacts on emotional crisis factor of a relational contract (β = 0.167), while the latter also significantly affects the former (β = 0.346). Interaction between trust crisis and emotional crisis of psychological contract violation intensifies customer’s dissatisfaction, results in more serious negative reactions, and further aggravates customer relationship crisis.

5. Conclusions

A structural equation model is utilized in the paper to demonstrate significant impacts of psychological contract violation on customer relationship crisis. Product defect and service error are roots of customer relationship crisis, but what really results in customer relationship crisis is customer’s negative emotional reaction caused by psychological contract violation and the consequent reduction of trust. The conclusion promotes our understanding that a psychological contract between a tourism enterprise and a customer is an important factor for maintenance of customer relationship. Therefore, after occurrence of product defect or service error, customer relationship crisis can be avoided if relevant parties pay sufficient attention and take corresponding measures to fix emotional and trust relations with the customer.

Firstly, service result of a tourism enterprise inevitably affects customer relationship. Facing with product defect or service error, a customer will certainly be discontented and complain the due to benefit loss. What the customer wants at first is compensation. At this moment, as long as the tourism enterprise takes measures immediately, respects the customer’s demand and provides psychological or material compensation for customer’s benefit loss, the customer relationship can be maintained. While improving service environment and quality, a tourism enterprise shall spend more efforts in upgrading service staff’s expertise, enhancing their service communication behaviors and standardization of professional skills, boosting their confidence and therefore reducing service error. It is the root for maintenance of customer relationship.

Secondly, psychological contract violation is the major factor causing customer relationship crisis. Neglecting psychological contract in a transaction results in reduction of customer’s enterprise-oriented emotion and confidence. Therefore, trust is the formation foundation of customer relationship, and a customer will only understand and forgive an enterprise’s product defect or service error upon the precondition of fully trusting the enterprise. Trust-based customer relationship is an important footstone for long-term and sustainable development of an enterprise. A customer can easily perceive evaluation service and employee’s behavior. While receiving services, a customer perceives whether a service employee is sincere and delivers services with care and respect. Only when a service employee stands on a customer’s side, works with emotional input, expresses understating and listens to the customer properly, provides reasonable attribution and explanation, presents the willingness to help the customer, and cares about and emphasizes the customer will the customer’s emotional affiliation to the enterprise and emotional attachment be enhanced, relationships with the customer be relieved and generation of customer relationship crisis be avoided.

Thirdly, trust crisis of transaction contract and emotional crisis of relational contract interact with each other, increasing the possibility of customer relationship crisis. When serving a customer, a tourism enterprise shall value care and respect to the customer, repair, improve and reconstruct the customer’s psychological contract, and make the customer understand that the enterprise’s violation behavior is an unintentional act. When a customer emotionally approves an enterprise and establishes trusts and dependence on the enterprise, customer relationship crisis can be prevented.

From the perspective of psychological contract, the research explores customer relationship in tourism enterprises, further promotes theoretical study on customer relationship management, and makes beneficial supplementation to pervious researches, but there are some limitations. Firstly, psychological contract violation is customer’s subjective perception, which is undoubtedly affected by individual differences, reference group and other variables. These factors shall be considered in future researches. Secondly, customer relationship crisis is a progressive course, there are different crisis degrees, and conversion of crisis degrees caused by any certain conditions requires in-depth and thorough study.

Conflicts of Interest

The authors declare no conflicts of interest regarding the publication of this paper.

Cite this paper
Xu, Q. and Wu, K. (2018) Service Failure, Psychological Contract Violation and Formation of Customer Relationship Crisis—An Empirical Research of the OCT Theme Park. Journal of Service Science and Management, 11, 466-478. doi: 10.4236/jssm.2018.114032.
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