Although close customer–company interactions are essential sources of value creation, their effect on well-being, depending on fair treatment by the service employee, has not been established. This research identifies two customer-centric, proactive, market orientation strategies that might accelerate the positive effects of fairness perceptions in service encounters.
Two experimental studies investigate if customer participation and price savings can boost the positive effects of fairness or compensate for the negative influence of unfairness, through customers’ word of mouth, on hedonic well-being.
The results show that high levels of customer participation can boost customers’ well-being, but monetary compensation in the form of price savings cannot offset low fairness experienced during the service encounter. Service firms benefit directly from increased word of mouth when customers perceive high fairness; customers benefit indirectly from increased hedonic well-being.
This research contributes to academic debates about the extent to which transformative services contribute to consumer well-being. By linking service fairness perceptions to value co-creation and well-being, it also advances research on power distribution in service ecosystems. Finally, this study contributes to services literature by identifying customer participation as a feasible way to increase consumers’ hedonic well-being.
Introduction
Service interactions are part of consumers' everyday experiences, with the potential to significantly influence individual hedonic well-being, positively or negatively. As is true of any human interaction, service encounters are prone to inconsistencies, and whether they take place online or offline, they create opportunities for value co-creation. Yet they can also elicit intense challenges linked to collaborative value creation processes (Robinson et al., 2022). According to the logic of transformative service research (TSR) (Anderson et al., 2013), touchpoint experiences influence not just whether the consumer recommends the company to others but also the consumers’ own well-being (Finsterwalder and Kuppelwieser, 2020). Thus, services hold the promise of shaping positive consumer outcomes, such as satisfaction or well-being, but also create notable risks of consumer vulnerability (e.g. lack of power, expertise and agency). The latter is particularly pertinent when close interactions between customers and companies lead to customers’ perceptions of unfairness, as noted by Schaarschmidt et al. (2021), which can result from unfair or impolite behaviors by service employees. In response to the calls of Rahman (2021) and Russell-Bennett et al. (2019) for more empirical research on transformative services at the individual level, this paper offers an empirical assessment of service interactions in which customers experience feelings of unfairness (e.g. due to unfair or impolite treatment) to determine the effects on their word-of-mouth (WOM) intentions and hedonic well-being. With a specific focus on micro-level service entities (i.e. consumer–employee encounters), we explore two consumer-centric compensation strategies that service firms might adopt to prompt WOM intentions and enhance consumers’ hedonic well-being. That is, combining both financial and psychological incentives in compensation efforts should exert the most substantial impact on consumers’ behavioral intentions following unfavorable service experiences (Azizi et al., 2022). Using a theoretical categorization established by Azizi et al. (2022), we include customer participation as a non-monetary, psychological strategy and price savings as a financial, tangible strategy. Both incentives should enhance positive service experiences and mitigate negative ones, in ways that contribute to value co-creation and hedonic well-being.
Participation requires consumers to invest time and skill (Stokburger-Sauer et al., 2016); it also can spark hedonic experiences of fun, enjoyment and spontaneous delight (Zare et al., 2019). Even if some degree of participation is inevitable in service encounters, the extent or degree to which customers participate should affect their evaluations of the service encounters and companies (Haumann et al., 2015). In identifying consumer proactivity for well-being as a key priority for service research, Ostrom et al. (2021) ask, “How can dignity and fairness be designed into service processes customers engage in for personal health and welfare?” Drawing on this question, our first research objective is to investigate whether higher levels of participation help boost hedonic well-being through overall fairness perceptions and WOM.
Monetary or financial compensation, in the form of price savings, represents a popular means to restore justice to consumers who suffer unfavorable service outcomes, including unfairness (Azizi et al., 2022). It demonstrates to customers that the company acknowledges its unfair behavior and aims to transform negative outcomes into positive ones, which could prompt even greater customer loyalty (Vázquez-Casielles et al., 2012). Therefore, as our second research objective, we examine whether monetary compensation in the form of price savings (i.e. a price lower than the initial offer or than a similar service alternative) can offset customers’ perceptions of unfairness in service encounters and thereby restore positive WOM and hedonic well-being.
To address these research goals, we address customer participation and its influence on consumer well-being, as conceptualized in recent research (Ostrom et al., 2021; Rahman, 2021). With study 1, we investigate if and how fair (vs unfair) service encounters might exert a conditional, indirect effect on hedonic well-being, through WOM. In study 2, we also test whether price savings might offset consumers’ perceptions of the unfair service encounter. For the field of TSR, this study clarifies how perceptions of fairness in service experiences relate to both WOM intentions and hedonic well-being. We further expand service management research pertaining to the interplay between customer participation and fairness perceptions (Schaarschmidt et al., 2021).
Conceptual framework and hypotheses
Overview
Consumer well-being is a central theme for TSR. It can be investigated at a micro, meso or macro level; the current research concentrates on the micro level to address the consumption experiences of individual consumers. In addition, subjective well-being can be investigated using either a eudaimonic, other-oriented approach (e.g. harmony, power and respect; Anderson et al., 2013) or a hedonic, self-oriented approach (e.g. dimensions of happiness and enjoyment; Anderson et al., 2013; Huta and Ryan, 2010), with distinct emphases on cognitive (being satisfied), affective (feeling good) or goal-oriented (seeking pleasure) aspects (Ryan and Deci, 2001). In this research, we adopt the latter and analyze well-being achieved through a quest for pleasurable goals (e.g. fun, enjoyment, excitement) and reduction of unpleasant experiences (e.g. being treated unfairly). For such assessments, we also consider “a relatively narrow window in time, such as the immediate moment, a day, or a week” (Huta, 2020, p. 512).
To better understand (un)fairness perceptions in service encounters, according to a TSR framework, we investigate the effects of fairness on WOM, as a traditional service outcome and a situational state of hedonic well-being, as a TSR-linked service outcome. Furthermore, we include customer participation and price savings as consumer-centric strategies, designed to accelerate favorable or compensate for unfavorable service experiences. Conceptually, we propose a chain of effects: Fair (vs unfair) service encounters affect WOM intentions, as a direct consequence and then those intentions affect hedonic well-being. This mediation also should be moderated by different levels of customer participation and price savings (see Figure 1).
The flowchart shows three rectangles arranged horizontally across the top and one larger rectangle beneath the left and center rectangles. On the far left, the first rectangle is labeled “Service Experience” and contains an oval labeled “Fair versus Unfair Service (Post-) Encounter”. A right-pointing arrow runs from this rectangle to the center rectangle labeled “Traditional Service Research Performance Indicator”, which contains an oval labeled “Word of Mouth”. A right-pointing arrow continues from this center rectangle to the third rectangle on the right labeled “Transformative Service Research Outcome”, which contains an oval labeled “Hedonic Well-being (Fun, Enjoyment, Excitement)”. Below the left and center rectangles, a short upward arrow labeled “H 1, H 2” points toward the lower edge of the center rectangle right arrow. Beneath this arrow, a larger rectangle is labeled “Acceleration or Compensation Strategy” and contains two ovals: the upper one labeled “Customer Participation” and the lower one labeled “Price Saving”.Conceptual framework
The flowchart shows three rectangles arranged horizontally across the top and one larger rectangle beneath the left and center rectangles. On the far left, the first rectangle is labeled “Service Experience” and contains an oval labeled “Fair versus Unfair Service (Post-) Encounter”. A right-pointing arrow runs from this rectangle to the center rectangle labeled “Traditional Service Research Performance Indicator”, which contains an oval labeled “Word of Mouth”. A right-pointing arrow continues from this center rectangle to the third rectangle on the right labeled “Transformative Service Research Outcome”, which contains an oval labeled “Hedonic Well-being (Fun, Enjoyment, Excitement)”. Below the left and center rectangles, a short upward arrow labeled “H 1, H 2” points toward the lower edge of the center rectangle right arrow. Beneath this arrow, a larger rectangle is labeled “Acceleration or Compensation Strategy” and contains two ovals: the upper one labeled “Customer Participation” and the lower one labeled “Price Saving”.Conceptual framework
Customer participation
In proposing a link between customer cocreation and well-being, Anderson and Ostrom (2015) adopt a TSR perspective and conceive of well-being as “the realized and experienced value by the actor which results from co-creative activities” (Finsterwalder and Kuppelwieser, 2020, p. 2). Value co-creation practices empower people to enhance their own well-being by accessing resources, while also enhancing the well-being of the service ecosystem overall (Pham et al., 2019). In that customer participation reflects the degree to which the customer is involved in producing the service (Dabholkar, 2015), it requires them to provide or share information or make suggestions for service creation and production (Chang, 2019). Greater participation also tends to prompt positive customer responses (Schaarschmidt et al., 2021), such that customer participation even might represent a “strategic imperative that leads to sustainable competitive advantage” (Roy et al., 2018, p. 293). In the TSR logic, it should contribute to sustainable service creation too.
According to attribution theory, applied to understand customers’ assessments of their participation behavior, people judge incidents on the basis of their causal explanations of success and failure (Heider, 1958; Kelley and Michela, 1980; Weiner, 1972). Therefore, the reason for a service’s success or failure (i.e. perception of causality) influences how customers respond, including their decision-making and future behaviors (i.e. their perception of causality; Martinko and Thomson, 1998). Customer participation, as a form of value co-creation, also relates closely to fairness perceptions (Chandni and Rahman, 2020), and fairness perceptions positively affect WOM (Le, 2024). Insufficient fairness implies that staff members are not paying attention to customers or failing to treat them with respect and courtesy, which has detrimental effects on well-being. As Xie et al. (2020) showcase, involving consumers in service processes leads to more effective communication of their needs to employees and thus to an improved service experience in which consumers are more likely to reach their objectives. Accomplishing their goals helps accomplish people’s desire for self-fulfillment, which boosts their overall well-being. That is, when customers participate to a high degree in an unfair service encounter, their WOM should be greater than if they participate to a low degree, because these consumers attribute the outcomes partially to themselves. Encouraging participation, as a customer-centric strategy, thus might accelerate the positive outcomes of fairness, such that it improves WOM and enhances hedonic well-being.
Customer participation moderates the mediating effect of WOM on the influence of fairness perceptions on hedonic well-being, such that high levels of participation accelerate the mediating effect.
Price savings
Financial incentives can drive customers to engage in service interactions (Zare et al., 2019) by ensuring economic rewards or financial benefits linked to a particular exchange. Price saving is one form of economic reward and can be achieved by replacing some expensive resources provided by non-consumer partners with lower cost resources provided by consumers (Homburg et al., 2019), such as when people invest time and effort searching the Internet for the best vacation deal instead of paying a travel agent to provide that service. Such consumers expect to get a better deal online, as a reward for spending hours searching, which aligns with social exchange theory (Adams, 1965; Homans, 1958). A social exchange can be any voluntary action, of an unspecified nature, that extends beyond basic role obligations and implies a personal commitment to the partner (Bettencourt, 1997). Furthermore, financial rewards are a common compensation strategy that has positive effects on WOM. Customers will accept a certain, moderate level of risk regarding service quality, as might be induced by negative online reviews, in return for financial advantages (Han et al., 2024). The extent to which customers choose to maintain a social exchange relationship with a company in turn drives their willingness to engage in WOM (Su et al., 2016) and affects their sense of well-being. Accordingly, we propose that fairness perceptions and price savings interact to influence WOM and hedonic well-being. Specifically, price savings should enhance WOM even if customers perceive the outcome to be disproportional to the resources they invested through their participation in the service process.
Price savings moderates the mediating effect of WOM on the influence of fairness on hedonic well-being, such that greater price savings accelerate the mediating effect.
Study overview
For this study, we consider two service settings in the leisure industry (health club and travel agency), whose primary goal is to fulfill consumers’ hedonic and experiential goals, such as seeking pleasure (Ryan and Deci, 2001), in direct relation to their hedonic well-being. These settings also feature close company–consumer interactions. At the health club in study 1, interactions are both informal (e.g. juice bar, reception) and more formal (e.g. training and nutrition advice, gym classes). We gathered data from real-life customers of this health club, which is located in a medium-sized city in Austria and is nearly 2,000 square meters in size. It offers many facilities, including personal training, massage, wellness and spa services, and childcare, as well as more than 60 courses (e.g. yoga, Pilates, body shaping, spinning, aerobics), included in the membership fee. This gender-neutral setting effectively enables us to observe consumers’ participation, WOM and well-being outcomes. Similar to most health clubs, it offers different membership options, as well as customized individual programs. For the lab experiment in study 2, we referred to a travel agency, describing a small company that requires a high level of employee–customer interaction (Homburg et al., 2005). Such participation is common in a vacation booking context (Grissemann and Stokburger-Sauer, 2012).
Study 1: customer participation as a strategy to boost well-being
Experimental design and stimuli
We used a 2 (fairness: low vs high) 2 (customer participation: low vs high) between-subjects design with a scenario-based technique to test H1. Participants were randomly assigned to one condition and read a scenario about membership in a health club, then responded to questions. On the introductory page of the online questionnaire, we informed respondents about the length of the questionnaire, that participation was voluntary, and that all collected information would be anonymous and used for scientific purposes only. Respondents also received a data protection declaration that noted the anonymity of all collected information and data storage protections. By clicking “Next,” respondents confirmed they had read and understood the data protection declaration and agreed to take part in the study.
We manipulated customer participation at two levels (low vs high) and fairness at two levels (low vs high). For customer participation, the manipulations reflect the notion that participating customers act as partial employees (Büttgen et al., 2012); perform self-generated activities, such as accessing their personal knowledge or skills (Mccoll-Kennedy and Sparks, 2003); are actively involved in the service development; and bring in their own ideas and wishes during service participation (Stokburger-Sauer et al., 2016). The low customer participation condition thus describes participants’ minimal involvement in developing the service (i.e. training), whereas the high customer participation condition indicates that respondents introduce their own suggestions and develop training plans. The second factor, fairness, reflects the fairness the customer perceives during the service encounter (Mattila, 2001). We adopt a holistic understanding of the fairness concept, such that customers’ overall fairness assessment of the service and post-service encounters should determine their service evaluation. This includes, for example, being treated with courtesy, being advised fairly, being treated competently (Scholl-Grissemann et al., 2020). The low fairness condition describes minimal support by employees during the participation process; the high fairness condition indicates sufficient support of the customer and good interpersonal treatment (see Appendix 1 for the scenarios).
Pretest
We collected data from 53 respondents, assigned to the different conditions (47.2% women; mean age = 25.94 years) in a within-subjects design. We analyzed the effectiveness of the manipulation of the scenarios using analysis of variance (ANOVA).
To confirm that the manipulation of customer participation was successful, we used four items adapted from Stokburger-Sauer et al. (2016) to capture respondents’ evaluations of their participation in the development of the service (“I was able to bring in many of my ideas for the design of my training and nutrition plan,” “I was able to adapt my training and nutrition plan according to my needs and wants,” “I have expressed my wishes how to design my training and nutrition plan,” and “I have been actively involved in arranging my training [equipment, personal training]”; α = 0.92). To check the successful manipulation of fairness, we used four items adapted from Blodgett et al. (1997) and Voorhees and Brady (2005) that measured respondents’ perceptions of being treated fairly during the encounter (“I was treated fairly during the interaction with the service employee/s,” “The advising process was fair,” “The service employees listened carefully to what I had to say,” and “The service employee/s were competent and treated me with courtesy”; α = 0.93). All manipulation check items were measured on seven-point, agree–disagree Likert scales (1 = “strongly disagree,” 7 = “strongly agree”).
We found a significant effect of customer participation on the manipulation check items (F (1, 104) = 88.13, p < 0.001). As expected, participants evaluated the high-participation condition as a process in which they invested more of their resources (Mhigh = 5.47), compared with the low-participation condition (Mlow = 2.91). We also found a significant effect of fairness on the manipulation check items (F (1, 104) = 74.77, p < 0.001), such that respondents perceived the encounter as fairer in the high-fairness condition (Mhigh = 5.46) than in the low-fairness condition (Mlow = 2.95). Thus, both manipulations were successful. Ratings for the realism (M = 5.78) and comprehensibility (M = 4.87) of the scenarios were high.
Sample and measures
The data came from 122 customers of a family-owned health club (41.0% women; mean age = 30.97 years), whom we recruited from the company’s mailing list. We sent the link to the study once (without reminders) and sought a sample size of around 120 people, reflecting both practical and statistical considerations. Although the participating service provider did not share its total number of members, the club is active on Facebook, where it attracts around 5,000 followers. At 120 responses, we obtain an acceptable response rate of approximately 2.4%. In addition, a sample size of around 30 people per group is sufficiently large to obtain reasonable statistical power to detect large effects size, according to Cohen’s d units (independent samples t-test with 90% power to detect an anticipated large effect size of d = 0.8 at the two-tailed significance criterion of 0.5%). The instructions asked the respondents to read the scenario carefully and complete a structured questionnaire, which included the manipulation check items and realism and comprehensibility measures (Jha et al., 2013), as well as the questions pertaining to WOM and hedonic well-being and some demographic items.
We used three items to measure WOM and four items for hedonic well-being (situational-level assessment), with items adapted from prior literature (Table 1). The construct items used seven-point, agree–disagree Likert scales (1 = “strongly disagree,” 7 = “strongly agree”). After checking for the reliability and internal consistency of each factor, we combined the items by calculating the mean scores. As covariates, we used gender (0 = male, 1 = female), age and average monthly expenses at the health club (M = 51.72, SD = 23.34).
Construct measurements and reliability tests
| Study 1 | Study 2 | |||||||
|---|---|---|---|---|---|---|---|---|
| EFA | EFA | |||||||
| Constructs and items | FL | α | AVE | FL | Α | AVE | ||
| Word of mouth (Study 1/2) (adapted from Harrison-Walker, 2001; Maxham III and Netemeyer, 2002) | M = 3.77 | 0.92 | 0.79 | M = 4.53 | 0.98 | 0.96 | ||
| SD = 1.89 | SD = 2.32 | |||||||
| I would recommend this [health club/travel agency] to my friends and relatives | 0.96 | 0.98 | ||||||
| I would speak positively about this [health club/travel agency] | 0.87 | 0.97 | ||||||
| I would encourage others to [train in this health club/book their holiday trips on this travel agency] | 0.84 | 0.98 | ||||||
| Hedonic well-being (Study 1/2) (adapted from Chen et al., 2023; Huta, 2020) | M = 4.87 | 0.89 | M = 4.19 | 0.98 | 0.93 | |||
| SD = 1.67 | SD = 2.04 | |||||||
| I have felt enjoyment | 0.75 | 0.97 | ||||||
| I have felt fun | 0.92 | 0.97 | ||||||
| I have felt interest | 0.93 | 0.93 | ||||||
| I have felt joy | 0.87 | 0.98 | ||||||
| I have felt pleasure | 0.97 | |||||||
Note(s): EFA = exploratory factor analysis, FL = factor loadings, α = Cronbach’s alpha, AVE = average variance extracted. All factor loadings are significant at p < 0.001
Source(s): Table created by authors
Manipulation checks
We checked the manipulations with the items from the pretest, plus one additional item for participation (“I was able to design my training and nutrition plan together with a trainer”). Respondents had to complete all the manipulation checks (presented in random order) after reading the scenario and before answering the WOM and hedonic well-being questions. We again confirmed the effectiveness of both factors. The ANOVA revealed that customer participation (F (1, 120) = 54.59, p < 0.001) was perceived as higher in the high-participation condition (Mhigh = 5.28) than in the low-participation condition (Mlow = 3.01). The same was true for fairness (F (1, 120) = 52.97, p < 0.001; Mhigh = 5.76; Mlow = 3.44). Ratings of the realism (M = 5.00) and comprehensibility (M = 5.93) of the scenarios also were high.
Results
Table 2 presents the results of the regression analysis, for which we used a bootstrapping technique implemented in the PROCESS macro (Model 7; k = 10,000; Hayes, 2018), performed with the covariates, fairness as the independent variable, customer participation as the moderator, WOM as the mediator and hedonic well-being as the dependent variable. To determine if WOM mediates the relationship between fairness and hedonic well-being when customer participation is high, we must establish whether the magnitude of the conditional indirect effect of fairness (low vs high) on hedonic well-being, through WOM, differs across the two levels of customer participation (low vs high). The results indicate a significant indirect effect of fairness on hedonic well-being at high levels of customer participation (=0.58, Boot SE = 0.20, [CI95%]: 0.21, 0.99) but not at low levels (=0.02, Boot SE = 0.21, [CI95%]: −0.39, 0.45). The difference between the conditional indirect effects is significant (=0.57, Boot SE = 0.28, [CI95%]: 0.01, 1.12). That is, when consumers participate in the service development, reflecting on and sharing their positive experiences and WOM with others adds to their hedonic well-being, as long as the company treats them well during the service encounter.
Moderated mediation model (study 1)
| B | SE | t | |
|---|---|---|---|
| WOM (mediator variable model) | |||
| Constant | 3.25*** | 0.69 | 4.73 |
| Fairness | 0.04 | 0.43 | 0.09 |
| CP | 1.19** | 0.41 | 2.89 |
| Fairness × CP | 1.19° | 0.62 | 1.93 |
| Covariates | |||
| Sex | −0.51 | 0.32 | −1.59 |
| Age | 0.00 | 0.01 | 0.35 |
| Av. expenses | 0.01 | 0.01 | 0.93 |
| R2 | 0.26 | ||
| F (df) | 6.45(6)*** | ||
| Hedonic well-being (dependent variable model) | |||
| Constant | 4.00*** | 0.59 | 6.77 |
| Fairness | 0.02 | 0.26 | 0.08 |
| WOM | 0.48*** | 0.07 | 7.09 |
| Covariates | |||
| Sex | −0.34 | 0.26 | −1.31 |
| Age | 0.02 | 0.01 | 1.47 |
| Av. expenses | −0.02*** | 0.01 | −2.94 |
| R2 | 0.36 | ||
| F (df) | 13.13(5)*** | ||
Note(s): n = 122; WOM = word of mouth; CP = customer participation
°p < 0.10. *p < 0.05. **p < 0.01. ***p < 0.001
Source(s): Table created by authors
Study 2: price saving as a strategy to boost well-being
Experimental design and development of stimuli
To test H2, we used a 4 (fairness: encounter low/post-encounter low vs encounter high/post-encounter low vs encounter low/post-encounter high vs encounter high/post-encounter high) 2 (price saving: absent vs present) between-subjects design, with a scenario-based technique in an experimental setting. We extended the manipulation of fairness for this study, because price savings is strongly associated with evaluations that take place both during and after the encounter (Lusch et al., 1992). Participants indicated their consent in response to the data protection declaration, as described in study 1. Then they read a scenario about booking a vacation trip online and responded to the questions. As in study 1, we manipulated fairness according to the interpersonal treatment exhibited by the employee during the service encounter (Mattila, 2001); for post-encounter fairness, we referred to fairness perceptions after the interaction had ended (Blodgett et al., 1997). Thus, the low post-encounter fairness condition describes an outcome that is disproportional to the customer’s own contributions, whereas high post-encounter fairness implies that the customer received outcomes proportional to their effort. We specified price savings as monetary advantages associated with a specific exchange outcome (Lusch et al., 1992). In the absent price savings condition, participants did not experience any monetary advantage; in the present price savings condition, they received a monetary advantage (see Appendix 2 for the scenarios).
Pretest
We collected data from 245 respondents who were randomly assigned to the eight conditions (50.6% women; mean age = 34.30 years) in a between-subjects design. We analyzed the effectiveness of the manipulation of the scenarios using ANOVA.
The manipulation check for fairness during the encounter included the four items detailed in the pretest for study 1 (α = 0.98). We used two items to check the manipulation of post-encounter fairness (“The outcome in relation to the effort involved for arranging my trip was right,” and “The outcome in relation to the effort involved for arranging my trip was fair”; α = 0.97), adapted from Voorhees and Brady (2005). Items specifically derived for this study context provided the check of the manipulation of price savings (“The price of the individual travel arrangement was lower than comparable offers from other travel agencies,” and “The price of the individual travel arrangement is comparable to similar offers from other travel agencies” [R]; α = 0.95). All the manipulation checks used seven-point, agree–disagree Likert scales (1 = “strongly disagree,” 7 = “strongly agree”).
As expected, fairness exerted a significant effect (F (1, 243) = 1530.65, p < 0.001). Participants evaluated the high fairness condition (Mhigh = 6.82) as more just than the low fairness condition (Mlow = 1.77). We also found a significant effect of post-encounter fairness on the manipulation check items (F (1, 243) = 152.88, p < 0.001), such that respondents regarded the effort involved as more appropriate in the high-fairness condition (Mhigh = 6.16) than in the low-fairness condition (Mlow = 2.89). Finally, because the effect of price savings was significant, this manipulation also was successful (F (1, 243) = 2865.89, p < 0.001). Respondents rated the advertised offer as significantly lower-priced in the price savings condition (Mprice saving = 6.61) than in the no price savings condition (Mlow = 1.11). Ratings for the realism (M = 6.87) and comprehensibility (M = 6.70) of the scenarios were high.
Sample and measures
This study was conducted online, using a convenience sample of 340 respondents (48.5% women; mean age = 39.77 years) in a between-subjects design. Reflecting practical and statistical considerations similar to those for study 1, we sought a target sample size of 320 participants. Over three weeks, we recruited respondents through an actual Facebook group created for the purpose of this study, which included an invitation to participate and a link to the online questionnaire. A sample size of approximately 40 participants per group is sufficient to detect an anticipated large effect size of d = 0.8 at the two-tailed significance criterion of 0.5% in terms of Cohen’s d units, assuming an independent samples t-test with 90% power. We instructed all respondents to read the scenario carefully and imagine themselves in it. Thereafter, they completed the structured questionnaire with the manipulation check items and checks for realism and comprehensibility (Jha et al., 2013). Finally, they responded to questions about WOM, hedonic well-being and demographics.
We used the three items from study 1 to measure WOM. For hedonic well-being, we included five items (see Table 1), gauged on seven-point, agree–disagree Likert scales (1 = “strongly disagree,” 7 = “strongly agree”). After checking for reliability and the internal consistency of the factors, we combined the items by calculating mean scores. As covariates, we used gender (0 = male, 1 = female), age, and average yearly holiday expenses (M = 1198.34, SD = 476.70). Fairness is multicategorical in this study (fairness: 0 = low encounter fairness/low post-encounter fairness; 1 = high encounter fairness/low post-encounter fairness; 2 = low encounter fairness/high post-encounter fairness, 3 = high encounter fairness/high post-encounter fairness), so we relied on simple effect contrast coding to compare the effects across various fairness levels.
Manipulation checks
We checked the effective manipulation of all factors—encounter fairness, post-encounter fairness and price saving—using the items from the pretest. The manipulation check items appeared in random manner, after the scenarios but before any other questions. The ANOVA results supported the effective manipulation of all factors, such that fairness (F (1, 338) = 4618.41, p < 0.001) was perceived as higher in the high-fairness condition (Mhigh = 6.92) than in the low-fairness condition (Mlow = 1.36). Perceptions of post-encounter fairness were higher in the high-fairness condition than in the low-fairness condition (F (1, 338) = 409.72, p < 0.001; Mhigh = 6.33; Mlow = 2.44). The manipulation of price savings also was successful (F (1, 338) = 2897.84, p < 0.001), in that participants identified the price savings condition as such (Msaving = 6.62) compared with the no price savings condition (Mnosaving = 1.16). Ratings for realism (M = 6.77) and comprehensibility (M = 6.82) were again high.
Results
We regressed hedonic well-being using a bootstrapping technique in the PROCESS macro (Model 7; k = 10,000; Hayes, 2018) on the covariates, fairness, WOM and price savings (Table 3). When we consider the indirect effects of the effect-coded variables for fairness (X1 = contrast between fairness conditions 0 and 1; X2 = contrast between conditions 0 and 2; X3 = contrasts between condition 0 and 3) on hedonic well-being through WOM, conditioned by absent versus present price savings, the results demonstrate significant indirect effects. Yet we find no significant differences between absent and present price savings. In detail, when we compare fairness condition 0 (low encounter fairness/low post-encounter fairness) with condition 1 (X1nosaving = −0.59, Boot SE = 0.16, [CI95%]: −0.92, −0.29; X1saving = −0.39, Boot SE = 0.14, [CI95%]: −0.68, −0.09), condition 2 (X2nosaving = 0.94, Boot SE = 0.15, [CI95%]: 0.66, 1.25; X2saving = 0.73, Boot SE = 0.13, [CI95%]: 0.46, 0.99), and condition 3 (X3nosaving = 1.07, Boot SE = 0.13, [CI95%]: 0.83, 1.33; X3saving = 1.20, Boot SE = 0.12, [CI95%]: 0.98, 1.44), price never moderates the indirect effect of fairness on hedonic well-being. These results indicate that WOM significantly mediates the effect of fairness on hedonic well-being, but price savings cannot make up for low fairness, leading us to reject H2. Sharing service experiences with others (WOM) elicits hedonic well-being when the customer is treated fairly during the service encounter, and it depletes hedonic well-being when the customer is treated unfairly. These outcomes occur independent of the price level though.
Moderated mediation model (study 2)
| B | SE | t | |
|---|---|---|---|
| WOM (mediator variable model) | |||
| Constant | 4.59*** | 0.43 | 10.76 |
| Effect 0–1 fairness (X1) | −0.98*** | 0.20 | −4.83 |
| Effect 0–2 fairness (X2) | 1.57*** | 0.20 | 7.71 |
| Effect 0–3 fairness (X3) | 1.77*** | 0.20 | 8.72 |
| Price | 0.56*** | 0.17 | 3.36 |
| X1 × price | 0.34 | 0.28 | 1.19 |
| X2 × price | −0.36 | 0.29 | −1.26 |
| X3 × price | 0.23 | 0.28 | 0.80 |
| Covariates | |||
| Sex | −0.19 | 0.17 | −1.14 |
| Age | −0.01 | 0.01 | −0.90 |
| Av. expenses | 0.00 | 0.00 | 0.71 |
| R2 | 0.59 | ||
| F (df) | 47.45(10)*** | ||
| Hedonic well-being (dependent variable model) | |||
| Constant | 2.16*** | 0.38 | 5.65 |
| Effect 0–1 fairness (X1) | −0.27** | 0.12 | −2.35 |
| Effect 0–2 fairness (X2) | −0.13 | 0.13 | −1.00 |
| Effect 0–3 fairness (X3) | 0.67*** | 0.14 | 4.92 |
| WOM | 0.60*** | 0.04 | 14.46 |
| Covariates | |||
| Sex | −0.01 | 0.13 | −0.05 |
| Age | −0.01* | 0.01 | −2.04 |
| Av. expenses | −0.00° | 0.00 | −1.77 |
| R2 | 0.68 | ||
| F (df) | 100.52(7)*** | ||
Note(s): n = 340; WOM = word of mouth; X1 = contrast effect of fairness conditions 0 and 1, X2 = contrast effect of fairness conditions 0 and 2, and X3 = contrast effect of fairness conditions 0 and 3
°p < 0.10. *p < 0.05. **p < 0.01. ***p < 0.001
Source(s): Table created by authors
Discussion
Close service interactions have many advantages and can contribute to sustainable consumer–company relationships that benefit both the company and consumers. Service effectiveness depends, strongly and directly, on service interactions in which customers actively co-create value (Finsterwalder and Kuppelwieser, 2020). Yet given customers’ potential vulnerability in service encounters (Schaarschmidt et al., 2021), they also bear the risk of failure, such as when they are forced to undergo unfair service encounters. Therefore, this research had two objectives: first, to investigate how higher levels of customer participation shape the relationship between fairness perceptions and hedonic well-being considering WOM as mediating the relationship between fairness perceptions and hedonic well-being (WOM); and second, to examine whether monetary compensation, specifically through price savings, could offset the negative effect of customers’ perceptions of unfairness during service encounters, thereby restoring positive WOM and enhancing hedonic well-being. To determine when and how consumers’ hedonic well-being might be boosted by more fairness, and to contribute to TSR (Ostrom et al., 2021), we investigate two customer-centric strategies that might accelerate the effects of perceptions of fairness in service encounters: customer participation as a form of nonmonetary compensation and price savings as a form of monetary compensation, both of which might affect WOM and consumers’ hedonic well-being. In line with TSR, we go beyond conventional service outcomes to address consumers’ well-being and support goals of improving the well-being of multiple customer and service entities (Rahman, 2021; Xie et al., 2020). By shedding light on unfavorable service experiences, including perceptions of service unfairness that can have detrimental consequences for WOM, we help clarify how resources can be integrated most effectively in service interactions (Hogg, 2024).
In detail and in accordance with a TSR logic, we show that sharing positive service experiences with others through WOM boosts people’s hedonic well-being. These results emphasize the positive effects of customer participation in a fair service encounter on WOM (Schaarschmidt et al., 2021), as well as the importance of co-creation in establishing sustainable services (Kuppelwieser and Finsterwalder, 2016; Ostrom et al., 2021). As we show, fair service encounters enable WOM intentions and hedonic well-being if participation opportunities are high. For low participation levels, no such effects emerge. These findings resonate with Schaarschmidt et al.’s (2023) finding of links among fairness perceptions, customer integration, and WOM in a silent endurance context. These findings lead to implications for both service theory and practice.
Theoretical implications
This research broadens our understanding of how well-being is boosted by fair service encounters and customer participation, in response to Ostrom et al. (2021) call for service designs that enable consumers to take more agency and responsibility for their own well-being. Our empirical studies, conducted in the contexts of a health club and travel services, feature relatively low information asymmetries, as well as pleasure seeking as a central consumption goal. The association of fair services and positive consumer reactions (WOM, hedonic well-being) might be even more relevant in sectors marked by high information asymmetries, such as banking (e.g. bank advisors often have more information than clients when granting a loan), car repair services (e.g. mechanics usually have more technical information about the car than drivers), or elderly care. In such situations and contexts, the positive effect of customers’ perception that the service is fair, on both their WOM and well-being, might be even higher, assuming they have opportunities to participate. For example, in an elderly care context, participation might be expressed by allowing the patient to choose the arm from which blood is taken. This form of participation increases the person’s sense of autonomy and satisfaction with the service (e.g. nursing home), as well as their general well-being.
In contrast with a participation strategy, financial rewards do not offer the power to accelerate the positive effects of fairness or overcome the negative effects of perceived unfairness on WOM and hedonic well-being. As such, our results challenge some existing predictions of the importance of economic rewards for restoring social exchange relationships after unfavorable service outcomes (Han et al., 2024; Schaarschmidt et al., 2023). In these ways, our study theoretically contributes to both TSR and fairness literature in service research (e.g. Schaarschmidt et al., 2023), as well as to the participation and co-creation literature (e.g. Kuppelwieser and Finsterwalder, 2016).
Managerial implications
For service management practitioners who seek to have positive impacts on consumers’ well-being, our findings emphasize the importance of encouraging their participation, because it accelerates well-being achieved through fair service encounters. Unfair policies or procedures (even if unknown by the company) lower consumers’ perceptions of fairness, which has detrimental effects on situational, hedonic well-being. Regardless of whether such low levels of perceived unfairness are known or unknown by service firms, companies need to have their customers participate in service encounters and feel pleasure in doing so.
Service firms might explore new possibilities for involving customers in service creation, beyond some required minimum. However, such options also can run the risk of overburdening customers, with negative effects on company metrics (e.g. customer loyalty). We concur with previous research in predicting some optimal level of customer participation, which companies must pursue (Stokburger-Sauer et al., 2016). Integrating customers into service production also is a strategic management decision (Heinonen and Strandvik, 2018). When it is sufficiently high, customer participation has the potential to increase hedonic well-being, but no such effect arises for low customer participation. Thus, we recommend integrating people by identifying a good level of participation, to make the best use of the effects on consumers’ hedonic well-being.
When offering participation opportunities, service firms also should ensure that the interactions create a sense of fun and enjoyment. Service firms then can capitalize on customer participation by highlighting the outcome as having been co-created with customers. Online travel agencies might finalize the booking process with a line such as, “This is your self-arranged trip.” Coffee shops or burger restaurants that allow customers to mix and match their preferred flavors and ingredients also can emphasize that the final product has been assembled by customers, stating for example, “This is your personalized coffee/burger, created by you.” Even if the service outcome is unsatisfying, a sense that they were engaged in the service production can compensate for consumers’ negative feelings. Merlo et al. (2014) cite the example of MyStarbucksIdea.com, a website that encouraged customers to post ideas about how to enhance the Starbucks experience and note that “whether the ideas are chosen is not as important as the fact that customers are engaged, feel a sense of ownership and have a connection with the brand” (p. 86).
We also acknowledge that insufficient fairness sometimes cannot be avoided, such as in a busy restaurant where people are forced to wait for a table. If busy restaurants provide a bar, where customers can enter into initial interactions with service personnel while waiting, the bartender should acknowledge their presence and involve them in the service delivery, because doing so might help trigger situational, hedonic well-being. In addition, fairness perceptions vary across different customer participation settings, such as when customers take on roles as partial employees (Schaarschmidt et al., 2021) and enjoy the associated advantages. Considering our finding that price savings do not compensate for low fairness levels (i.e. do not affect the mediation of fairness on hedonic well-being through WOM), we also caution that price savings cannot compensate for bad customer service. Fairness is imperative for all service encounters, to establish sustainable service relationships and protect consumers’ hedonic well-being.
Limitations and avenues for further research
This study advances understanding of fairness in service encounters and also raises additional issues for research. First, we use a scenario-based technique to study hedonic well-being outcomes. The fictitious scenarios could affect the external validity of our findings, so a field experiment with actually different degrees of participation (e.g. physiotherapy) could provide further insights into consumers’ well-being. Second, customer participation might not always boost hedonic well-being, particularly if the services are very complex or less hedonic in nature (e.g. insurance services). Furthermore, customer participation might not be voluntary but rather could be a prerequisite of service delivery. It would be interesting to investigate if such forms of customer participation evoke different types of well-being, such as financial well-being in stressful, utilitarian contexts (e.g. insurance, repair services). That is, integrating the service type (hedonic vs functional) as a boundary condition while also accounting for a broader conception of well-being (Rahman, 2021) could be an interesting avenue for research.
Third, our finding that price savings cannot make up for low fairness might reflect timing effects. Previous research indicates that companies can avoid customer churn when their responses to claims are quick (Goudarzi et al., 2013) but not if the company’s response is slow. Research that accounts for time effects could test if immediate reactions might mitigate the negative consequences of low perceived fairness on consumers’ well-being. Fourth, we focus solely on the consumers’ well-being in specific contexts; moving beyond one-directional, individual well-being, researchers might apply a systems perspective to address meso- (e.g. community) and macro-environmental (e.g. societal) well-being (Anderson et al., 2013). In relation to the contexts, the health care sector typically struggles with limited (human) resources, so we call for research that applies our study design to public services, to determine how engaging customers to participate in public health care services might contribute additional resources at virtually no cost, with benefits for the well-being of collectives (Ostrom et al., 2015), even if fairness expectations are not met per se.
Fifth and finally, we call for more research that transfers the notions of the “I designed it myself” effect to service encounters (Franke et al., 2010; Morgan and Townsend, 2022; Turner et al., 2020). We need research insights into how service firms can capitalize on customers’ sense of having participated in service encounters and being partially responsible for the outcomes, particularly if price might have a role. This effect could be particularly important following an unfair service encounter. Our study provides initial insights into this important research area.
This paper forms part of a special section “Service Marketing for Good”, guest edited by Sven Tuzovic, Jörg Finsterwalder and Marjan Aslan.
We thank students of the Master's programme Strategic Management and Kathrin Gabriel for supporting us data collection.
References
Appendix 1 Scenarios in study 1
INTRO:
Imagine you move to a new city and sign up for a 12-month subscription to a health club there. With this subscription you can use the entire training area and you have free access to other facilities, such as health fitness courses and wellness facilities.
Customer participation LOW:
When training, you can only bring in a few of your wishes and ideas. You notice that:
the personal training progress is not discussed,
the exercises are not adapted to your individual performance levels,
no trainer is available to ask questions (e.g. about the correct use of the device),
no personal training and/or nutrition plan can be drawn up together with an exper, and
no personal training hours can be arranged.
Customer participation HIGH:
When training, you can bring in many of your wishes and ideas. You notice that:
the personal training progress is addressed,
the exercises are well adapted to your individual performance levels,
trainers are available to ask questions (e.g. about the correct use of the device),
a personal training and/or nutrition plan can be drawn up together with an expert and
personal training hours can be arranged.
Fairness LOW:
The number of service staff is low, they often seem unhelpful, rude or harsh, and don’t adequately answer your questions. Electrolytes are not included in the subscription and must be paid for separately. The studio does not give room for feedback nor responds to criticism.
Fairness HIGH:
The studio has a reasonable number of service staff, they appear to be extremely helpful, friendly and accommodating and always answer your questions competently. Electrolytes are included in the subscription price. The studio encourages you to give feedback and reacts appropriately to criticism.
Appendix 2 Scenarios in study 2
INTRO:
You want to book a trip. You decide to put the trip together yourself and use an online travel portal. To get an overview, you invest some time and read through a large number of reviews by former hotel guests on the travel portal.
Fairness LOW:
To get more information about the desired travel destination, you call the travel portal’s service hotline which is at cost. After 20 min in the queue, you talk to a stressed employee who gives short standard answers. You do not get any information on re-booking conditions or travel cancellation insurance.
Fairness HIGH:
To get more information about the desired travel destination, you call the travel portal’s free service hotline. After only a few minutes in the queue, you talk to a friendly employee who gives you detailed and competent answers. The employee informs you about re-booking conditions and travel cancellation insurance.
Post-encounter fairness LOW:
Reflecting the holiday planning process, you find that costs of putting together the trip exceed benefits.
Post-encounter fairness HIGH:
Reflecting the holiday planning process, you find that costs and benefits of putting together the trip was balanced.
Price saving ABSENT:
Later you discover a similar offer from a travel agency in the newspaper. The price for this offer is roughly the price for the tailor-made trip.
Price saving PRESENT:
Later you discover a similar offer from a travel agency in the newspaper. The price for this offer is 25% cheaper than your tailor-made trip.
