A Rejection-Based Model of Partial Service Termination and its Impact on Unprofitable Customers

Abstract

This research examines partial service termination (PST) as a strategy that allows companies to deliberately cease providing unprofitable customers with certain services while maintaining relationships with those customers. Through a preliminary qualitative study, a quasi-experiment, and two scenario-based experiments, this research contributes to the intentional service failures literature by demonstrating negative customer reactions to PST. First, the results showed that PST increases the probability of customers terminating their other contracts by 2.14 times while increasing their propensity to spread negative word-of-mouth (nWOM). Second, using belongingness theory, we identify the key underlying psychological process behind PST: customers interpret PST as a threat to their need to belong in relationships with companies, which is reflected in their feelings of rejection and anger. Third, relationship breadth and three recovery tactics (i.e., monetary compensation, explanations, and support in finding alternatives) were identified as contingent variables that buffer the negative consequences of PST. Customers with high relationship breadth are less likely to terminate other contracts and bad-mouth following PST. This is likely because high relationship breadth reduces perceived rejection following PST. Furthermore, a combination of monetary compensation, explanations, and support in finding alternatives represents the most efficient recovery approach to reduce anger.

Graphical Abstract

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