Does service innovation reduce customer defection intentions among disappointed customers? A latent growth modeling approach in the hotel sector

Abstract

Despite the importance of service innovation research, it remains unclear how service innovation paradoxically induces customer defections during service failures. Using a three time-lag interval design, our findings show that customers' negative responses to hotel betrayals outweigh their positive responses to service innovations. Thus, we demonstrate that service innovation does not always positively impact organizational performance. Similar outcomes arise when examining the insignificance of static online reviews and review change rates. We find that while customers experiencing hotel service failures are likelier to end their relationships with said hotels as their negative perceptions increase, their experiences are unaffected by the rate at which the hotel implements service innovations. Finally, online reviews directly and indirectly affect defection intentions in service failure contexts, especially when time is a factor.