Prosocial Compensation Following a Service Failure: Fulfilling an Organization's Ethical and Philanthropic Responsibilities.

Prosocial compensation (PC) is a corporate social responsibility (CSR) practice that involves donating money to a charitable cause on behalf of customers as a means to compensate them for their loss after a service failure. In order to determine the efectiveness of PC, we carried out three experiments while also comparing its efectiveness within private and public settings. Experiment 1 focused on the signaling efects of communicating the promise to ofer PC to potential customers in the event of service failure. Results show that, in both private and public settings, PC has positive efects on corporate image, credibility, and word-of-mouth intent. More signifcantly, PC improved one’s CSR image, whereas more tangible compensation, such as a gift voucher, did not. Experiments 2A and 2B focused on the efects of ofering PC after a service failure on perceptions of justice. Results show that PC contributes to perceived distributive justice, procedural justice, and post-recovery satisfaction in both private and public settings. Our study showed that PC could be a relevant new CSR practice for organizations wanting to enhance theirs CSR image while contributing to fulflling their ethical and philanthropic CSR responsibilities. We discuss the implications of our fndings and ofer several avenues for follow-up research on this initial study on PC.

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