An Analytical Approach for Allocating Service Recovery Efforts to Reduce Internal Failures

Prior research substantiates the value of compensating customers for poor quality. However, little guidance has been provided for the recovery of errors while service delivery is in progress. The authors provide analytical models inspired by reliability theory to guide managers in allocating their investments in service recovery. Models are constructed to achieve four different objectives and converted to Lagrangian formulations for solution. Example solutions illustrate the contrast in investment allocations.