Effect of service transgressions on distant third-party customers: The role of moral identity and moral judgment

Service failure studies have paid little attention to the role of the other customers or bystanders present in a service setting. Using a mixed method approach, the current study examines the effect of visible service transgressions on distant third-party customers in a shared service territory. A netnography study reveals that a distant third-party customer is most affected by service transgressions that are unethical, that is violating the prescriptive norms of social and human behavior, and can lead them to engage in negative e-Word-of-Mouth (eWOM) against the transgressor. To reaffirm these findings, a conceptual model is proposed based on moral identity theory, moral judgment, distrust, and moral reasoning choice to explain the effect of ethical service transgression on distant third-party customers' intentions to engage in negative eWOM and brand avoidance. The study highlights the strategic significance of the other customers in a triadic setting for firms and contributes theoretically to the research on ethical service transgressions, moral identity, and third-party customers.