External failure costs tend to be particularly high for service organizations.

Question

Quizplus · Accepted Answer

External failure costs for service organizations can include things like compensation for customer complaints, refunds, legal action, loss of reputation, and more. These costs can be higher for service organizations because their offerings are intangible and the quality of the service is heavily dependent on the interaction between the customer and the service provider. If something goes wrong in that interaction, the costs of repairing the damage can be significant.

External Failure Costs Tend to Be Particularly High for Service