Final answer:
Internal failure costs are usually higher for service organizations with high customer contact because service failures are more visible and require immediate action to rectify.
Step-by-step explanation:
Internal failure costs tend to be higher, not lower, for service organizations with high customer contact. This is because such organizations are very reliant on human interactions, and any failure in service delivery can require significant effort and cost to rectify. High levels of customer contact mean there are more opportunities for service failure, and such failures can be immediately visible to the customer. This necessitates prompt and often costly remedies, whether through service recovery actions or compensations.