Remedy or cure for service failure?: Effects of service recovery on customer satisfaction and loyalty

Purpose – This paper aims to contribute to a growing body of service recovery knowledge by examining the relationship between service recovery, consumer satisfaction and loyalty in a commercial banking environment. Design/methodology/approach – A conceptual framework encompassing th\e concepts of service recovery, communication, customer satisfaction and customer loyalty in the commercial bank setting is developed. A questionnaire is designed to focus on issues related to efforts made to investigate causes of service failure and to develop recovery strategies that meet customer expectations of how their banks should handle such problems. Findings – Results show that communication had a significant relationship with service recovery and that higher levels of redress independently increase positive consumer responses. The findings also show that the interaction of employee responsiveness and courtesy can also have a positive impact on consumer evaluations. Satisfaction was highest and negative word-of-mouth intentions lowest only under conditions of high responsiveness and courtesy. Research limitations/implications – Service recovery is process-oriented, and does not assess whether the reported problem that led to the actual complaint has been resolved. This aspect of the study opens a number of directions for future research with the goal of increasing the still limited understanding of service recovery issues in commercial banks. To achieve an in-depth view, a more comprehensive qualitative study that pursues the same research questions may be appropriate. Practical implications – An implication is that, when managing complaints related to customer dissatisfaction, the approaches undertaken by service quality leaders should aim to provide just resolutions/fairness in service recovery. This study also provides insight into a company’s customer relationship management practices. However, in order to encourage customers to complain directly, a company, if complained to, needs to enhance the perception of a possible outcome. Originality/value – A conceptual framework is developed and used to investigate the relationship between service recovery, consumer satisfaction and loyalty.