• Journal of Distribution Research
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• v.17 no.1
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• pp.1-36
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• 2012

Service failure is one of the major reasons for customer defection. As the business environment gets tougher and more competitive, a single service failure might bring about fatal consequences to a service provider or a firm. Sometimes a failure won't end up with an unsatisfied customer's simple complaining but with a wide-spread animosity against the service provider or the firm, leading to a threat to the firm's survival itself in the society. Therefore, we are in need of comprehensive understandings of complainants' attitudes and behaviors toward service failures and firm's recovery efforts. Even though a failure itself couldn't be fixed completely, marketers should repair the mind and heart of unsatisfied customers, which can be regarded as an successful recovery strategy in the end. As the outcome of recovery efforts exerted by service providers or firms, recovery of the relationship between customer and service provider need to put on the top in the recovery goal list. With these motivations, the study investigates how service failure and recovery makes the changes in dynamics of fundamental elements of customer-firm relationship, such as customer affection, customer trust and loyalty intention by comparing two time points, before the service failure and after the recovery, focusing on the effects of recovery satisfaction and the failure severity. We adopted La & Choi (2012)'s framework for development of the research model that was based on the previous research stream like Yim et al. (2008) and Thomson et al. (2005). The pivotal background theories of the model are mainly from relationship marketing and social relationships of social psychology. For example, Love, Emotional attachment, Intimacy, and Equity theories regarding human relationships were reviewed. As the results, when recovery satisfaction is high, customer affection and customer trust that were established before the service failure are carried over to the future after the recovery. However, when recovery satisfaction is low, customer-firm relationship that had already established in the past are not carried over but broken up. Regardless of the degree of recovery satisfaction, once a failure occurs loyalty intention is not carried over to the future and the impact of customer trust on loyalty intention becomes stronger. Such changes imply that customers become more prudent and more risk-aversive than the time prior to service failure. The impact of severity of failure on customer affection and customer trust matters only when recovery satisfaction is low. When recovery satisfaction is high, customer affection and customer trust become severity-proof. Interestingly, regardless of the degree of recovery satisfaction, failure severity has a significant negative influence on loyalty intention. Loyalty intention is the most fragile target when a service failure occurs no matter how severe the failure criticality is. Consequently, the ultimate goal of service recovery should be the restoration of customer-firm relationship and recovery of customer trust should be the primary objective to accomplish for a successful recovery performance. Especially when failure severity is high, service recovery should be perceived highly satisfied by the complainants because failure severity matters more when recovery satisfaction is low. Marketers can implement recovery strategies to enhance emotional appeals as well as fair treatments since the both impacts of affection and trust on loyalty intention are significant. In the case of high severity of failure, recovery efforts should be exerted to overreach customer expectation, designed to directly repair customer trust and elaborately designed in the focus of customer-firm communications during the interactional recovery process to affect customer trust rebuilding indirectly. Because it is a longer and harder way to rebuild customer-firm relationship for high severity cases, low recovery satisfaction cannot guarantee customer retention. To prevent customer defection due to service failure of high severity, unexpected rewards as a recovery will be likely to be useful since those will lead to customer delight or customer gratitude toward the service firm. Based on the results of analyses, theoretical and managerial implications are presented. Limitations and future research ideas are also discussed.