A Report on Customer Response to Service Failure and Recovery

This report delves into the critical aspects of service failure and recovery within the service industry, emphasizing the paramount importance of customer satisfaction and retention. It explores the phenomenon of service failure, often stemming from technical or human errors, and its detrimental impact on customer loyalty and organizational goodwill. The report highlights the necessity of effective service recovery strategies, defined as actions aimed at regaining dissatisfied customers, and examines the intriguing concept of the service recovery paradox, where successfully remedied service failures can lead to higher customer satisfaction and loyalty compared to those who never experienced a failure. Furthermore, it discusses the role of complaint management as a tool for addressing inconsistencies between customer expectations and service delivery, emphasizing the importance of understanding customer reactions to varying problem severities and recovery options. Drawing upon existing literature, the report investigates the theories underpinning service recovery strategies, including distributive justice and the impact of word-of-mouth communication, ultimately underscoring the significance of proactive and customer-centric approaches to mitigate the negative consequences of service failures and foster long-term customer relationships. Desklib provides access to similar assignments to help students study.

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Introduction
Research Background
In the service industry, the consumer satisfaction is considered to be of utmost importance. It
is necessary for the consumer satisfaction and retaining customers for a long-term tenure.
However, there is always a possibility of service failure, due to technical or human error.
These failures in the effective customer delivery result in the customer dissatisfaction. In the
service industry, each and every customer is important for the organization. One dissatisfied
customer will result in ten customers to return back from the organization. It erodes the
goodwill of the organization. Therefore, it can be posited that once a service failure occurs,
the organization requires taking the crucial step of service recovery. The service recovery
refers to the action, aimed at gaining back a dissatisfied customer (Casidy & Shin, 2015). The
service failure and the service recovery encounter are critical moments of truth in a service
organization. When a service failure occurs, the business organization has two options, either
to reinstate the customer satisfaction to reinforce customer loyalty or to ignore the situation
and motivate customer to join a competing business organization. Therefore, it can be stated
that the service failure and the service recovery signify critical moments of truth in the
relationship between the customers and the service providers.
The service recovery encounters provide the customer with the opportunity to strengthen the
bond between the customers and the business organization. Therefore, the service recovery is
a strategic marketing tool, which can provide valuable return to the organization. It results in
increased customer satisfaction and high customer loyalty rate. In the service industry, the
business organizations encounter a very intriguing phenomenon, which is called service
recovery paradox. It I the phenomenon, in which the customers, who have suffered from the
service failures and successfully remedied were more satisfied and loyal, in comparison to the

customers, who have never experienced any failure (Sengupta, Balaji & Krishnan, 2015). It
means that these customers were more likely to be loyal and they remain engaged in
favourable word -of-mouth than the customers, who have never experienced any failure.
Similarly, the service dissatisfaction arises from the inability or unwillingness of the
employees to provide high quality service to the customers. The research also highlights that
it was not thee initial failure, which resulted in the customer dissatisfaction, but the response
of the employee at the service encounter. In this regard, the present research will discuss the
effect of customer delivery on the customer satisfaction. Also, it aims to evaluate the
consumer response for the service recovery strategies.
Problem Definition
The service failure is an aspect of the service industry. The complaint management is
considered as an important tool for the business managers in the service industry so that the
customers can complain about the inconsistency between their service expectations and
demands. However monitoring the service quality is not enough and the business
organizations should focus on understanding. How customers react to the failure in the
service (Nikbin, Iranmanesh, Hyun, Baharun & Kim, 2015). Therefore, it is important to
evaluate the consumer reaction to different types of problem severity and the service recovery
options.
Research Questions
The research questions of the present research can be framed as:
 What are the reactions of the customers to service failure and different service
strategies?

 Does the service recovery paradox is true, and the customers become happier after a
highly satisfied service failure and recovery encounter?
Literature Review
In the perspective of Choi & Choi (2014), the service recovery refers to the actions taken to
address the consumer complaints for a particular service failure. The service recovery is the
process in which the organization takes step to remove the negative perception of the
consumers. The service failure is a situation, when the company is not able to meet the
expectations of the organization. It results in dissatisfied customer, who is motivated to
engage with the competing firms. Therefore, the business organizations should use
appropriate service recovery strategies so that the customer remains engaged with them.
According to McCollough, Berry, & Yadav (2000), the service recovery option is also
important as it can easily spread bad word of mouth. Therefore, it is important for the
organizations to develop service recovery strategies, which can resolve the problems of the
customer and remove the negative attitude from their behaviour. In the present competitive
times, it is also important for the business organizations to build long-term relationships so
that it can maintain their market share.
In the views of Hess, Ganesan & Klein (2003) the service recovery can be defined as the
well-planned, sorted out process, which has the capability in gaining back the satisfaction of
the aggrieved customers. There is a different between the complaint management and the
service recovery approaches as the almost every second customer is reluctant to complain to
the organization, even when they have faced difficulties in gaining the service. In the service
recovery approach, the organization tries to stop customers from complaining for any issues
in the service delivery.

According to Wallin Andreassen (2000) in the service encounter, the service failure
represents a second service encounter in which the customer recognizes a specific problem in
the service delivery or the service provider. If the expectations of the organization are not
met, then the organization provides another set of service, called service recovery option.
Therefore, it can be stated that the service recovery is a technique to achieve the customer
loyalty. The organization should focus on effective service recovery strategies so that it can
achieve the customer loyalty. The service recovery options also allow the customers to
maintain its customer base for a prolonged period. In the service organizations, effective
customer recovery strategies are important to deal with the customers, who have encountered
service encounter. It will also save the cost related to the dissatisfaction of the customers.
However, according to Hess, Ganesan, & Klein (2003), most of the research stated that the
companies should pay enough attention to manage the customer complaints. Moreover, a
large number of consumers are discontented that the company does not handle their
complaints in an efficient manner. It means that the consumer complaints are not properly
handled by the business organizations. The present is service-oriented economy; therefore,
the disregard to the consumer complaint can result in severe consequences for the customers.
There are several short-term and long-term consequences of the consumer dissatisfaction
such as negative word-of-mouth and switch to other consumers. The consumer once lost will
have negative consequences for the overall organization. The overall income for the
acquisition of new customer is higher than the service recovery strategies.
In the views of Sengupta, Balaji & Krishnan (2015) it also reduces the loyal feelings of the
customers towards the organization. The organization should focus on developing a holistic
and positive approach to handle the consumer complaints. The companies should emphasize
on creating positive relationships and they should generate positive communication with the

organization. The primary benefit of the service recovery strategies is preventing the
deflection of the customers towards other competing organizations. The customers, once
deflected are difficult to regain back. It will result in customer retention as gaining new
customers is costlier than retaining the previous ones. The development of a loyal customer
base is beneficial to the company is various ways, as these customer will bring other potential
customers with positive word of mouth.
In the views of Collier, Breazeale & White (2017), there are different theories, which lead to
the development of the service recovery strategies in the organization. It is the responsibility
of the business organizations to develop effective service recovery strategies, which can
recognize the inconvenience that a failure in the service has caused the customers. The
distributive justice refers to the perception of the consumers regarding the complaints. It
encompasses the fundamental of equity, equality and the consistency in the needs when
different resources are exchanged between the consumer and the organization. The
distributing justice identifies the recovery measures which are developed on the consumer
perception of the equity based on the expenditure of the company’s resources and tangible
outcomes of the service encounter. It develops specific outcomes, which the organization or
the service provider can use to recover the mistakes in the past service offering to the
customers. The service providers can provide different offers related to the discounts,
coupons, and refunds.
According to Maxham III & Netemeyer (2002) the decision whether a service failure is
worthy of recovery efforts is based on the treatment of the consumers and the amount of loss
that they have to bear, as a result of the failure in the service delivery. However, the
satisfaction arising from the service recovery action is based on the consumer relationship
with the business organization. If the same amount of recovery is provided, the customers in

a high quality relationship will consider fairness, whereas, the consumer in low quality
relationship will consider lower fairness confirming their negative attitude towards the
organization. The literature has highlighted that the consumers always expect that the
organization will treat their customers in a fair and polite manner. If the same consumer
experience is not provided, the consumers become angry and skeptical in shopping with the
organization again. The group-value model states that the consumers value their relationship
with the service provider and the organizations will suffer various direct and indirect effects,
if the consumers assume that they are treated unfairly.
In the views of Buttle & Burton (2002), along with it, if the organization does not
immediately identify the cost, time and efforts of the consumers in seeking service, it will
also result in service failure. Every consumer has different level of expectations regarding the
compensation, which is based on the type of service failure. The distributive justice is
significant dimension in understanding the customer evaluation of the service recovery.
In the perspective of Kuo & Wu (2012), in the service failure, word-of-mouth plays a critical
role. The word-of-mouth can be defined as the message regarding an organization’s
credibility, trustworthiness and the efficiency in the business. It is the communication
between two different consumers, which play a critical role in the consumer attraction and the
consumer retention. The word of mouth is the informal communication, in which they show
concern about the quality of the services or products delivered by the firm. It is different from
the consumer complaints, in which the customers make formal complaints to the
organization. In the service industry, setting, the word-of-mouth is considered as an important
post-purchase behavior. In this communication, the company talks about the noticeable,
personally experienced and complicated qualities of the product or the service. The literature

highlights that when the consumer achieve satisfaction with the service, it results in positive
communication to other consumers.
Acording to Maxham III, & Netemeyer (2003) the word of mouth can be defined as the
communication between the consumers regarding the characteristics of the product and the
service. The word of mouth is an important piece of information, which is a part of the post-
purchase behavior of the organization. The word-of-mouth provides valuable information,
and it can influence the perception of others. It can also influence the intent of other
customers for making the purchase decision. The word-of-mouth can be positive or negative
in its overall impact to the organization. It is almost as important as the face-to-face
communication and emits information, which can establish a brand image of the organization.
It rewards the companies, if they are considerate of high consumer satisfaction. It can be
stated that if the consumer accept a fair treatment of the service recovery, they will engage in
positive word of mouth in a more enthusiastic manner.
According to Ok, Back & Shanklin (2005), the service delivery process is complicated
process as the service requires an interaction between the purchaser and the workers of the
company. However, in the service industry, the service failures are regularly encountered. It
can be posited that the service failure cannot be completely eradicated from the service
companies; therefore, the service provider should carry out the recovery strategies, so that the
negative effects of the service failure can be reduced. Further, the companies should also
focus on the influence of the service recovery on the consumer satisfaction.
The service failure results in the emotional experience from the customers. The inadequate
customer treatment can result on the intensive negative emotions. However, the emotional
response of the customers is controlled by the age of the individual. The service recovery
strategies are developed to control the negative emotions of the consumers. The service

recovery strategies are used to design the actions of the organization, which it will follow
after a service failure.
Methodology
The research methodology is an important aspect of the research. It provides direction to the
research and impacts the outcome of the research. In the current research, the positivist
research paradigm will be used (Silverman, 2016). The positivist research philosophy states
that the factual knowledge is gained through observation and measurement. In the positivism
research, the focus of the research is to collect the data in and interpret it in an objective
manner (Smith, 2015). The positivism research paradigm is applied when the research
findings can be represented in a free manner. It is a philosophy, in which the researcher
follows the empirical views that the knowledge develops from the interactions of the humans
with his environment. In positivism, the researcher is independent of the study and the
researcher focuses on the facts that the researcher is required to focus on the facts.
Along with it, the researcher has applied the deductive approach to accomplish the objectives
of the research. The deductive approach is the process in which, the researcher is focussed to
develop a hypothesis on the existing theory (Panneerselvam, 2014). In the research, the
researcher validates the theory or the hypothesis. The deductive approach is the process in
which a causal relationship is implied by a particular case or theory. The deductive design
evaluates the relationship or the link between two different valuables. The deductive
approach is used to explain the causal relationships between two different variables measure
the concepts quantitatively and generalize the findings (Neuman and Robson, 2014).
In the present research, the data collection tool of survey instrument is taken. In this method,
different questions will be designed in accordance to the research aims and objectives. It is a

primary data collection method. The data collection methods can be divided into primary and
secondary research methods. In the primary research method, the information is obtained
directly from the participants. On the other hand, in secondary research, the research uses the
information obtained by other researchers. It is a quantitative research method (Mackey and
Gass, 2015). It means that the researcher will collect the information from the statistical
methods. The data is statistical in nature and can be analysed through quantitative methods.
The survey will be administered to the management executives in the service industry. The
sample size selected for the research is 100. It survey participants will be selected through
random sampling. In the random sampling method, each member of the population has an
equal chance of getting selected as a subject. The sampling process in conducted in such a
manner that each research participant is independent and has an equal chance of being chosen
for the research. The simple random sampling method is chosen as there is an ease in
selecting the participants of the sample (Kumar, 2014). Another benefit of the random
sampling method is that it can represent the entire population. When the sample is not able to
represent the entire population, a random variation occurs, which is also called the sampling
error (Glesne, 2015). The survey questionnaire will be sent to the research participants with
the help of email ID. Along with it, a consent form will be sent to the participants. The
research participants will have to fill the survey questionnaire and the consent form. The
consent form is necessary to make the research participants aware of the aims and objectives
of the research process (Flick, 2015). They can also understand the privacy terms of the
research. The participants have to revert back in three weeks.
The researcher will abide by the ethical considerations of the research community. The
researcher will make sure to authentically cite the work of other authors. The information
taken from other authors has been cited appropriately within the text. Other than that, the

researcher will make sure that the personal information of the research participants is secured.
The researcher will take appropriate measures to maintain the privacy and the confidentiality
of the researcher. The research will be carried out in a transparent manner. The researcher
will make sure that the information collected from different sources is represented accurately
without any fabrication (Gast and Ledford, 2014). The research ethics compliance is
important to gain the trust of the research community. The involvement of the human
subjects or animals raises important questions regarding the ethical, legal and the social
issues (Taylor, Bogdan and DeVault, 2015). The ethics allow the researcher to conduct the
research in a proper manner. In this regard, the researcher has carried out the research so that
it is conducted in a manner that it supports the interest of the individuals and the society as a
whole (Resnik, 2015, December).

References
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Consumer Behaviour, 1(3), 217-227.
Casidy, R., & Shin, H. (2015). The effects of harm directions and service recovery strategies
on customer forgiveness and negative word-of-mouth intentions. Journal of Retailing and
Consumer Services, 27, 103-112.
Choi, B., & Choi, B. J. (2014). The effects of perceived service recovery justice on customer
affection, loyalty, and word-of-mouth. European Journal of Marketing, 48(1/2), 108-131.
Collier, J. E., Breazeale, M., & White, A. (2017). Giving back the “self” in self service:
customer preferences in self-service failure recovery. Journal of Services Marketing, 31(6),
604-617.
Flick, U. (2015) Introducing research methodology: A beginner's guide to doing a research
project. USA: Sage.
Gast, D. L., and Ledford, J. R. (Eds.). (2014) Single case research methodology: Applications
in special education and behavioral sciences. UK: Routledge.
Glesne, C. (2015) Becoming qualitative researchers: An introduction. USA: Pearson.
Hess, R. L., Ganesan, S., & Klein, N. M. (2003). Service failure and recovery: The impact of
relationship factors on customer satisfaction. Journal of the Academy of Marketing
Science, 31(2), 127.
Hess, R. L., Ganesan, S., & Klein, N. M. (2003). Service failure and recovery: The impact of
relationship factors on customer satisfaction. Journal of the Academy of Marketing
Science, 31(2), 127.
Kumar, R. (2014) Research methodology: A step-by-step guide for beginners. Sage.
Kuo, Y. F., & Wu, C. M. (2012). Satisfaction and post-purchase intentions with service
recovery of online shopping websites: Perspectives on perceived justice and
emotions. International Journal of Information Management, 32(2), 127-138.
Mackey, A., and Gass, S. M. (2015) Second language research: Methodology and design.
Routledge.
Maxham III, J. G., & Netemeyer, R. G. (2002). A longitudinal study of complaining
customers’ evaluations of multiple service failures and recovery efforts. Journal of
marketing, 66(4), 57-71.
Maxham III, J. G., & Netemeyer, R. G. (2003). Firms reap what they sow: the effects of
shared values and perceived organizational justice on customers’ evaluations of complaint
handling. Journal of Marketing, 67(1), 46-62.

McCollough, M. A., Berry, L. L., & Yadav, M. S. (2000). An empirical investigation of
customer satisfaction after service failure and recovery. Journal of service research, 3(2),
121-137.
Neuman, W. L., and Robson, K. (2014) Basics of social research. Canada: Pearson Canada.
Nikbin, D., Iranmanesh, M., Hyun, S. S., Baharun, R., & Kim, I. (2015). The role of airline
travelers’ pre-recovery emotions during the service recovery process. Journal of Travel &
Tourism Marketing, 32(6), 677-691.
Ok, C., Back, K. J., & Shanklin, C. W. (2005). Modeling roles of service recovery strategy: a
relationship-focused view. Journal of Hospitality & Tourism Research, 29(4), 484-507.
Panneerselvam, R. (2014) Research methodology. USA: PHI Learning Pvt. Ltd.
Resnik, D. B. (2015, December). What is ethics in research & why is it important. In ideas.
Sengupta, A. S., Balaji, M. S., & Krishnan, B. C. (2015). How customers cope with service
failure? A study of brand reputation and customer satisfaction. Journal of Business
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failure? A study of brand reputation and customer satisfaction. Journal of Business
Research, 68(3), 665-674.
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USA: Sage.
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Appendix
Appendix A
Questionnaire
Thank you for participating in the survey. Please, select the correct response for the following
questions.
What is the name of your organization?
How long have you been employed?
Q. 1 How many purchases do you make per month?
a) 1-2
b) 3-5
c) 5-10
d) 10 and more
Q. 2 Which medium do you use for making a purchase?
a). online mediums
b). offline mediums
Q. 3 Do you agree that you have encountered a service, wherein you were not delivered, what
you were promised?
a). Strongly agree
b). Agree
c). Neutral
d). Disagree
e). strongly disagree
Q. 4 Do you agree that that several times, organizations are not able to deliver, what they
promise to their customers?
a). Strongly agree
b). Agree
c). Neutral
d). Disagree

e). strongly disagree
Q. 5 Do you agree that it is the responsibility of the service organizations to recompense the
services, which they have not delivered appropriately?
a). Strongly agree
b). Agree
c). Neutral
d). Disagree
e). Strongly disagree
Q. 6 Do you agree that your organization takes initiatives for the service recovery?
a). Strongly agree
b). Agree
c). Neutral
d). Disagree
e). Strongly disagree
Q. 7 Do you agree that the organization should focus on service recovery to enhance brand
loyalty?
a). Strongly agree
b). Agree
c). Neutral
d). Disagree
e). Strongly disagree
Q. 8 Do you agree that the business organizations should create separate service recovery
strategy?
a). Strongly agree
b). Agree
c). Neutral
d). Disagree
e). Strongly disagree

Q. 9 Do you agree that the service recovery strategies result in positive word of mouth?
a). Strongly agree
b). Agree
c). Neutral
d). Disagree
e). Strongly disagree
Q. 10 Do you agree that the service recovery results in better brand image of the
organization?
a). Strongly agree
b). Agree
c). Neutral
d). Disagree
e). Strongly disagree

Appendix B
Hello, thank you for participating in the research!
It can be assured that the information provided in the survey will be secured. The information
provided by the research participants will be protected in accordance with the Data Protection
Act and Market Research Society’s Code of Conduct. All the research participants are
assured anonymity and confidentiality throughout the research process. The researcher will
make sure that neither the organization nor the research participants will be identifiable from
the information shared with the third party. It is a voluntary participation survey and the
research participants can take voluntary participate in the survey. There are no right or wrong
answers to the survey questions; therefore, it is expected that genuine answers will be
provided to the questions.