Service failure and recovery remain critical issues for both academicians and marketing practitioners. Defined as a service provider’s response to a failed service, service recovery can mean the difference between a firm’s success and failure, for increasing customer retention and limiting customer defection are integral components of organizational growth and profitability.
The purpose of this dissertation was two-fold: (1) to test the effects of magnitude of service failure, service failure responsiveness, and the presence of a service guarantee on customer satisfaction levels and other service recovery outcomes (Study 1); and (2) to test the effects of additional recovery effort and magnitude of service failure on customer satisfaction levels and other service recovery outcomes (Study 2). Additional objectives of Study 2 included examining the data for evidence of two posited phenomena: (1) the plateau effect, characterized by a ‘leveling off’ effect in regard to the effects on the dependent variables as service failure recovery increases, and (2) the service recovery paradox effect, evidenced by increasing levels of satisfaction and repurchase intentions as recovery remuneration increases, to the point that levels of these criterion variables are higher among those experiencing a service failure compared to those who did not experience a service failure.
The results indicated several findings. Magnitude of service failure had a very strong individual and moderating influence on all outcome variables. Service failure responsiveness can have positive effects on these outcome variables, but only under the condition of a low level of magnitude of service failure. Service guarantee was found to have little effect on service outcomes. Evidence was present to indicate that a plateau effect occurs as recovery remuneration increases, and very little support was found to support the contention that the recovery paradox effect should be present as recovery remuneration increases.
This research has made a contribution to the study of service failure and recovery. It is hoped that there will be continued interest in examining additional constructs, trying different methodologies, and studying new effects in this field of marketing research.