An Empirical Study of Service Recovery Quality and Customer Retention

This article proposes and empirically tests an original model of service recovery. Customer loyalty significantly impacts a company's profitability. Customer satisfaction influences customer loyalty, and perceived recovery quality affects satisfaction. Surveys were mailed to 1, 476 customers of a large financial services firm. This study examined how customers’ perceptions of the quality of service recovery efforts differs among customer groups. Customer groups were formed according to differing levels of post-recovery customer loyalty in order to study the impact of perceived service recovery quality on customer loyalty. The results of the study indicate that high-and low-loyalty customer groups differ in their perceptions of two components of service recovery quality: psychological and tangible. Therefore, managers should focus on these components when making decisions regarding service recovery designs. The study also analyzes the implications of the findings on service recovery design.