Looking Backward To Costs And Forward To Rewards: The Influence Of Service Recovery And Relationship Structure On Customer Responses To Service Failure

Abstract

Service failure research has failed to consider the potential for rewards to influence customer retention while overlooking the role that relationship structure plays in shaping customer responses to service failure. Using the investment model of ongoing relationships as a conceptual framework, this study investigates the effects of recovery strategies that manipulate past service failure costs and customer loyalty strategies that manipulate future relationship rewards on customer responses to a core service failure. Service recovery strategy and customer loyalty strategy were observed to increase relationship satisfaction and decrease customer defection. Beyond influencing service failure responses directly, relationship structure variables such as current relationship rewards, costs, and investments, and alternative relationship value mediated service recovery effects on customer defection.