The Effectiveness of Service Recovery in Addressing Service Failures and in Achieving Customers' Advocacy, Retention and Purchasing Loyalty Within the UAE Luxury Retail Industry

Abstract

Within the current hyper-competitive market, attracting new customers and retaining the existing ones is paramount to the success of any business and to its ability to control more market shares and achieve a competitive edge. Nonetheless, despite the efforts made by firms across the globe that aim to provide an excellent service, many companies are subject to service-related failures affecting customers’ satisfaction, loyalty and in turn, put an end to the relationship between both parties. It is for this reason; the following paper has explored the effectiveness of service recovery in responding to service failures and in achieving customer loyalty. Previous studies on this topic have focused on classification development and several typologies, including service failure (e.g. outcome-related service failure and/or process-related service failure) and service recovery (psychological recovery or tangible recovery). This study, therefore, followed the same concept by investigating a gap within current literature through the development of a service failure classification and by exploring the effectiveness of service recovery in response to first and repeated service failures. To achieve the aims of this study, both primary and secondary data was collected. The secondary data consists of analyzing more than 1024 complaints logged within 2017/2018, while the primary data was gathered through mixed method approach by using questionnaires taking perspective of both customers and organization. A qualitative interview was also conducted with a senior management to generate in-depth information. The study revealed that regardless of severity and magnitude of first service failure, if an effective service recovery in line with perceived justice is implemented, the organization can achieve higher satisfaction level which lead to service recovery paradox and impacting customers’ loyalty and commitment toward the firm by spreading positive word of mouth and repurchase intentions. Contrariwise, in event of repeated service failure, Service recovery process gets impacted wherein customers spread negative word of mouth and demand tangible recovery in the shape of compensations. Additionally, despite the efforts and implications of tangible recovery, almost 50% of customers’ put an end and terminate their relationships with the firm.