Abstract
The primary objective of this study is to investigate the effects of service recovery strategies on customer satisfaction. Specifically, it examines the perception of justice in service recovery and how it affects the level of satisfaction and behavioral outcomes. A total of 408 customers chosen with random sampling method, from four major Turkish banks were surveyed, and structural equations models were used to verify the reliability and validity of the scale of perceived value. Our results indicate that service failure recovery strategies in banks affect justice perceptions directly. On the other hand, perceptions of justice influence satisfaction with recovery, overall firm satisfaction, loyalty to the employee, loyalty to the organization.
1.Introduction
Todays, customer complaints in service sectors are rising sharply. While firms can't annihilate complaints, they can learn to respond to them in effective way. This response named service recovery, is defined as the process by which the firm attempts to correct a service related to failure (Kelley & Davis, 1994). Some investigators suppose that a firms' reaction to failures can either fortify customer relationships (Smith, Bolton & Wagner, 1999) or exacerbate the negative effects of the failure (Kelley, Hoffman & Davis, 1993). Really, some researchers purpose that it is frequently a retailer's response to a failure, rather than the failure itself, that triggers discontent (Hoffman et al., 1995). Recoveries are important because customers perceiving poor recovery endeavors may dissolve the buyer seller relationship and buy elsewhere (Schneider & Bowen, 1999). Such customer turnover can be costly, in particular given that it costs more to win new customers than it does to hold up current ones (Schneider, White & Paul, 1998). One valid strategy for retaining customers comprises recovering fairly from failures.
Customer satisfaction is supreme to the survival of all business. However, service failures are often inevitable because of human and non-human errors. Such failures to fulfill a service unavoidably lead to customer dissatisfaction. The consequences can be terrifying to a service provider. The breakdown in relationship can contribute to a rise in customer complaints, bad word of mouth communications and defections. It has been found that a dissatisfied customer may relate his or her bad experience with the service provider to 10 to 20 other people (Zemke, 1999), thus eroding potential patronage of the service provider. It has therefore been recognized that once a service failure occurs, it becomes crucial that service recovery, defined as the action taken by the service provider to seek out dissatisfaction (Johnston, 1995) and as a response to poor service quality (Gronnroos, 1988), be effectively carried out to reduce the damage in relationship and to pacify the dissatisfied customer. It has also been suggested that effective service recovery had led to higher satisfaction compared to service that had been correctly performed on the first time (McCollough and Bharadwaj, 1992). This phenomenon of service recovery paradox has also been discussed more recently by McCollough et al. (2000), Smith and Bolton (1998) and Tax et al. (1998).
Three issues are notable. First, though some research has examined the effects of perceived justice in service recovery (Blodgett, Granbois & Walters, 1993), the relative effects of the dimensions of justice on two important and distinct aspects of satisfaction have not been addressed. Given the importance of relationship marketing in ongoing service industries, such analyses are needed to determine if satisfaction gains realized by offering justice in service recovery affect overall firm satisfaction as well. Second, research is needed that examines the mediating effects of satisfaction with recovery and overall firm satisfaction on the relationships between perceived justice and different types of customer intent (loyalty). Given the distinction between purchase intent research is also needed that examines the relative effects of the satisfaction constructs on these intent constructs. Third, service recovery assumes that both a failure and a recovery effort have occurred. Ideally, then, researchers need to gauge customer perceptions when the failure and recovery are most salient in their memories. The existing literature is mostly comprised of laboratory (Goodwin & Ross, 1992) or field experiments (Smith et al., 1999) based on hypothetical scenarios. Other studies report cross sectional studies in which respondents were asked to "think back" to some past failure (Tax et al., 1998). Though these studies have contributed to our understanding of service recovery, it seems evident that field studies are needed that capture customer perceptions as they form over time.
The primary objective of this study is to determine the effects of organizational recovery strategy on customer loyalty via complainants' perception of justice dimension within a structural model in the bank service sector in Turkey. Specifically, firstly the study would examine the organizational recovery strategy (compensation, apology, promptness, empathy, effort, facilitation, reparation) effect on perception of justice (distributive justice, interactional justice, procedural justice) and how it affects the level of satisfaction (satisfaction with recovery and overall firm satisfaction). Second, it aims to determine the impact of satisfaction on behavioral outcomes (loyalty to employee and loyalty to firm) of the affected consumers.
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