Service recovery paradox effect: Comparisons in two service industries

Service failure and recovery have caught researchers' attention in recent years. However, one important question is still left unanswered: if SRP (service recovery paradox) really does occur. Does it exist or not? Is it industry-specific? A scenario-based experiment was conducted in two service industries, banking and restaurant, to resolve those questions. Results revealed that the likelihood of service recovery paradox happening is different across different industries, which provide both theoretical contributions and managerial implications in China.

I. Introduction

For any service, it is not unusual to have failures. When failures occur, customers usually feel disappointed, uncomfortable, and/or dissatisfied about the service provider. A dissatisfied customer can take actions such as, complaining to the firm, having negative word of mouth, and/or exiting. In these cases, firms face losing both customers and reputation. Naturally, when service fails, a firm should take immediate actions to prevent customers from switching to competitors. Service recovery efforts are such actions.