Service recovery's impact on customers next-in-line

Purpose – Previous research considers service recovery as a one-on-one interaction between a service provider and a complaining customer. However, customers frequently complain at the place where they receive the service, making an investigation of the impact of a service recovery on observing customers necessary. Using observational learning theory and attribution theory as theoretical anchors, this paper examines whether observing a service recovery influences the observing customers’ satisfaction and repurchase intentions. In addition, this paper tests whether service quality perceptions mediate, and customers’ locus of control attributions moderate these relationships. Design/methodology/approach – Study 1 tests the main hypothesis using a scenario-based experiment in two settings (restaurant, retail). Study 2 further elaborates on these findings using a scenario-based experiment in a hotel setting. Findings – The findings show that the negative consequences of a failed recovery extend beyond the complaining customers to observing customers, whereas the positive consequences of observing a satisfactory recovery do not influence the observing customer when compared to observing a failure-free service delivery. These relationships are driven by the service quality information customers extract from observing a service recovery. In addition, the results indicate that the negative spill-over effects are attenuated if the observing customer gets information about who caused the failure. Originality/value – From a theoretical point of view, this study contributes by outlining service recovery's different impacts on complaining and observing customers: whereas service recovery forms a critical for complaining customers, it only acts as a dissatisfier for observing customers. In addition, it is the first to test a potential explanation for why observing a service recovery leads to lower customer outcomes, and provides insights about how service providers might attenuate the negative spill-over effects of a failed recovery.