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 comp...