Project Materials

BUSINESS ADMINISTRATION

THE IMPACT OF SERVICE RECOVERY ON CUSTOMER LOYALTY

THE IMPACT OF SERVICE RECOVERY ON CUSTOMER

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FIRST PART

INTRODUCTION

Every day, new sellers or products enter the market, making it tough for sellers to survive in the modern business environment. In recent years, client loyalty has emerged as a crucial idea for surviving, earning high profits, and minimizing customer switching costs. Both the and the services must recognize the significance of consumer loyalty. Nonetheless, human and non-human errors can influence client loyalty. These errors cannot be overlooked, as they significantly effect client satisfaction.

101 (Kau and Elizabeth, 2006) Due to the complexity and variability of consumer requirements, errors are more prevalent in service operations. Swanson and Kelly (2001, p.194) define service failure as a collection of faults that occurred during service operation. Service failures include the absence of a service representative, lengthy wait times, incorrect bank statements, and so on. The service provider should perform service recovery after a service failure in order to mitigate the negative effects of service failure on the customers.

According to Gronroos (1988, p.10), service recovery is the process through which a service provider offers additional services in response to client complaints resulting from service failure. In their research, Hart et al. (1990, p.150) discovered that more than half of all service recovery initiatives result in customer dissatisfaction. According to Gilly (1987, p.294), clients who receive an appropriate service response are frequently more satisfied than those who were satisfied with the Core service and did not complain. In their article, Kau and Elizabeth (2006, p. 108) state that Service recovery increases not just customer pleasure, but also customer trust, word-of-mouth, and customer loyalty. A disappointed client who does not complain will have more bad word of mouth than a dissatisfied customer who has complained. Observations suggest that original service recovery may have different effects on customer satisfaction and customer loyalty, as customers may be satisfied but not loyal, and their loyalty may be attributable to the original service and not the service recovery.

According to Johnston and Michal (2008, p.80), the quick implementation of customer-focused tactics has resulted in an increase in the significance of service recovery research during the past two decades. Service recovery is essential because it can influence client loyalty, which in turn generates positive word-of-mouth and attracts additional consumers; conversely, a failed recovery will have the opposite effect. According to Tax and (1998. ), service recovery has an impact on a company’s financial position because client loyalty, which is a result of good service recovery methods, affects a company’s financial standing.

STATEMENT OF PROBL

In 1999, Andreassen observed that service recovery studies over the previous decade had mostly centered on why, to whom, and how dissatisfied consumers replied. Prior to this investigation, Goodwin and Ross (1992) determined that little attention was paid to corporate replies to customers’ vocal complaints and that customers’ subsequent changes in attitude and behavior were not successfully tracked. In addition, Conlon and Murray (1996) stated that the majority of current service recovery research at the time concentrated on the short-term impact of recovery efforts (i.e. compensation and apology quality) and failed to investigate the true determinants of service recovery satisfaction.

In addition, according to Ruyter and Wetzels (2000), very few studies have explored the relationship between service recovery and service quality characteristics (i.e. on-going customer satisfaction, loyalty and behavioral intentions). As a result, service companies were not properly identifying or evaluating the drivers of service recovery satisfaction in the service business; hence, the benefits of ongoing satisfaction and customer retention were not fully realized.

Colgate and Norris (2001) proposed that in the hospitality business, a commitment to a continuous quality improvement process could only be achieved by tracking the frequency and severity of service failures. Thus, the researchers felt that a customer’s assessment of service quality was ly proportional to the frequency and severity of service failures. In addition, their research revealed that the quality of the organization’s reaction and problem resolution was essential to the customer’s ongoing pleasure, loyalty, and inclination to return or suggest.

The objective of this study is to examine the effect of service recovery on customer loyalty using a luxury hotel as a case study. Numerous authors have focused on service recovery and its effect on customer satisfaction; nevertheless, customer satisfaction resulting from service recovery may or may not result in customer loyalty. Although customer loyalty cannot exist without consumer satisfaction, satisfied customers may not necessarily be loyal either. equently, we prioritize customer loyalty over customer happiness. The study is predicated on the following .

OBJECTIVES OF

Many hospitality firms now view the implementation of a complaint management system as a crucial element in ensuring service recovery satisfaction.

Despite the efforts made to provide quality service, satisfy clients, and cultivate customer loyalty and influence, quality service and resolving service concerns are ongoing issues in the hospitality industry.

The purpose of this study was to investigate

1. the connection between the organization’s service recovery efforts and the level of ongoing customer satisfaction

2. the link between pre-failure client loyalty, ongoing customer happiness, and post-recovery customer loyalty

3. the connection between post-recovery consumer feeling, loyalty, and behavioral intentions

QUESTIONS

How is the concept of recovery satisfaction best described within the luxury hotel industry? What, if any, is the connection between a company’s service recovery efforts, customer satisfaction, and customer loyalty? What, if any, function do perceived emotion and loyalty play in the rehabilitation process as a mediator?

HYPOTHESIS

There is no correlation between service restoration measures and word-of-mouth.

There is an association between service recovery measures and word-of-mouth.

H00; There is no correlation between service recovery measures and consumer repurchase intent.

There is a correlation between service recovery measures and the intent to repurchase.

DEFINITION OF TERMS

Attitudinal Loyalty: The point at which a customer establishes a positive or loyal attitude

negative perception of the service or supplier This results in the client’s

intent to return or advocate (Dick & Basu, 1994).

Behavioral Loyalty: When a client’s intentions are translated into actions; thus, the customer’s motivated intentions in the previous loyalty state have transformed or evolved to the point where the consumer is prepared to act on their intentions.

umption Emotion: The mix of pleasant and negative feelings associated with a service encounter. This plays a key effect on the level of customer happiness, customer loyalty, and future behavioral intention.

Service is a company’s response to subpar service.

THE IMPACT OF SERVICE RECOVERY ON CUSTOMER

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