The Service Recovery Paradox: Increased Loyalty through Effective Service Recovery

image How is it possible that customers are more loyal after failures of products or services than they were before? Excellent service recovery is the key, and with the right activities companies can fully utilize this service recovery paradox.

The service recovery paradox states that with highly effective service recovery, a service or product failure offers the opportunity to achieve higher satisfaction ratings from customers than if the failure had never occurred. A bit less academically, this means that a good recovery turns angry and frustrated customers into loyal customers. In fact, it has the potential to create even more goodwill than if things had gone smoothly in the first place.

Nevertheless, not all service recovery efforts lead to increased satisfaction ratings as several studies have already shown. The key is to differentiate between service recovery situations that will lead to increased customer satisfaction and those that will not. Service recoveries that are most likely to produce increased customer loyalty are those where the failure is perceived not to be systematic or over which the company had little control. Even in cases of systematic failure over which the company had control, effective service recovery activities benefit both the customer and the company. A solution or remedy for the customer brings them satisfaction and post-failure actions by the company can eliminate the failure for current and future customers.

The key questions to ask of your organization are these:

  • Are you aware when your customers encounter service failures?
  • Have you thought about an “emergency plan” that can be put in action whenever your customers encounter a service failure?
  • Or do you plan to take ad-hoc action when the business relationship with your customers is endangered?

Read more about the service recovery paradox in these publications:

VP Magnini et. al., “The service recovery paradox: justifiable theory or smoldering myth?,” Journal of Services Marketing 21, no. 3 (2007): 213-225.

CA de Matos, JL Henrique, und C Alberto Vargas Rossi, “Service Recovery Paradox: A Meta-Analysis,” Journal of Service Research 10, no. 1 (2007): 60.