FROM SERVICE FAILURES TO CUSTOMER LOYALTY: A HOLISTIC REVIEW OF SERVICE RECOVERY PERFORMANCE

Abstract

This study investigates the critical role of Service Recovery Performance (SRP) in fostering customer loyalty within service-based industries. Despite efforts to provide excellent service, service failures are inevitable, and organizations must implement effective recovery strategies to mitigate their impact. SRP refers to a firm's ability to manage service failures and restore customer satisfaction, which directly influences long-term loyalty. Previous research has identified key recovery strategies such as communication, compensation, and feedback. However, gaps remain in understanding which strategies are most effective across different industries and in assessing the long-term implications of recovery efforts on customer loyalty. This study aims to provide a comprehensive review of SRP literature by synthesizing existing research on its relationship with customer loyalty, identifying key determinants of effective service recovery, and highlighting emerging trends and research gaps. The review finds that while immediate satisfaction can often be restored through appropriate recovery efforts, the long-term impact on customer loyalty remains underexplored. Additionally, the role of technology in service recovery, particularly through digital platforms, is insufficiently examined. The study proposes an integrated framework that connects SRP strategies to customer satisfaction and loyalty, offering valuable insights for both scholars and practitioners. It also emphasizes the need for future research on the role of cultural contexts in shaping recovery strategies and the application of technology to enhance service recovery. This paper contributes to the understanding of SRP’s impact on customer loyalty and provides practical guidance for businesses seeking to optimize their recovery mechanisms for better customer retention and competitive advantage. By addressing these gaps, this study aims to enhance both theoretical knowledge and managerial practices in service recovery.