The harmful consequences of failed recoveries in the banking industry

Abstract

Purpose This paper aims to examine which behaviour or set of behaviours customers are prone to follow in double deviation scenarios (i.e. consumption experiences in which customers face both the initial service failure and a failed service recovery), as well as how customers' perceptions of the problem and the firm's recovery efforts may influence these behaviours. Design/methodology/approach The paper uses multinomial logit models with random coefficients to test the proposed model. Findings Magnitude of service failure, explanations, apologies, perceived justice, anger and frustration felt by the customer, and satisfaction with the service recovery have significant and different effects on customers' choice of a type of response. Research limitations/implications Additional research should try to determine the effects of different variables and their potential interactions. Further work incorporating different subjects, service settings or additional combinations of complaining behaviours is needed to validate the results of this investigation. Practical implications This study highlights the importance of effective management of consumer responses to double deviations. Even when it is not possible to respond to customer complaints the first time, firms can learn from double deviations. Furthermore, new market entrants and competitors who want to capture consumer switchers should recognise what happened and try to avoid making the same mistakes. Originality/value This study is the first to examine the consequences of double deviations by considering the multi‐dimensional nature of complaint behaviour and the existence of simultaneous responses. This study is based on analyses of real service failures and recovery strategies and actual customer behaviour.

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