Service Failure, Recovery Strategies and Effect on Service Performance – A Literature Review

Managers of service organizations must work hard towards developing appropriate strategies that can lead to customer retention. It is inevitable for service providers to face situations in which service failure occurs and their customers are not satisfied, understanding the nature of service failures and the ways in which an organization can recover after a failure are considered key factors for achieving customer retention. Service failure is a very common scenario, but recovering from such failures is one of the most challenging tasks that management faces. There is always a hidden opportunity in a service failure, it just depends on the management whether it worsens or can set an example of recovery. Those retail organizations that truly value their customers prepare their employees with service recovery strategies that include an immediate and appropriate service failure response. The problem of service failure is further compounded by the fact that there is an increased competition in most service industries. Analyzing service failures and service recovery strategies is an extremely useful management tool. Earlier service marketing research concentrated on defining service failures; later research examined recovery strategies. However, previous literature paid little attention on how to establish the relationship between service failure, recovery and firm‟s performance. This study helps to establish relationship between speedy identification of service failure and service performance. This review aims to analyze literature related to service failure, recovery and service performance. Chronologically arranged literature is studied using relevance to the topic. This paper brings the contribution about service failure and recovery strategies stated by various authors so far in the literature. The strategies so identified in the present paper can give valuable insights to the managers in designing the polices for retention of customer, to have competitive advantage and to establish relationship with service performance.