Skip to main content

Please enter a keyword and click the arrow to search the site

The effects of service failures and recovery on customer loyalty in e-services: An Empirical Investigation


International Journal of Operations and Production Management


Management Science and Operations

Authors / Editors

Sousa R;Voss C A


Publication Year



Purpose – Despite having been widely studied in traditional (bricks-and-mortar) services, the effect of service failures and recovery (SFR) on customer loyalty has received only limited attention in the context of e-services. This paper sets out to empirically test the following set of hypotheses in an e-service setting: H1, service failures have a negative effect on customer loyalty intentions; H2, failure resolution has a positive effect on customer loyalty intentions; H3, satisfaction with the recovery has a positive effect on customer loyalty intentions; H4, outstanding recovery results in loyalty intentions which are more favorable than they would be had no failure occurred (service recovery paradox). Design/methodology/approach – The paper is based on an online survey of actual customers of a commercial e-banking service. Findings – H1-H3 are supported, suggesting that: the detrimental effects of failures are also present online; problem resolution leads to increased loyalty; despite the challenging nature of online failures and the reduced degree of human interaction, it is possible to achieve effective recovery in e-services. H4 is also supported. We observes a recovery paradox effect but it only take place for a small proportion of “delighted” customers, i.e. those who perceived an outstanding recovery. Although unlikely, the impact (size effect) of outstanding recovery on loyalty is substantial. Research limitations/implications – Future research should examine other types of e-services. Practical implications – E-service delivery systems should be designed with a strong failure-prevention mindset and include effective service recovery mechanisms. However, in general, e-service providers should not look at superior recovery as a substitute for error-free service. Despite not being a viable strategy in general, delighting customers in the recovery may make sense for the most profitable customers. Originality/value – The paper provides empirical evidence of the effects of SFR in the context of online service, an area which has received limited attention to date. Unlike other research, this paper draws on data from customers of an actual e-service and therefore benefits from increased external validity.

Available on ECCH


Select up to 4 programmes to compare

Select one more to compare
subscribe_image_desktop 5949B9BFE33243D782D1C7A17E3345D0

Sign up to receive our latest news and business thinking direct to your inbox


Sign up to receive our latest course information and business thinking

Leave your details above if you would like to receive emails containing the latest thought leadership, invitations to events and news about courses that could enhance your career. If you would prefer not to receive our emails, you can still access the case study by clicking the button below. You can opt-out of receiving our emails at any time by visiting: or by unsubscribing through the link provided in our emails. View our Privacy Policy for more information on your rights.