The Effects of Service Failure and Service Recovery on Customer Loyalty in E-Services: An Empirical Investigation

Although there has been a lot of research examining the effect of service failures and recovery on customer loyalty in traditional (bricks-and-mortar) services, there is still little rigorous empirical research examining this in e-service settings. The objective of this study is to empirically examine the impact of service failures and service recovery on customer loyalty in e-services. The study is based on data from an online questionnaire of customers of an e-banking service. The results validated the relationships generally found in traditional services: i) service failures result in decreased customer loyalty intentions; ii) effective recovery from failures increases customer loyalty intentions; and iii) unless recovery efforts elicit very high levels of satisfaction from customers, they can, at best, restore loyalty to the levels existing prior to the failures. The implications for the management of e-services are discussed