Service Recovery Paradox In Indian Banking Industry: An Empirical Investigation

Customer feels dissatisfied in a service setting when the service on offer fails. A service fail- ure is defined as "any service-related mishaps or problems (real and/or per- ceived) that occur during a consumer's experience with the firm" (Maxham, 2001). The customer may categorize a service as failed service if the per- ceived quality of service after service delivery does not match the expected service. The perceptions regarding quality of services delivered depends upon outcome and output of the ser- vice, process of service delivery, time taken to deliver the service, conduct of service personnel, etc., and failure on any of the dimensions of service de- livery may be responsible for catego- rizing a service as failed service. No matter how much effort the firm puts into ensuring service quality, it is not possible to entirely eliminate service errors and failures. This is largely due to simultaneous production and con- sumption characteristic of services. Customers experience several nega- tive emotions in the event of a service failure. He may stop using the product, complain to the firm, complain to the third party or spread negative word of mouth. Complaint management and service recovery process by service firms, and resultant outcome become crucial in such situations to ease the customer. It is believed that appropri- ate service recovery efforts may re- store dissatisfied customer to a state of satisfaction (Bitner et al., 1990). Service recovery refers to the actions by the service provider in response to service failure (Gronroos, 1988). At times, it is felt that dissatisfied cus- tomer who has experienced service failure is even more satisfied after ser- vice recovery than the customer who receives correct service in the first place. Service recovery paradox has been suggested to refer to this kind of situation. Such satisfied customer after service recovery is supposed to pos- sess higher word-of-mouth intention and repurchase rate as compared to the customer who has not faced service failure in the initial service (McCol- lough and Bharadwaj, 1992). Hence, it has been proposed that service failure is an opportunity for the service firm to affect an excellent service recovery which enhances satisfaction and loy- alty levels of the customer.The present paper aims to examine service recovery paradox in case of banking services. The study has been taken up in the tri-city of Chandigarh, Panchkula and Mohali. The opening up of the Indian economy has already seen the entry of many private-sector banks. Various public and private- sector banks are trying to woo the customers by distinguishing their of- fers and services. An attempt is be- ing made by these banks to implement effective service recovery strategies in the event of experience of service failure by a customer. In this context, an investigation into service recovery paradox will give an opportunity to these banks to understand if effective service recovery strategies contribute towards ensuring higher satisfaction of a recovered customer as compared to that of a customer who receives a correct initial service. The specific ob- jectives of the study are to study the existence of service recovery paradox with respect to customer satisfaction and recommendation intention in case of banking services.LITERATURE REVIEWOne of the most cited works supporting the concept of service recovery paradox is by Hart et al. (1990). The authors contended that an effective service recovery after service failure can ensure that post-failure satisfac- tion of the customer exceeds his satis- faction when there is no service failure. However, McCullough and Bharadwaj (1992) are credited with coining the term service recovery paradox.Some studies have contested the existence of service recovery paradox. Berry et al. (1990) and Zeithaml et al. (1996) concluded that no service prob- lem is better than a service problem resolved satisfactorily. Repurchase in- tentions for non-complaining satisfied customers were found to be higher than for complaining customers who were satisfied with complaint handling (Halstead and Page, 1992). …