THE IMPACT OF SERVICE RECOVERY ON CUSTOMER LOYALTY

Abstract

This study was on the impact of service recovery on customer loyalty. Three objectives were raised which included: To ascertain the impact of service recovery on customer satisfaction and to ascertain the impact of service recovery on customer loyalty. The study adopted a survey research design and conveniently enrolled 80 participants in the study. A total of 77 responses were received and validated from the enrolled participants where all respondents were drawn from first bank, Uyo. Hypothesis was tested using Chi-Square statistical tool (SPSS).

Chapter one

Introduction

1.1Background of the study

In today’s business world, competition has made it difficult for sellers to survive and every day new sellers or new products are coming to the market. In order to survive, earn high profit and avoiding customer Switching cost, customer loyalty has become a very important concept in recent years. The importance of customer loyalty cannot be ignored in both the products and services. However customer loyalty can be influenced by the human and non-human errors. These errors cannot be ignored because these errors negatively impact customer satisfaction (Kau and Elizabeth, 2006, p.101). The errors are more common in service operations due to the complexity and heterogeneity of the consumer’s needs. According to Swanson and Kelly (2001, p.194) service failure can be defined as a variety of errors happened during the service operation. Service failure can be the unavailability of the service person, long waiting time, bank statements errors and so on. After the service failure service recovery should be done by the service provider in order to avoid the negative impacts of service failure on the customers. According Grönroos (1988, p.10) service recovery is a process in which the Service provider offer additional services for addressing consumer’s complaints that have been resulted fromservice failure. Hart et al (1990, p.150) have found in their research that more than half of the all the efforts of service recovery creates dissatisfaction towards service. Gilly (1987, p.294) states that Often consumers who get proper service response become more satisfied than those who were satisfied from the Core service and did not complaint. Kau and Elizabeth (2006, p. 108) mentioned in their article that Service recovery not only increase the customer satisfaction but it also increases customer trust, word of mouth and customer loyalty. The Customer who is dissatisfied and does not complaint will have more negative words of mouth than the customer who is dissatisfied even after complaints. Original service recovery may have different impacts on customer satisfaction and customer loyalty, because observations show that customer may be satisfied but not loyal and loyalty may be due to the original service not the service recovery. According to Johnston and Michal (2008, p.80) the importance of service recovery research can easily be observed in last twenty years, that has resulted from rapidly increase in adaptation of the customer focused strategies. Service recovery is important because it may impacts the customer loyalty which will leads to positive word of mouth and attracts more customers, and in the case of unsuccessful recovery the effect will be the opposite. Tax and Brown (1998.) have argued that service recovery influence the financial position of a company, because financial position is affected by customer loyalty that is generated by the customer satisfaction, resulted from effective service recovery procedures.

Statement of the problem

The impact of service recovery on customer loyalty by considering a Case study of first bank company. Service recovery and its impact on the customer satisfaction has been focused by many authors, however customer satisfaction resulted from the service recovery may cause customer loyalty or may not cause customer loyalty. Though the customer loyalty is not possible without customer satisfaction but satisfied customer may not be loyal also. Therefore, we are interested in customer loyalty rather than customer satisfaction. Briefly the study is based on following.

Objective of the study

The objectives of the study are;

1. To ascertain the impact of service recovery on customer satisfaction
2. To ascertain the impact of service recovery on customer loyalty

Research Hypotheses

The following research question were formulated;

H0: there is no impact of service recovery on customer satisfaction

H1: there is an impact of service recovery on customer satisfaction

H0: there is no impact of service recovery on customer loyalty

H2: there is impact of service recovery on customer loyalty

Significance of the study

The study will be of help to students, customers and business organizations. the study will give a clear insight on the impact of service recovery on customer loyalty. The study will also serve as a reference to other researcher that will embark on the related topic

Scope of the study

The scope of the study covers the impact of service recovery on customer loyalty. The study will be limited to first bank Plc in uyo

Limitation of the study

However, in the course of this research, the following constraints were encountered thus:

1. Non-availability of enough resources (finance): A work of this nature is very tasking financially, money had to be spent at various stages of the research such resources which may aid proper carrying out of the study were not adequately available.
2. Time factor: The time used in carrying out the research work is relatively not enough to bring the best information out of it. However, I hope that the little that is contained in this study will go a long way in solving many greater problems.

Definition of terms.

Service recovery: Service recovery is a company’s resolution of a problem from a dissatisfied customer, converting them into a loyal customer. It is the action a service provider takes in response to service failure.

Customer loyalty: Customer loyalty is a measure of a customer’s likeliness to do repeat business with a company or brand. It is the result of customer satisfaction, positive customer experiences, and the overall value of the goods or services a customer receives from a business.

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