Impact of service failure: the protective layer of customer relationships

Abstract

Although there has been considerable research about service failure in the last 15 years, scholars have only recently started to examine its impact on relational constructs. This study proposes a holistic model that jointly investigates the role of company image and trust in response to service failures and their impact on the customer value-loyalty process across routine and service failure scenarios. Using survey data of a sample of 552 airline customers, the empirical results find evidence of a relational protective layer for the firm. This layer protects the customer value-loyalty process from the negative impact of service failure by exerting a halo effect on customer value and loyalty, which is concurrently magnified by this negative impact. Further analysis also indicates the diverse roles of company image and company trust in service failures, which reveals the coexistence of the buffering and magnifying effects. The findings underline that company image is the most versatile asset of the firm, and it can serve as an indicator of how service failures will affect the company. Company trust, as opposed to its passive role in routine situations, acts like a safety net in service failures by enhancing the customer’s value perception.