Customer reactions to service failure and recovery in the banking industry: the influence of switching costs

Purpose – The purpose of this study is to test the effects of satisfaction, satisfaction with service recovery (SSR) and switching costs (SC) on loyalty and positive word-of-mouth (PWOM) of bank customers in a service recovery context, taking into account the interaction among latent variables and the effects of contextual factors. Design/methodology/approach – A theoretical model is proposed based on previous studies and tested using structural equation modeling technique and bootstrapping estimates. A survey was conducted with 1,878 bank customers of a large Brazilian bank. Findings – Results supported the positive effects of satisfaction and SC on loyalty, while PWOM was influenced mainly by SAT. In addition, SC significantly interacted with satisfaction, reducing the effects of satisfaction on loyalty. Finally, relationship time, gender and age were the most relevant contextual factors. Practical implications – This study highlights the importance of switching costs in the banking industry. Although s...

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