Previous research has examined the effect of service failure and recovery on target and the observing customers separately, with an emphasis on evaluations by target customers. It has been assumed that the reactions of those customers observing the recovery efforts would mirror those of target customers, or perhaps be even more favourable, given that they are not directly affected by the service failure. This research challenges this pre-conception. Through a series of experimental studies, this research shows that while target customers react positively to any recovery efforts, high resources should be expended to enhance the observers’ evaluations.
free text keywords: Marketing not elsewhere classified, Service failure, service recovery, observing customers, compensation, apology, 150599 Marketing not elsewhere classified, FOS: Economics and business