Maintaining Customer Loyalty and Satisfaction in Service Recovery through Javanese Philosophy

The concept of service failure and service recovery have been largely addressed in the literature. The aim of this study is to examine the relationship between perceived justice, customer engagement, customer satisfaction, and customer loyalty in the context of service recovery. This study also considers the moderating role of apology and diuwongke, a Javanese-Indonesian philosophy for treating others with dignity and respect, as a condition that can strengthen or weaken the influence of the variables. The population of this study is customers of three large state-owned banks in two provinces in Indonesia, with the number of samples of 430 respondents, chosen using purposive sampling technique. The data is collected through online survey with Google Forms and analyzed using SEM-PLS with PLSpredict. The findings indicate that perceived justice has a positive influence on customer engagement, while customer engagement positively influences customer satisfaction and loyalty. Customer satisfaction is found to mediate the relationship between customer engagement and customer loyalty. Furthermore, this finding prove that apology plays a moderating role in the relationship between perceived justice and customer satisfaction, such that the relationship is stronger when apology is high. Finally, diuwongke is also found to moderate the influence of customer engagement on customer satisfaction and customer loyalty.