When a third party is a third chance: The impact of mediation on relationship quality with the firm in the post-recovery stage

The demand for mediation, in which a neutral third party offers advice to resolve a customer-firm conflict, continues to increase steadily in Europe. This article is the first to consider the recourse to mediation as a stage of the service recovery journey and empirically examine how the intervention of a mediator affects customer relationship quality in the post-recovery stage. The results indicate that the mediation outcome affects customers' loyalty intentions toward the firm through the mediating effect of distributive justice. Considering neutrality as the foundational element of the mediation process, this research reveals a moderating impact of the mediation type (internal vs external) on the relationship between the mediation outcome and customers' loyalty intentions toward the firm. The findings highlight the efficiency of the internal mediation over the external one after a favorable outcome and encourage firms to leverage mediation strategically to maintain customers, because it represents the last chance for firms to recover from the service failure.