This paper reports the findings of a study that investigates the effects of severity of service failure and cultural familiarity on customer satisfaction. The study also examines the interaction effect between these two independent variables. An exploratory study using six focus groups was undertaken to elicit insights into the potential influences of the proposed variables on customer satisfaction. The findings from the focus groups were used to develop the stimulus material for an experimental research design. Ultimately, a 3 (cultural familiarity: low, medium, high)׳ (severity of failure: low, medium, high) experimental design was employed. Using an online survey method, 740 respondents were randomly assigned to various scenario conditions and were asked to rate their satisfaction levels (measured using a multi-item scale). Significant results were found from the analysis of the data using ANOVA. Theoretical and practical contributions of the study, limitation and suggestions for future studies are discussed.