Purpose - This study draws on conflict management literature to examine service recovery by service organizations and its effect on the important marketing outcomes of customer perceptions of service quality (satisfac- tion, trust, attribution/praise, and value) which influences customer retention rate (loyalty) and thus firm profitability. Design/methodology - Data from 412 banking customers are first employed to test the study's model, and the results are subsequently cross- validated using a sample of 421 health-care customers. Findings - In services marked by moderate to low customer contact (i.e., task oriented) such as banking, effective conflict management tends to increase customer satisfaction, trust, and perceived customer value. It also has a positive effect on customer loyalty, albeit mediated by the above