34 Service Guarantee Strategies
Dr. Puja Waalia Mann
1.0 Introduction
What if the target customer is uncertain about the services being sold by a marketer? What if he is not sure about the quality of the services? What if the customer is not sure whether or not buying a particular service will necessarily satisfy his need or want? In most of such situations, the marketer would like to take a guarantee of hundred percent satisfaction and promise a hundred percent error free service which would ensure to deliver value for money to the consumer. Do you think that the marketer is crazy and can never ensure a cent percent error- free service? The answer is No. The marketer is not crazy and it is possible to deliver satisfaction to the consumer.
1.1 Objectives of Learning
In this module you will learn:
a) Meaning of Service Guarantee
b) Features of a good Service Guarantee
c) Significance of Service Guarantee
d) Hurdles in offering effective Service Guarantee
1.2 Keywords
Service Guarantee, Guarantee of Services
1.3 Meaning of Service Guarantee
The service marketer can offer a guarantee of satisfaction to the consumer if the service marketer commits himself, his resources and his workforce to deliver the same. In fact, strong service guarantee can actually lead to higher profitability by putting the consumers satisfaction as the prime motive of its existence, which can be achieved by offering a complete Guarantee of consumer satisfaction. Such a service target can facilitate the marketer work with clear goals supported by required information network to offer a incomparable service performance.
Thus, Service Guarantee is a tool in the hands of the Service providers to assure the consumers of a certain quality of service delivery and to be used as risk minimization tactic. While offering a Service Guarantee, the marketer promises the consumer of service performance level else some form of compensation like refund, cash back, freebie etc may be offered unconditionally.
However, a mere service guarantee does not necessarily bring profitability to the firm. The offer of the service guarantee has to be a well thought, designed and implemented strategy. Let us look at the example of service guarantee of Lufthansa airlines. The airline guarantees that the flyer will not miss their connecting flight, if there is no delay caused due to bad weather or air traffic control problems. The Organisation believes that these two are uncontrollable factors affecting the flight delay, for every other reason it provides a guarantee of letting a flyer board his connecting flight. However, in this case ninety – five percent flight delay is caused due to these two factors only, and giving guarantee against any other reason does not really serve the purpose of delighting the consumer. Thus, if a service provide offers a guarantee of service performance but puts some conditions, it does not strike the desired cord and becomes ineffective. This is like saying that the restaurant offers a prompt delivery of the order except when there is rush.
Therefore, it is important to be courageous to offer a Service Guarantee, but it is even more important to be intelligent in offering something worthwhile to the prospective consumer.
1.4 Features of a Good Service Guarantee
Following are some of the features of a good service guarantee:
a) Unconditional
As discussed above in the Lufthansa example, if a service provider puts many conditions for the Service guarantee or if the conditions put are also the main reasons for the delay in providing service or delivering a sub standard service, then the guarantee become ineffective. Thus, a good Service guarantee is the one which is offered unconditionally. An online furniture marketer in India- pepperfry.com – has set a Service guarantee standard of hundred percent satisfaction or else hundred percent refund. This is a courageous guarantee to make. It is given that Indian market is in introductory stages of the purchase of Furniture and fixtures online. One of the main obstacles in buying online is the lack of trust on buying without physically touching and seeing and an uncertainty that how will the purchased product look when it is actually placed at home.
The online retailer‟s promotional message is “100% satisfaction or refund. No Questions asked.”
This makes the consumer feel confident in shopping online with a guarantee that the purchased product can be returned back without making any explanations. The consumer does not need a lawyer and does not need to cook any stories to return a piece. Rather he can simply ask for the return. A similar guarantee is offered by Amazon in India by allowing a smooth return of the product and an instant credit of the price of the service in the customer‟s account. On the other hand, another online retailer in India- flipkart, also offers the same guarantee with a condition that the price money of the returned item will be deposited in the e-wallet of the consumer and a purchase in future can be made on any items sold exclusively by Flipkart. This condition makes it difficult for the consumers to use the money in case of a return as it is very difficult to identify a product which is needed by the consumer and is exclusively being marketed by flipkart (since there are many retailers attached with Flipkart). Hence, in the above examples, the return and refund policies of Pepperfry and Amazon are obviously more effective as compared to Flipkart.
Further, if a marketer cannot guarantee the uncontrollable factors, it is always important to guarantee the controllable factors. In case of Lufthansa, if the delay against two factors cannot be promised, a guarantee can be made for the neat and pleasant airport waiting area, the consumers may be served good quality snacks free of cost or at subsidized rates. Similarly, Flipkart can offer a list of products which are exclusively sold by it for the ease of consumers choice.
b) Clear
The Service guarantee should be clear and concise in its choice of words, which could be easily understood by the consumers. A confusing guarantee statement or a guarantee with some hidden messages should also be completely avoided by the service providers. For instance, as against saying “Quick delivery” by a courier service provider, it should be “Overnight delivery” or “one day delivery” for a clear understanding of the Service guarantee.
c) Useful
The Service guarantee should be useful in what it offers to the consumers in case of a failure of the service. It should be meaningful enough to offer to the consumer something worthwhile. Let us take an example of a Multiplex cinema chain, which offers a guaranteed on–seat service of refreshments during the movie in the morning shows of weekdays only. Since the morning shows witness very less crowd, it is not a burden for a viewer himself to get the refreshments from the counter during the intervals also. Rather such a service is more useful when offered during rush hours, when getting to the counter could take a lot of time.
d) Easy to invoke guarantee
The procedure to avail a guarantee should be easy and short for the consumer. If there is a guarantee a consumer wishes to invoke but in doing so there are several obstacles to be cleared in the name of policy- like, filing some forms, paying some processing fees, writing or talking to some seniors, waiting for a certain duration of time etc- the guarantee itself becomes a cause of dissatisfaction for the consumers. Consider a guarantee of allowing a mobile telephone subscriber to get guaranteed network connectivity in a given region, else the consumer will get a cash balance of Rs. 100 on any call drop. The scheme looks attractive to the consumer. However, in case a subscriber wants to invoke the guarantee, there is an elaborate procedure to be followed of writing a complaint to the Head Office, giving the details of the call, providing a service purchase bill and an identity proof etc, the chances of the guarantee to be invoked would be far less.
e) Meaningful
The guarantee being offered should carry a meaning to the consumer. Else it is very likely that the guarantee may not be taken as a positive gesture of the service provider. For instance, a restaurant offers free home delivery within the duration of 30 min to any location within the radius of 2 km, else the food will be delivered free of cost. If the restaurant is located on the periphery of the residential area and does not really have very many takers of the free home delivery of food within the radius of 2 km, the guarantee is meaningless. Hence, such a guarantee is likely to have a contrary effect on the consumers perception. Pizza Hut in India, runs a promotion of free home delivery of its Pizza within the time duration of 30 min else it is to be delivered free of cost. However, on placing the order, there are several locations within the city to which the free home delivery is not offered. Hence, the scheme is perceived to be meaningless for the target consumers.
f) Valuable to the consumer
The guarantee should be perceived to have some substantial value for the consumer. If a guarantee is not financially significant, it may not elicit the desired consumer behavior.
CHECK YOUR PROGRESS
1. „Services cannot assure a standard level of satisfaction at all times to all consumers‟. Do you agree?
2. What is the concept of Service Guarantee?
3. With the help of an example discuss the meaning of invoking a service guarantee.
1.5 Significance of Service Guarantee
A Service Guarantee is a powerful marketing tool in the hands of the service providers for making a strong Brand image of its quality in the minds of the target consumers. The intangible nature of the service opens several fronts on which the consumer needs can be satisfied. Sometimes, the Service firm may not be aware of what the consumer really expects out of a service delivery experience or what he rates high in the service delivery process. British Airways (BA) conducted a feedback survey of its regular fliers to assess their perception of the service delivery. Four dimensions were rated as high for the passengers in defining their satisfaction with BA. i) Courtesy and Care offered by the BA employees and their show of care and concern towards the consumers ii) Routine or unusual Problem solving ability and effort of the employees in searching for a suitable solution to the problem iii) Initiative taken by the employees in their ability and willingness to jockey the system on behalf of the passengers iv) Handling a situation of service delivery, perceived to be failure, by the consumers. The managers at BA confessed that the last two categories of service expectations was not thought of and thus not on the manpower training agenda of it crew. Hence, it is clear that if the managers could not be foresighted to train the crew on these dimensions, how much care would the crew take in coming upto the expectations of the passengers on the same dimensions. These dimensions were not only added to the employees training modules but the guarantee statement was designed to focus on the actual expectations of the employees.
Let us look at some of the reasons for the importance of Service Guarantee:
a) Focus on Consumers needs
While a guarantee aims to offer a certain level of performance standard, it is important to identify what the consumer expects from a service and what is the desired compensation expected, in case of failure from the end of the marketer to service the same. The first step in designing and offering the guarantee is to look forward to the consumers needs and wants. This can help the marketer focus on the consumer needs in service delivery and designing service guarantee.
b) Helps set performance standard of employees
The needs of the consumers sought to be served are the benchmark of the performance of the service firms‟ employees. The service marketer assures the consumer to offer a clearly set performance else there is a compensation to be paid in form of a guarantee. This guides the employees in adhering to these standards in all that they do to deliver the service to the consumer.
c) Focus on Service Quality
One of the most important factors which is influenced by a service Guarantee is the focus of the organization and all the employees to the delivery of high quality performance in each of its service encounters. The performance level of all personnel in the organization is directed towards the pre determined clear performance standards to be matched. These standards not only boost the morale of the employees but also serve as the measure for performance appraisal to examine the level of service delivery and check loopholes, if any.
d) Develops team spirit
A mutually shared performance goal encourages the spirit of togetherness in the organization. The service staff can relate themselves to clearly defined performance standards and hence tend to be more compatible in their working relations.
e) Boost employee pride
Manpower, fiddled with the idea of withdrawing its guarantee as it felt that the target consumers were well aware of its service standards and hence a guarantee was not needed. It surveyed through its accounts and felt the same. Interestingly the resistance to withdraw the Guarantee came from the unexpected corner i.e. the organisation‟s employees. The employees shared that the guarantee is not just a marketing tool for them. Rather, they take pride in offering a guarantee to the consumer in case of a service delivery failure as they were so confident about their performance. They maintained that they felt themselves to be great company by assuring the consumers of the highest service performance and in case the consumer is not satisfied, they would like to convey that the fault lies with the employee not the consumers. Thus, a good service guarantee boosts the pride of the service HR as it facilitates the setting of an internal commitment towards organisation‟s target consumers.
f) Payout is painful
When a guarantee offers some payout as a compensation against service delivery failure, it pinches all employees of the firm, from top to bottom. A significant Guarantee payout will keep the service personnel on their toes to delight a consumer as the failure to do so can lead to a painfully high payout. The purpose for the same is very simply, not to hurt the employees of the manager financially, but to convey a power statement that the management demands consumer satisfaction. If a manager was to bear the cost of fulfilling a guarantee, he would know all the means to please a consumer at the first place.
g) Generates consumer feedback
When a consumer invokes a guarantee, he informs the reasons of the service delivery failure to the firm. As the Japanese practice goes, these reasons for invoking the guarantee are
“Golden Nuggets” as it is the precious feedback given by a disgruntled consumer, who may otherwise have not shared his reasons of dissatisfaction. This is a system which highlights the errors in the service delivery system and provides a valuable opportunity to the organization to work on its sensitive areas.
While there are systems developed by the service firms to elicit feedback they may not offer a very honest opinion due to the very nature of the mechanism used to gather the consumer response. For instance, a very common method of collecting consumer feedback in a Restaurant is a Comments Card. While consumers do fill the same, due to its very precise nature, real reasons of satisfaction or dissatisfaction may not be clearly shared through the card. An impersonal form may also discourage a consumer to pen down his real feelings with the service. Moreover, there might be many dissatisfied consumers who may not like to be rude in writing a bitter experience but may decide not to come to the restaurant again. On the contrary, when the consumer feels that he may be paid back something if he feels that the level of service received does not match with the promised quality of service, he may be more expressive in pointing out the deficiencies in the service. Hence the invoking of service guarantee may be a more useful method of gauging the consumer sentiment and problems while availing of a service.
h) A powerful marketing tool
Marketers have to be very careful in offering a Service guarantee. They need to identify the most valuable aspect of a service purchased by a consumer and the most common loopholes or the points of failure in the service delivery. These commonly skipped areas of service satisfaction need to be evaluated with their own performance. Only when the marketer is fully convinced of offering unmatchable quality in those sought after variables of services should a Guarantee be given to the consumers. But once offered, it can act as a very powerful tool for the firm‟s Marketing personnel who can smoothly compare their services with that of the competitor and be confident in making a strong marketing pitch.
CHECK YOUR PROGRESS
4. Why should a Marketer offer a Service guarantee?
5. Can a guarantee make employees conscious in their performance?
6. How can a service Guarantee boost the morale internally?
1.6 Hurdles in offering effective Service Guarantee
While the discussion so far, takes us to the conclusion that a Service guarantee is a very useful marketing tool and can generate a strong brand perception, there may be enough reasons for not to use the same. A strong Brand may not like to use a Guarantee fearing that the consumers may rather take them otherwise. Many International Brands may feel that their Brand itself implies a high standard of service delivery and offering a Service guarantee undermines their positioning in the market.
Further, there may be some obstacles in offering a strongly perceived Service guarantee, as follows:
a) External variables- There are factors, beyond the control of the service provider which may determine the level of satisfaction of the consumers. In such cases it may be impractical to offer any guarantee to the consumers. For example, experience in the Water Park is to a great extent influenced by the weather conditions. A relatively cold day or a rainy day may act as a spoilt sport and hence any Guarantee of an enjoyable day becomes impractical to offer.
b) Lack of faith on consumers– Service managers may not feel good about offering a service guarantee fearing that the consumers might cheat to invoke the same. Customers may be required to present a written proof of the service purchase to minimize the possibility of a customer cheating.
c) High Cost- Another hurdle in the Service guarantee programme could be the cost involved in settling the claims. While it is important to understand that over a period of time, the fear of guarantee claim may actually lead to Quality improvement and thus reap higher benefits.
Conclusion
Due to the intangible nature of the Services, the consumers might perceive a risk in making a complete down payment while purchasing a service. In such situations, Service guarantee is a strong marketing tool used to reduce the perceived risk and encourage the trials and consumer purchase. Guarantees should be offered after a thorough analysis of what the consumers give priority to in the various aspects of a service and whether the organization is capable enough to assure a high quality service on the same platform. While there will be initial cost in training the personnel to offer a high standard of Service, the long term benefits are more productive. But Service Guarantees cannot be used as a blanket marketing technique. There may be service providers who feel that their quality of service delivery is beyond the guarantee statement.
Summary
Service guarantees are marketing tools used to reduce the perceived risk of the consumer in availing of a service which is intangible in nature. Not all Guarantees may act as a magic wand to attract the target consumers. Guarantees, to be effective, should be useful for the consumers and should be clear and meaningful. The process of invoking a guarantee should be short and easy to avail. However, a well designed Service Guarantee can lead to higher profitability by laying focus on the consumers needs. Guarantees can also facilitate in setting a performance standard of the employees thereby improving the quality of services offered to the consumers. When a manager gets to pay out the guarantee, the pinch may be hard enough to ensure high quality service in the next service delivery situation. There is no doubt that a well designed service guarantee is a powerful tool over the competitors in the market. But the cost involved in the same may be a hurdle, especially if the firm‟s personnel are not capable or trained enough to ensure high quality services, as promised.
Learn More:
a) Aaker, D. and Joachimsthaler, E. (2000), Brand Leadership, Free Press, New York.
b) Dwayne D. Gremler, “Twenty Years of Service Guarantee Research,” Journal of Service
Research, 11, No. 4, 2009, 322–343.
c) Christopher Lovelock and Jochen Wirtz (2011), Services Marketing: People, Technology, Strategy. 7th ed., Upper Saddle River, New Jersey: Prentice Hall, 626 pp, ISBN 978-0-13-610721-7
d) Christopher W. L. Hart, “The Power of Unconditional Service Guarantees,” Harvard Business Review 66, July–August 1988, 54–62.
e) A. Tucci and J. Talaga, “Service Guarantees and Consumers’ Evaluation of Services,” Journal of Services Marketing, 11, No. 1, 1997, 10–18; Amy Ostrom and Dawn Iacobucci, “The Effect of Guarantees on Consumers’ Evaluation of Services,” Journal of Services Marketing, 12, No. 5, 1998, 362–378.