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The Power of Unconditional

Service Guarantees
Christopher W.L. Hart, Harvard Business Review, July-August, 1988, pp. 54-62

Presenting- Group
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Characteristics Of An Effective Service Guarantee

1. Unconditional
2. Easy To Understand And Communicate
3. Meaningful
4. Easy To Invoke
5. Easy To Collect

Characteristics of an Effective Service Guarantee


More the no of conditions less the power of service guarantee.
E.g..- Lufthansa Airlines
Companies uses UNCONDITIONAL SERVICE GUARANTEE as a boon to
profits-

UNCONDITIONAL

BBBK (Bugs Burger Bug Killer)


No payment unless all pests have been eradicated
Easy Refund
Letter Of Apology
Payment Of Fines and Lost Profit

L.L. Bean
100% satisfaction in every way.
Customer can return, replace or credit a product at any time

Characteristics of an Effective Service Guarantee


Easy To Understand And Communicate

Characteristics of an Effective Service Guarantee


Meaningful
Meaningful in two aspects1. Important for customers

15 min service or free during lunch only

2.Financially

Delivery within 30 min or $3 off

Characteristics of an Effective Service Guarantee


Easy To Invoke
A company should encourage unhappy customers to invoke its
guarantee, not put up roadblocks to keep them from speaking up
Travelers Advantage
vs.
Cititravel

Characteristics of an Effective Service Guarantee


Easy To Collect
Customers shouldnt have to work hard to collect a
payout.
The procedure should be easy and quick

Why a Service Guarantee Works

1.Focus on customers
2.Sets clear standards
3.Generates feedback
4.Forces company to understand why it failed
5.Builds Marketing Muscle

Why a Service Guarantee Works

Focus on customers
Guaranteeing something customers dont want or value is not meaningful

Passengers judge its customer services on four dimensions:


I. Care and concern (employees friendliness, courtesy, and warmth).
II. Initiative (employees ability and willingness to jockey the system on the customers behalf)
III.Problem solving (figuring out solutions to customer problems )
IV. Recovery (going the extra yard, when things go wrong)

Why a Service Guarantee Works


Sets Clear Standards

A specific, unambiguous service guarantee sets standards for your organization.


It tells employees what the company stands for
And it forces the company to define each employees role and responsibilities in delivering
the service

Why a Service Guarantee Works


Generates Feedback

Companies need to know when they go wrong.


A guarantee forces companies to create a system for discovering errors

Why a Service Guarantee Works


Forces You To Understand Why You Fail

What failure points exist in the system?


If failure points can be identified, can their origins be tracedand overcome?
Before giving guarantee to customers a company should understand basic things about it .
For eg. system throughput time, capacity, process flow, operations capability and the
factors limiting that capability

Why a Service Guarantee Works


Builds Marketing Muscle (i)

Encourages consumers to buy a service by reducing the risk of the purchase decision
Generates more sales to existing customers by enhancing loyalty.
Generates Word-of- Mouth Promotion
Very important for service companies
Service companies biggest competitors are themselves.
Money spent on guarantees is an investment in customer satisfaction and loyalty

Why a Service Guarantee Works


Builds Marketing Muscle (ii)

Conditions where offering Service Guarantee leads to Marketing Impact

High price of service


Customer ego on the line
Low customers expertise with service
Negative consequences of service failure are high
Industry has bad image for service quality
Company depends on frequent customer repurchases
Companys business is affected deeply by word of the mouth

Does everyone need a guarantee?


When is there little to no benefit when offering a service guarantee?
Four Seasons Hotel

Strong internal vision of absolute customer satisfaction


Implicit guarantee

Can FedEx drop its absolutely, positively assurance ?


Companies with little to gain by providing a Service guarantee

Perceived as Quality Leader in its Industry


Employees inculcated with absolute customer satisfaction philosophy
Employees empowered to take corrective action to handle complaints/errors

Reasons Companies Do NOT Offer Guarantees


External variables

Influence by uncontrollable factors


How BBBK turned the situation around ?
Employees response to externally imposed problems

Fears of cheating by customers

Worrying about the 1%.


Incentive of cheating

Costs of the guarantee are too high

Quality is free Philip Crosby


Benefits of Quality Improvement fewer errors, higher productivity, repeat business
Offering unconditional guarantee blindly

Breakthrough Service
Altering the basis of competition and putting competitors at severe disadvantage

Redefining the meaning of service


Performing at unmatchable levels

Replicating success in other Service Businesses?


Spending to reduce errors is an investment

Protecting market position


Reducing time-consuming service errors
Reinforcing companys values to employees

Tapping into powerful source of competitive advantage

Thank You!

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