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The Power of Unconditional Service GuaranteesChristopher W.L. Hart, Harvard Business Review, July-August, 1988, pp. 54-62Presenting- Group 4

UM14128UM14160UM14130UM14163UM14134UM14165UM14149UM14166Characteristics Of An Effective Service GuaranteeUnconditionalEasy To Understand And CommunicateMeaningfulEasy To InvokeEasy To CollectCharacteristics of an Effective Service GuaranteeUNCONDITIONAL

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-

BBBK (Bugs Burger Bug Killer)No payment unless all pests have been eradicatedEasy RefundLetter Of ApologyPayment Of Fines and Lost Profit

L.L. Bean100% satisfaction in every way.Customer can return, replace or credit a product at any time

3Characteristics of an Effective Service GuaranteeEasy To Understand And Communicate

4Characteristics of an Effective Service GuaranteeMeaningful

Meaningful in two aspects-

Important for customers2.Financially

15 min service or free during lunch only

Delivery within 30 min or $3 off5Characteristics of an Effective Service GuaranteeEasy 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

6Characteristics of an Effective Service GuaranteeEasy To Collect

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

7Why a Service Guarantee WorksFocus on customersSets clear standardsGenerates feedbackForces company to understand why it failedBuilds Marketing Muscle8Why a Service Guarantee WorksFocus on customers Guaranteeing something customers dont want or value is not meaningful

Passengers judge its customer services on four dimensions:Care and concern (employees friendliness, courtesy, and warmth).Initiative (employees ability and willingness to jockey the system on the customers behalf)Problem solving (figuring out solutions to customer problems )Recovery (going the extra yard, when things go wrong)

9Why a Service Guarantee WorksSets Clear Standards

A specific, unambiguous service guarantee sets standards for your organization. It tells employees what the company stands forAnd it forces the company to define each employees role and responsibilities in delivering the service

10Why a Service Guarantee WorksGenerates Feedback

Companies need to know when they go wrong.A guarantee forces companies to create a system for discovering errors

11Why a Service Guarantee WorksForces 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

12Why a Service Guarantee WorksBuilds 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 PromotionVery important for service companiesService companies biggest competitors are themselves. Money spent on guarantees is an investment in customer satisfaction and loyalty

13Why a Service Guarantee WorksBuilds Marketing Muscle (ii)

Conditions where offering Service Guarantee leads to Marketing Impact High price of serviceCustomer ego on the lineLow customers expertise with serviceNegative consequences of service failure are highIndustry has bad image for service qualityCompany depends on frequent customer repurchasesCompanys business is affected deeply by word of the mouth14Does everyone need a guarantee?When is there little to no benefit when offering a service guarantee?

Four Seasons HotelStrong internal vision of absolute customer satisfactionImplicit guarantee

Can FedEx drop its absolutely, positively assurance ?

Companies with little to gain by providing a Service guaranteePerceived as Quality Leader in its IndustryEmployees inculcated with absolute customer satisfaction philosophyEmployees empowered to take corrective action to handle complaints/errors

Reasons Companies Do NOT Offer GuaranteesExternal variablesInfluence by uncontrollable factorsHow BBBK turned the situation around ?Employees response to externally imposed problems

Fears of cheating by customersWorrying about the 1%.Incentive of cheating

Costs of the guarantee are too highQuality is free Philip CrosbyBenefits of Quality Improvement fewer errors, higher productivity, repeat businessOffering unconditional guarantee blindly

Breakthrough Service

Altering the basis of competition and putting competitors at severe disadvantageRedefining the meaning of service Performing at unmatchable levels

Replicating success in other Service Businesses?

Spending to reduce errors is an investmentProtecting market positionReducing time-consuming service errorsReinforcing companys values to employees

Tapping into powerful source of competitive advantage

Thank You!