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What is a good service guarantee?
With a good guarantee, you tell your customers where and how to complain, and that complaining is worth their time and effort. It also shows that you care. A good guarantee is:
1) Unconditional
Customers should not need a lawyer to explain the "ifs, ands and buts" of a guarantee because ideally there should not be any conditions; a customer is either satisfied or is not.
If a company cannot guarantee all elements of its service unconditionally, it should unconditionally guarantee the elements that it can control. Airlines cannot promise on-time arrival, but they can guarantee passengers will be satisfied with airport waiting areas, service on the ground and in the air, and food quality.
2) Easy to Understand and Communicate
A guarantee should be written in simple, concise language that pinpoints the promise. Customers then know precisely what they can expect and employees know precisely what is expected of them. "Five-minute" lunch service, rather than "prompt" service, creates clear expectations.
3) Meaningful
A good service guarantee is meaningful in two respects. First, it guarantees those aspects of your service that are important to your customers. It may be speedy delivery at lunch time, when many customers are in a hurry to get back to the office, but not at dinner, when fast service is not considered a priority to most patrons.
Second, a good guarantee is meaningful financially. It calls for a significant and fair pay out when the promise is not kept. What should it be? A full refund? An offer of free service next time? The answer depends on factors such as the cost of the service, the seriousness of the failure, and customers' perception of what is fair.
Example
At one point, Domino's Pizza promised "delivery within 30 minutes or the pizza is free." Management found that customers considered this too generous; they felt uncomfortable accepting a free pizza for a mere 5- to 15- minute delay and did not always take advantage of the guarantee. Consequently, Domino's changed the guarantee to "delivery within 30 minutes or $3 off," and customers appear to consider this commitment reasonable. The important point here is that you want your customers to use your warranty as much as possible. It a sure way to discover cracks in your service or products and avoid customer defection.
4) Easy to Invoke
A customer who is already dissatisfied should not have to jump through hoops to invoke a guarantee; dissatisfaction is only exacerbated when the customer has to talk to different people, fill out forms, make telephone calls, send in written proof of purchase with a full description of the events, wait for a written reply, and go somewhere else to see someone to verify all the preceding facts, and so on.
Similarly, customers should not be made to feel guilty about invoking the guarantee. A company should encourage unhappy customers to invoke the guarantee, not put up roadblocks to keep them from speaking up.
5) Easy to Collect
Customers should not have to work hard to collect a pay out. The procedure should be easy and, equally important, quick: on-the-spot, if possible.
In your guarantee, you should not:
- promise something your customers already expect
- shroud a guarantee in so many conditions that it loses its point
- offer a guarantee so mild that it is never invoked
A guarantee that is essentially risk free to the company will be of little or no value to your customers, and may be a joke to your employees.
Why is a service guarantee important?
A guarantee is a powerful tool - both for marketing service quality and for achieving it - for five reasons.
1) A guarantee forces you to focus on customers
Knowing what customers want is essential to offering a service guarantee. A company that wants to guarantee its service, but that lacks this knowledge, may very well guarantee the wrong things.
2) A guarantee 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 employee's role and responsibilities in delivering the service. This clarity and sense of identity have the added advantage of creating employee team spirit and pride. A guarantee is far more than a simple piece of paper that puts customers at ease. It sets the tone, externally and, perhaps more importantly, internally, for your commitment to your customers and workers.
A pay out that creates financial pain when errors occur is also a powerful statement, to employees and customers alike, that management demands customer satisfaction. A significant pay out ensures that both middle and upper management will take the service guarantee seriously; it provides a strong incentive to take every step necessary to deliver. A manager who must bear the full cost of mistakes has ample incentive to figure out how to prevent them from happening.
3) A guarantee generates feedback
A guarantee creates the goal; it defines what you must do to satisfy your customers. Next, you need to know when you go wrong. A guarantee forces you to create a system for discovering errors. (The Japanese call errors "golden nuggets" because they are opportunities to learn).
4) A guarantee forces you to demand why you fail
In developing a guarantee, managers must ask questions such as the following: What failure points exist in the system? If failure points can be identified, can their origins be traced and avoided? A company that wants to promise timely service delivery, for example, must first understand its operation's capability and the factors limiting that capability. Many service executives, lacking understanding of such basic issues as system throughput time, capacity, and process flow, tend to blame workers or customers - anything but the service-delivery process.
Even if workers are a problem, managers can do several things to "fix" the organization so that it can support a guarantee, such as designing better recruiting, hiring and training processes.
5) A guarantee builds marketing muscle.
Perhaps the most obvious reason for offering a strong service guarantee is that it can boost marketing: it encourages consumers to buy your product or service by reducing the risk of the purchase decision, and it generates more sales to existing customers by enhancing loyalty.
Do all companies need to offer a guarantee?
Of course, guarantees may not be effective or practical for all firms. In general, organizations that meet the following tests probably have little to gain by offering a service guarantee:
- The company is perceived by the market to be the quality leader in its industry.
- Every employee is inculcated with the "absolute customer satisfaction" philosophy.
- Employees are empowered to take whatever corrective action is necessary to handle complaints.
- Errors are few.
- A stated guarantee would be at odds with the company's image.
How can I set up my own unconditional guarantee?
To establish an effective unconditional guarantee, you must start with a vision of error-free service. Review every step of your delivery system to identify obstacles preventing you from offering an unconditional guarantee, and design your entire organization to support your guarantee.
The success of "Bugs" Burger Bug Killer (BBBK), a Miami-based pest-extermination company, is an example of how a company can turn its situation around by analyzing the elements of its service-delivery process. By asking, "What obstacles stand in the way of our guaranteeing pest elimination?" management discovered that clients' poor cleaning and storage practices were one such obstacle. The company now requires customers to maintain sanitary practices and, in some cases, even make physical changes to their property (such as putting in walls). By changing the process, the company can guarantee the outcome.
BBBK's service guarantee to hotel and restaurant clients promises several things:
- You don't owe one penny until all pests on your premises have been eradicated.
- If you are ever dissatisfied with BBBK's service, you will receive a refund for up to 12 months of the company's services - plus fees for another exterminator of your choice for the next year.
- if a guest spots a pest on your premises, BBBK will pay for the guest's meal or room, send a letter of apology, and pay for a future meal or stay.
- If your facility is closed down due to the presence of roaches or rodents, BBBK will pay any fines, as well as all lost profits, plus $5,000.
How successful is this guarantee? The company, which operates throughout the United States, charges up to 10 times more than its competitors and yet has a disproportionately high market share in its operating areas. Its service is so outstanding that the company rarely needs to make good on its guarantee. (In 1986 it paid out only $120 000 on sales of $33 million - just enough to prove that its promises are not empty ones).
While most of BBBK's competitors claim they will reduce pests to "acceptable levels," BBBK promises to eliminate them entirely because it has a delivery mechanism in place to support its warranty.
Table of Contents
Secure Customer Loyalty?
Maximize the benefits of Customer Feedback and Word of Mouth?
Address the needs of Dissatisfied Customers?
Profit from Customer Service Recovery?
Fulfill an Unconditional Service Guarantee?
Establish a Refund and Exchange Policy?
Adopt a Quality Management Program?
Entire Guide
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