Service Guarantees As A Strategic Weapon.

Service guarantees are a strategic weapon in the continuing battle to differentiate and gain a competitive advantage.

This is especially important for online businesses because customers often feel more assured when they can walk into “brick and mortar” stores and offices. Even if the company is selling an intangible service, the company somehow seems more “stable” because the customer can physically see and feel the business surroundings.

By offering a service guarantee, you can increase customer satisfaction and retention by reducing consumer risk, improve service quality and establish service standards for your business. An effective service guarantee can have a substantial impact on your bottom-line.

But which is more effective — an unconditional or specific guarantee? And what is the difference between the two?

A major challenge is to design a guarantee that is appropriate for your business situation. Guarantees specify what the consumer can expect (the promise) and what the company will do if it fails to deliver (the payout).

The pure unconditional guarantee does not specify either the coverage or the payout (e.g. Satisfaction guaranteed. Period.) The most common unconditional guarantee does not specify the coverage but does specify the payout (e.g. Satisfaction guaranteed or your money back.)

The pure specific guarantee details both the coverage and the payout (e.g. Delivery by 10:00 a.m. or your money back.)

Finally, a specific guarantee might contain a detailed coverage and an unconditional payout (e.g. Delivery in 30 minutes. Period.) although it is seldom used in practice.

The guarantee selected will have an impact on the costs and benefits for your firm.

What marketing researchers have discovered is that when it comes time to select a firm, consumers prefer the unconditional guarantee. To them it signals that the firm offers higher quality overall.

When it comes time to actually use the guarantee, consumers prefer a specific guarantee for both its clarity and ease of use.

The researchers concluded that if a firm were in the process of choosing which type of guarantee to use, the creation of an unconditional guarantee with a specific payout would have the greatest positive impact on the business.