Wirtz et al

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Wirtz et al

  1. 1. Should a firm with a reputation for outstanding service quality offer a service guarantee? Jochen Wirtz Associate Professor, Department of Marketing, Faculty of Business Administration, National University of Singapore, Singapore Doreen Kum Student, Department of Marketing, Faculty of Business Administration, National University of Singapore, Singapore Khai Sheang Lee Associate Professor, Department of Marketing, Faculty of Business Administration, National University of Singapore, Singapore Keywords Services marketing, Service quality, Perception, Consumer behaviour, Guarantees, Hotels Abstract Studies reputation for service quality as a potential moderator of the relationship between a service guarantee and its impact on consumer perceptions of service quality, risk and purchase intent. A before-after experimental design, set in the hotel industry, was employed to explore the impacts of a service guarantee for an outstanding versus a good service provider. Contrary to what had been implied in the past, the introduction of an explicit guarantee had no negative effect for the outstanding service provider in our study. In fact, the provision of a guarantee marginally improved expected quality, reduced perceived risk, and had no effect on purchase intent. However, for the good quality provider, the impacts were all positive and strong, and apart from the impact on perceived risk, the effects were significantly stronger than those for the outstanding quality provider. Our findings thus support the hypothesized moderating role of service quality. Introduction Service guarantees are often seen as an effective tool to jump-start quality improvements, to maintain superior quality levels, and to credibly signal high quality (Wirtz, 1998). Recent research has focused on the impact of various guarantee design features on consumer decision making (e.g. McDougall et al., 1998; Fruchter and Gerstner, 1999; Schmidt and Kernan, 1985; Wirtz, 1997; Wirtz et al., 1999). However, little has been done to examine a firm's reputation for service quality as a moderating variable on the impact of a guarantee on consumer perceptions. The role of a firm's reputation as a moderating variable is plausible because a firm known for service excellence may be perceived as offering an implicit guarantee. For example, one would take for granted that Ritz Carlton or McKinsey offered first-class service, and in the as unlikely perceived event of a quality problem, service recovery is fully expected. Hence, an explicit guarantee might puzzle clients as to why it is now necessary for the service provider to explicitly specify and offer a guarantee. It is therefore not clear whether outstanding service providers would benefit from the introduction of an explicit guarantee. We explore this issue by examining a firm's quality reputation as a moderating variable of the impact of an explicit guarantee on The current issue and full text archive of this journal is available at http://www.emerald-library.com The authors thank Shahrin Surif for his research assistance throughout this project, and Irene C.L. Ng for valuable feedback on an earlier draft of this manuscript. Service quality 502 JOURNAL OF SERVICES MARKETING, VOL. 14 NO. 6 2000, pp. 502-512, # MCB UNIVERSITY PRESS, 0887-6045 An executive summary for managers and executive readers can be found at the end of this article
  2. 2. consumer perceptions of risk and service quality, and consumer purchase intent. Impacts of a guarantee on perceived risk, expected quality and purchase intent A well-designed service guarantee should be unconditional, easy to understand and to communicate, meaningful, easy to invoke and to collect on (Hart, 1993). A service guarantee benefits the consumer by reducing the level of perceived risk associated with the service through various ways (Wirtz, 1998). First, an unambiguous guarantee clarifies the standards of performance a customer can expect, and thereby reduces the uncertainty faced. Second, it promises high quality performance in those service elements deemed as important by the consumer. Finally, it reduces negative consequences should the service fail by promising a substantial payout and/ or rework (Berry, 1995). In addition to reducing perceived risk, a service guarantee serves to increase expected service quality. Consumers would reason that if a company had not achieved high levels of service quality, it could not offer a guarantee (Hart, 1993). According to the theory of reasoned action, the belief that buying a service will lead to a favorable outcome induces the customer to form a more favorable attitude towards buying, which in turn leads to a stronger purchase intention (Azjen and Fishbein, 1980; Sheppard et al., 1988). Thus, a well- designed service guarantee is important in increasing consumers' likelihood of purchase. From the current literature, it can therefore be concluded that a well- designed service guarantee can lead to increased service quality expectations, lower perceived risk, and increased purchase intent. However, implicit in the research mentioned, the service providers examined are less known for their service quality, but are aspiring to improve consumer perceptions. Whether the benefits of introducing an explicit guarantee would extend to firms already known for their service excellence is a key research issue that is addressed in this paper. Hypothesis development While there seem to be substantial benefits from introducing an explicit service guarantee, the effects for a firm already known for its service excellence are less certain. It has even been suggested that it may not be advisable for a highly reputed service provider to offer an explicit guarantee (Hart, 1988). This is because consumers would already take outstanding quality for granted, and would fully expect service recovery in the case of an as unlikely perceived quality problem. Hence, outstanding service providers are often seen as providing implicit guarantees. This may be regarded as the pinnacle of customer service, as the guarantees are not explicitly stated, but yet customers are confident that they can count on the firm to do what is right. Hence, for such firms, advertising the ``known'' would produce little gain. Worse still, an explicit guarantee offered by such a firm may be seen as incongruent with the company's prestigious image (Hart, 1988), and may even be interpreted as a signal for potential quality problems (Wirtz, 1998, p. 71), resulting in negative consumer perceptions. An implicit guarantee is an unsaid promise that a firm will do whatever is necessary to satisfy a customer. This is the scope that is also offered by ``unconditional full satisfaction guarantees,'' which have been advocated as the best possible guarantee design (e.g. Ettore, 1994; Hart, 1988). Hence, firms that are known for their service excellence have little to gain and may, Service guarantee Implicit guarantees JOURNAL OF SERVICES MARKETING, VOL. 14 NO. 6 2000 503
  3. 3. as suggested in the previous paragraph, even risk creating negative perceptions by making their service guarantees explicit. In summary, prior research suggests that the introduction of an explicit guarantee will affect consumers' perceptions positively for service providers that are less known for outstanding service quality, but has limited or potentially even negative effects for service providers with a reputation for service excellence. We therefore hypothesize that a firm's reputation for service quality moderates the impact of an explicit service guarantee on consumer quality expectations, perceived risk, and purchase intent. Hypotheses: An explicit service guarantee (a) increases consumers' expected quality, (b) reduces consumers' perceived risk, and (c) increases consumers' purchase intent, to a larger degree for a good quality provider than for an outstanding quality provider. Methodology A before-after experimental design (Aaker and Day, 1990) using a role- playing technique was employed. The role-playing approach was used to avoid the problem of individuals reacting differently to the study context. For a more detailed discussion of the benefits of the role playing technique, refer to Havlena and Holbrook (1986). Manipulations Two hotels that differ in their reputation for service quality were selected. However, care was taken that the two hotels did not differ too greatly, as the intended benefits of a guarantee can only be realized if the hotels concerned have bond credibility, and are seen to fulfill their promise on the guarantee (Boulding and Kirmani, 1993). The impact of a guarantee would become weaker, and perhaps even insignificant, when the bond credibility of a provider is low. Accordingly, two five-star hotels were selected. The good reputation hotel (subsequently referred to as the ``good hotel'') was operationalized as the ANA Hotel, Singapore. The hotel with an outstanding reputation for service quality (subsequently referred to as the ``outstanding hotel'') was operationalized as the Ritz Carlton in Singapore. Both hotels belong to well known international chains. Procedure 250 questionnaires were randomly distributed to business travelers at Changi Airport in Singapore. Potential respondents were screened, and questionnaires were only given to travelers who were familiar with both hotel chains. A final sample of 95 respondents was achieved. The real research purpose was disguised to minimize potential demand effects, and respondents were told that they participated in a study that examined the level of service quality of hotels in Singapore. First, respondents were asked to read a short description of the hotel and then to answer a series of questions on expected service quality, perceived risk and purchase intent. Following which, the respondents were required to read a scenario in which the introduction of a service guarantee was simulated (refer to the Appendix for a sample). After reading the simulation, respondents again responded to items that measured the independent variables. Measures To check that the operationalization of reputation was successfully manipulated with the two hotels selected, respondents were asked for their opinion of the hotel's reputation for service quality. This measure was adapted from Boulding and Kirmani (1993). Expected service quality was Two hotels 504 JOURNAL OF SERVICES MARKETING, VOL. 14 NO. 6 2000
  4. 4. measured using the question ``How would you describe this hotel's reputation for service quality?'' with responses being anchored in ``1 = very poor service'' and ``5 = excellent service.'' The dependent measures for this study were expected service quality, perceived risk, and purchase intention. Expected service quality was measured with a five-item seven-point scale, which was adapted from Boulding and Kirmani (1993). The first item asked the respondents to compare the hotel's overall level of service to other hotels of the same class on a scale anchored at ``much lower than average quality'' and ``much higher than average quality''. The second item asked the respondents to rate the overall service quality of the hotel on a scale with ``low quality'' and ``high quality'' as anchors. Respondents were also asked to indicate their perceptions of the likelihood of service failure, non-breakdown in performance, and the likelihood that the hotel would resolve any service failure to their satisfaction, on seven-point rating scales anchored at ``very unlikely'' and ``very likely.'' A one-item scale was used to measure respondents' perceived risk that is associated with making a purchase decision about the hotel. The scale was anchored in ``very little risk'' and ``a great deal of risk.'' Finally, the measure for purchase intent again was adapted from Boulding and Kirmani (1993). The measure asked respondents about the perceived likelihood that they would pick the hotel in question over other hotels on a scale anchored at ``very unlikely'' and ``very likely.'' Data analysis Preliminary analyses The Cronbach alpha values for expected quality, the only multi-item scale, was high with a value of 0.85 at the first measurement before the service guarantee was introduced, and 0.86 at the second measurement after the guarantee introduction. The preliminary analysis showed that the hotels' quality levels were perceived as intended. The Ritz Carlton (thereafter referred to as ``outstanding hotel'') was perceived as offering significantly higher levels of service quality (mean = 5.6 on a scale from 1 to 7, 7 being highest quality) than the ANA Hotel (thereafter referred to as ``good hotel'') (mean = 4.6, t = 6.0, p < 0.001). Hypothesis testing To test the hypothesis advanced, a series of repeated measures analyses of variance tests were conducted with the guarantee condition (before and after introduction of the guarantee) and the hotel condition (the good and outstanding hotel) as independent variables. Expected quality, perceived risk and purchase intent were the dependent variables. The F-values of the main and interaction effects resulting from the ANOVA are presented in Table I, and the mean values of the dependent variables are plotted in Figure 1. To Guarantee main effects Guarantee and hotel interaction effects F-value P F-value P Expected quality 42.09 <0.001 5.24 <0.05 Perceived risk 4.50 <0.05 0.08 >0.10 Purchase intent 8.63 <0.05 8.63 <0.05 Table I. Results of repeated measures analysis of variance Expected service quality Perceived risk Variance tests JOURNAL OF SERVICES MARKETING, VOL. 14 NO. 6 2000 505
  5. 5. directly contrast the impact of the guarantee on the two quality conditions, the means for the two hotels before and after the guarantee introduction were tested for significance (Table II). The interaction effect for expected quality (F = 5.2, p < 0.05; Table I) showed that an explicit guarantee had a significantly stronger impact on the good hotel than the outstanding hotel, thus supporting our hypothesis. Furthermore, the t-tests showed that an explicit guarantee had a significant and positive effect on expected quality for both hotels (good hotel: t = 5.3, p < 0.001; outstanding hotel: t = 3.7, p < 0.001; Table II). In summary, an explicit guarantee significantly increased the expected quality for both hotels, but the impact was significantly stronger for the good hotel than for the outstanding hotel. Hence, H(a) is supported. The interaction effect for perceived risk was in the intended direction (see Figure 1), but was not significant (F = 0.08, p > 0.10). A significant guarantee main effect and an insignificant interaction effect together suggest that perceived risk was reduced by the explicit guarantee, regardless of the reputation of the hotel. Although the t-value was only marginally significant Figure 1. Interaction effects 506 JOURNAL OF SERVICES MARKETING, VOL. 14 NO. 6 2000
  6. 6. for the outstanding hotel, the impact was in the intended direction and relatively large with a delta of 0.31. In conclusion, an explicit guarantee reduced perceived risk independent of the reputation of the hotel. Hence, H(b) is only partially supported. Purchase intent showed a significant interaction effect (F = 8.6, p < 0.05). For the outstanding hotel, the before and after guarantee means were identical (delta = 0, t = 0.00, n.s.). This showed that an explicit guarantee impacted the purchase intent for the good hotel, but not so for the outstanding hotel, thus supporting the interaction effect advanced in H(c). In summary, the impact of the explicit guarantee was positive and highly significant for the good quality provider along all dependent variables, i.e. expected quality was improved, perceived risk was reduced, and purchase intention was increased. The effects of an explicit guarantee for the outstanding quality provider were weaker. Only expected quality and perceived risk were affected by the introduction of an explicit guarantee, and no increase in purchase intent was observed. The ANOVAs showed that the hypothesized interaction effects were significant for two of the three dependent variables (i.e. for expected quality and purchase intent). However, for the third variable (perceived risk), the effects were insignificant, though they were at least in the hypothesized direction. Overall, the findings therefore lend support to our hypothesis that an explicit guarantee has a stronger impact for a good quality provider than for an outstanding provider. Finally, our findings suggest that an explicit guarantee will not negatively affect consumers' perceptions for an outstanding provider, contrary to what had been implied in the literature. Rather, all the effects observed in this study were either positive (i.e. increased expected quality and reduced perceived risk), or null (for purchase intent), but not negative. Discussion and implications The results showed that the change in the expected quality for the good quality provider was significantly larger than for the outstanding provider. The expected quality for the outstanding provider was already high before the introduction of an explicit guarantee. Consequently, it might have been more difficult for customers to perceive large increases in expected quality. In contrast, it was easier for the good provider to boost quality expectations by offering an explicit service guarantee. Dependent variables Before guarantee (mean value) After guarantee (mean value) Delta mean values t-value P (one-tailed) Expected quality Good hotel 4.61 5.30 0.68 5.3 <0.001 Outstanding hotel 5.58 5.90 0.33 3.7 <0.001 Perceived risk Good hotel 3.09 2.67 0.42 2.0 <0.05 Outstanding hotel 2.47 2.16 0.31 1.2 <0.10 Purchase intent Good hotel 3.89 4.80 0.91 3.9 <0.001 Outstanding hotel 5.94 5.94 0.00 0.0 n.s. Note: Higher numbers mean higher expected quality, more perceived risk and higher purchase intention. All variables were measured on seven-point Likert scales ranging from 1 to 7 Table II. Impact of the introduction of a guarantee on consumer perceptions Good quality provider JOURNAL OF SERVICES MARKETING, VOL. 14 NO. 6 2000 507
  7. 7. There was no significant difference in the reduction in perceived risk between the two hotels, meaning that the impact of an explicit guarantee on perceived risk was independent of reputation level. This suggests that although highly reputed hotels may have implicit guarantees, consumers still prefer to have the certainty of an explicit promise. The impact of an explicit guarantee on purchase intent was strong for the good quality provider, but there was no change in the purchase intent for the outstanding provider. There are two plausible reasons for this. First, purchase intent was already high for the outstanding provider, hence it might have been difficult to boost the ratings much further. Second, the outstanding provider might have already captured the high-end of the market, even when it did not offer an explicit guarantee. Thus, the impact of providing an explicit guarantee would be minimal. In other words, it would be difficult for a highly rated hotel to attract new customers by signaling even higher quality, if it already was regarded as the quality leader. On the other hand, for a reputable service provider, the introduction of a guarantee would be seen as signaling higher quality. Therefore, by providing an explicit guarantee and signaling higher quality, it could more successfully attract the more quality conscious customers, in addition to its traditionally more value- for-money oriented clientele. The findings on the reputation effect are important for service managers when deciding on whether or not to implement a service guarantee. First, the findings confirm that a service provider with a good but not outstanding reputation for service quality has much to gain from the introduction of a well-designed service guarantee. Second, the findings suggest that the benefits of a guarantee would also be positive, but less so for an already highly reputed firm. This suggests that firms with a reputation for service excellence should carefully consider whether the costs of implementing a service guarantee are justifiable in terms of its market and/or operational impacts. In addition, contrary to what had been proposed earlier (e.g. Hart, 1988; Wirtz, 1998), the introduction of a service guarantee had no negative effects on customer perceptions of the outstanding provider. The guarantee caused none of the mean values of the dependent variables to move in an unfavorable direction. Managerially, this suggests that firms with a reputation for excellent quality need not shy away from launching an explicit service guarantee for fear of its negative impact on customer perceptions. The option of using a guarantee as a tool for competitive advantage and/or as a management tool to put pressure on operations to maintain and improve service quality is still open. Finally, this research suggests that for all practical purposes, offering an explicit guarantee is still better perceived by customers, than not offering one. We operationalized the outstanding provider with the Ritz Carlton in Singapore, which is probably the best hotel in the region. Still, an explicit guarantee could improve customer perceptions in our study. This was found although an implicit guarantee suggests unlimited scope and high service recovery expectations, as the hotel implicitly promises to satisfy its customers no matter what. However, our findings imply that consumers discount the expected value of implicit guarantees due to the uncertainty of what is covered and of the recourse in the event of service failure (Wirtz, 1997). In short, customers of even the best providers may prefer the certainty of an explicit guarantee over the uncertainty intrinsic in an implicit guarantee, although the latter may potentially cover a wider scope and offer a larger payout. Two plausible reasons Service guarantee 508 JOURNAL OF SERVICES MARKETING, VOL. 14 NO. 6 2000
  8. 8. Limitations and further research The conclusions drawn from this study are made with the usual caveats of experimental research. Also, future research could use a true experimental design, ideally the Solomon Four-Group Design (Aaker and Day, 1990, p. 327). We believed that testing effects would be negligible in the present study, since both the before- and after-measures were taken shortly one after the other, thus ruling out maturation and history effects, which are the most serious threats to validity in before-after tests. Furthermore, in the debriefings after each experimental session, respondents indicated that they were unaware of the experimental hypotheses of this study. Finally, any testing effect that might have occurred for one hotel should also have occurred for the other, thus the net effect would be negligible. This study was conducted with firms in the hotel industry, and we used only high-end hotels as the research context. This is because of our intention to test whether the implicit guarantee offered by such high-end providers would reduce, or even reverse the effects of an explicit guarantee. An interesting issue for future research is whether our findings can be extended to firms positioned at lower-service levels (e.g. motel chains or fast food restaurants), which nonetheless are known for outstanding quality in terms of consistently satisfying their target customers. In our study, we only examined reputable five-star hotels from international chains with high bond credibility. The selection of high-end providers was guided by Boulding and Kirmani's (1993) study on warranties, where it was found that sufficient bond credibility was a necessary condition for warranties to be effective. Future research could examine the moderating effects of quality reputation on consumers' perceptions for lower quality providers who possess little bond credibility. From past studies, it can be inferred that the impact of a service guarantee becomes weaker as a firm's reputation decreases (Boulding and Kirmani, 1993; Tucci and Talaga, 1997). This suggests that consumers may discount their expected value of warranties to the extent that perceived risk and likelihood of failure may not be reduced. This would mean that firms with a poor reputation would need to first improve their reputation by some other means (e.g. by communicating success stories on quality improvements, or by using testimonials of satisfied customers to signal improved quality), before they effectively could use service guarantees to gain more positive consumer perceptions. Examination of the interaction effect between bond credibility and reputation for service quality, is yet another research avenue worth pursuing. This discussion combined with the findings of our study suggests that the impact of a guarantee shows an inverted U-shape, with reduced or even insignificant impacts for firms with a reputation for very low and outstanding quality, and a maximum impact for providers with quality levels between the two extremes. References Aaker, D.A. and Day, G.S. (1990), Marketing Research, 4th ed., Wiley, Singapore. Azjen, I. and Fishbein, M. (1980), Understanding Attitudes and Predicting Social Behavior, Prentice Hall, Englewood Cliffs, NJ. Berry, L.L. (1995), On Great Service ± A Framework for Action, The Free Press, New York, NY. Boulding, W. and Kirmani, A. (1993), ``A consumer-side experimental examination of signaling theory: do consumers perceive warranties as signals of quality?'', Journal of Consumer Research, Vol. 20, June, pp. 111-23. Ettore, B. (1994), ``Phenomenal promises that mean business'', Management Review, March, pp. 18-23. Solomon Four-Group Design JOURNAL OF SERVICES MARKETING, VOL. 14 NO. 6 2000 509
  9. 9. Fruchter, G.E. and Gerstner, E. (1999), ``Selling with satisfaction guaranteed'', Journal of Service Research, Vol. 1 No. 4, pp. 313-23. Hart, C.W.L. (1988), ``The power of unconditional service guarantees'', Harvard Business Review, July-August, pp. 54-62. Hart, C.W.L. (1993), Extraordinary Guarantees: A New Way to Build Quality Throughout Your Company and Ensure Satisfaction For Your Customers, AMACOM, New York, NY. Havlena, W.J. and Holbrook, M.B. (1986), ``The varieties of consumption experience: comparing two typologies of emotion in consumer behavior'', Journal of Consumer Behavior, Vol. 13, pp. 174-84. McDougall, G.H.G., Levesque, T. and VanderPlaat, P. (1998), ``Designing the service guarantee: unconditional or specific?'', Journal of Services Marketing, Vol. 12 No. 4, pp. 278-93. Schmidt, S. and Kernan, J.B. (1985), ``The many meanings (and implications) of satisfaction guaranteed'', Journal of Retailing, Vol. 61 No. 4, pp. 89-108. Sheppard, B.H., Hartwick, J. and Warshaw, P.R. (1988), ``The theory of reasoned action: a meta-analysis of past research with recommendations for modifications in future research'', Journal of Consumer Research, Vol. 15, pp. 325-43. Tucci, L.A. and Talaga, J. (1997), ``Service guarantees and consumers' evaluation of services'', Journal of Services Marketing, Vol. 11 No. 1, pp. 10-18. Wirtz, J. (1997), ``Is full satisfaction the best you can guarantee ± an empirical investigation'', Proceedings of the Eighth Biennial World Marketing Congress 1997, Kuala Lumpur, Malaysia, Academy of Marketing Science, Vol. 8, pp. 416-18. Wirtz, J. (1998), ``Development of a service guarantee model'', Asia Pacific Journal of Management, Vol. 15 No. 1, pp. 84-102. Wirtz, J., Ng, I.C.L. and Lee, K.S. (1999), ``How to reduce consumer cheating on service guarantees. Results from two experimental studies'', Proceedings of the Ninth Biennial World Marketing Congress 1999, Qwara, Malta, Academy of Marketing Science, Vol. 9, pp. 198-203. Appendix. Operationalization of service guarantee & Figure A1. 510 JOURNAL OF SERVICES MARKETING, VOL. 14 NO. 6 2000
  10. 10. Executive summary and implications for managers and executives Advantages of an explicit service guarantee Service guarantees are often seen as an effective way to jump-start quality improvements, maintain superior quality levels and credibly signal high quality. A well-designed service guarantee should be unconditional, easy to understand and to communicate, meaningful, easy to invoke and collect upon. An unambiguous service guarantee clarifies the standards of performance a customer can expect. It promises high quality performance in the areas which the customer deems to be important. It also reduces negative consequences should the service fail by promising a substantial payout and/ or the service being offered again. In addition, a service guarantee increases expected service quality. Customers reason that if a company had not achieved high levels of service quality, it could not offer a guarantee. This, in turn, makes it more likely that a consumer will buy the service in the first place. Potential drawbacks for top service companies Most of the companies which introduce a service guarantee are striving to be known for offering a high quality service, rather than already known for their service excellence. Firms already known for service excellence may be perceived as offering an implicit guarantee. For example, one would take for granted that Ritz Carlton or McKinsey offer first class service and, in the unlikely event of a problem arising, that the matter would be put right. An explicit guarantee might cause clients to wonder why it is now necessary for the company explicitly to specify a guarantee. They might even take it as a sign of potential quality problems. Wirtz et al. carried out research among business people familiar with two five-star hotels in Singapore ± the ANA Hotel, which has a good reputation for service quality, and the Ritz Carlton, which is known as outstanding. The research was designed to show what people would think if the hotels decided to offer an explicit service guarantee. Good firms benefit more than outstanding ones The results showed that, for the ANA Hotel, expected quality was improved, perceived risk was reduced and purchase intention was increased. For the Ritz Carlton, only expected quality and perceived risk were affected by the introduction of an explicit guarantee. No increase in purchase intent was observed. However, nor was there any decrease in purchase intent, so an explicit guarantee did not harm the way consumers viewed the outstanding provider. Purchase intent was already high for the Ritz Carlton, so it might have been difficult to boost the ratings much further. The Ritz Carlton might already have captured the high end of the market, even when it did not offer an explicit guarantee, so the impact of providing an explicit guarantee would be minimal. For the ANA Hotel, in contrast, the introduction of a guarantee would be seen as signalling higher quality. This would improve its chances of attracting the more quality conscious customers, in addition to its traditionally more value-for-money orientated clientele. The change in the expected quality for the ANA Hotel was significantly larger than for the Ritz Carlton. The expected quality for the Ritz Carlton JOURNAL OF SERVICES MARKETING, VOL. 14 NO. 6 2000 511 This summary has been provided to allow managers and executives a rapid appreciation of the content of this article. Those with a particular interest in the topic covered may then read the article in toto to take advantage of the more comprehensive description of the research undertaken and its results to get the full benefit of the material present
  11. 11. was already high before the introduction of an explicit guarantee, so it might have been hard for customers to perceive large increases in expected quality. In contrast, it was easier for the ANA Hotel to boost quality expectations by offering an explicit quality guarantee. There was no significant difference in the reduction in perceived risk between the two hotels. This means that the impact of an explicit guarantee on perceived risk was independent of reputation level. This suggests that although highly reputed hotels may have implicit guarantees, customers still prefer to have the certainty of an explicit promise. Cost-benefit analysis required The findings on reputation confirm that a service provider with a good, but not outstanding, reputation for service quality has much to gain from introducing a well designed service guarantee. There would also be benefits for an already highly regarded firm ± but these would be less significant. This suggests that firms with a reputation for service excellence should carefully consider whether the costs of implementing the service guarantee outweigh the advantages. Offering an explicit guarantee is, it seems, better perceived by customers than not offering one. Customers of even the best service providers appear to prefer the certainty of an explicit guarantee over the uncertainty intrinsic in an implicit guarantee, although the latter may potentially cover a wider scope and offer a larger payout. (A preÂcis of the article ``Should a firm with a reputation for outstanding service quality offer a service guarantee?''. Supplied by Marketing Consultants for MCB University Press.) 512 JOURNAL OF SERVICES MARKETING, VOL. 14 NO. 6 2000

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