The effect of implicit service guarantees on business performance

Abstract

Purpose – Although service guarantees are generally believed to give firms a competitive edge, much remains to be learned about the value of, and return on, this customer relationship management strategy. This study aims to examine the influence of implicit service guarantees on two important aspects of business performance: customer satisfaction and return on investment. Design/methodology/approach – The study hypotheses are tested utilizing three different sources of secondary data to assess the study variables. Findings – Over a four-year period, top implicit service guarantee provider firms generated superior market and financial performance in terms of customer satisfaction and return on investment than their industry peers . Research limitations/implications Research limitations/implications – The number of top implicit service guarantee provider firms used to test the study hypotheses is relatively small due to inherent constraints associated with using secondary data. Testing more exemplar firms against their respective industry averages would have been preferable and may have yielded even more robust findings. Practical implications – Firms recognized for leveraging customer service skills and resources to “make right” any sources of customer dissatisfaction may achieve positional advantages associated with superior business performance. Therefore, focusing on building a firm's reputation for exceptional customer service provision may be a more effective approach than offering an explicit service guarantee. Originality/value – This research offers support for contentions that customers value the implicit service guarantees associated with firms recognized for outstanding customer service and responds to calls for research that evaluates the specific information that must be communicated to customers to enhance the credibility and effectiveness of service guarantees.