A subcommittee of the board of directors of Hampton Inns has made a bold proposal that customers be given a guarantee of “complete satisfaction or your night’s stay is free”. Employees will be permitted to make good on this guarantee without the approval of managers. But although the proposed guarantee would show great confidence in the hotels’ quality and would give Hampton Inns a competitive advantage, most of the hotel’s managers oppose the plan. Why would they not want to guarantee customer satisfaction? What are the possible customer reactions to such a guarantee?
What controls can be introduced to reduce customer abuse? A service guarantee (i. e. complete satisfaction or your night’s stay is free) makes the customer a meaningful promise and specifies a payout and an invocation procedure in case the promise is not kept (Van Looy, Gemmel & Dierdonck, 2003). Why would they (hotel managers) not want to guarantee customer satisfaction? In our opinion, it is unfair to suggest that the managers do not want to guarantee customer satisfaction. After all, that is the only guarantee of staying in business.
We think that their main concern is really about the amount of leverage the employees have in the decision process because they may make decisions that lack transparency and accountability. In addition, this empowerment may also usurp the authority of the managers. It might be their opinion that communication first between employees and managers before decisions are made would be more acceptable. Hotel managers may also think that total customer satisfaction is not achievable in the hotel and that offering this would be a set up for failure.
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It would be important for the hotel to have improvement projects which focus on the guaranteed promise, and boost the confidence of hotel managers and employees. Employees working under a service guarantee programme may find it increasingly difficult to meet organisational and customer expectations given their limited training and skills. Furthermore, a service guarantee may have a de-motivating effect on employees from the constant flow of negative feedback and service guarantee invocations (Hill, Sum, Lee & Hays, 2002).
This may cause the employee to make decisions which may not be conducive to the business, which the manager has no control over therefore leading to too many invocations and loss of profitability. What are possible customer reactions to such a guarantee? Potential and existing customers could be attracted to the hotel due to the reduction of the perceived risk of booking and staying at Hampton Inn (i. e. if I stay at Hampton Inns and I do not have complete satisfaction at least I would be able to get my night free).
The customer may be given a perception of superior quality based on the service guarantee offered. As a result of the service guarantee made, customers would expect superior service, since hotels would not want to give away free nights. The hotel may be seen as a reliable supplier. Customers may have increased loyalty based on service recovery in the case of service failure, and may spread the positive reviews about the hotel via word of mouth. Customers may want to try to abuse the system at the hotel, by trying to use trivial complaints in order to invoke the promise of the free night.
For instance, after Hampton Inn spotted a guest who invoked its guarantee 18 times within one year, they put this customer on a blacklist. (Van Looy, Gemmel & Dierdonck, 2003) Perception of reduced quality of the hotel based on the fact that the service guarantee may seem to be desperation or even a scam. What controls can be introduced to reduce customer abuse? Although it may appear that offering a guarantee will invite abuse, the reality is that only around 1% or 2% of the total market are truly unreasonable or will try to cheat a business.
It is far better to develop a really strong guarantee which is attractive to the 98% of customers who are honest and develop other ways to protect the business against the shady 2%. ( Keeffe, 2010) 1. The terms and conditions of the service guarantee should be easy to understand and communicate (Hill, Sum, Lee & Hays, 2002). This ensures the customer understands under what circumstances they should invoke the service guarantee. 2. Be specific about what the guarantee covers e. g. make sure that guests understand that the guarantee may be limited by things which are beyond your control. 3.
Time constraints- it could be a stipulation that any claims by customers should be made within a specific time frame. 4. Testing the guarantee in a small population – By using a pilot phase it is possible to assess the actual abuse to the service being guaranteed. For instance, an implicit guarantee may be used initially in the testing phase or an explicit guarantee on a limited scale. An implicit guarantee is defined as a guarantee that is not communicated with the customer, while an explicit guarantee is one that is communicated clearly to the customer (Van Looy, Gemmel & Dierdonck, 2003). . An implicit guarantee can be used by the institution exclusively. If the customers do not know about it and have a service issue, they would be surprised at the service. This would also minimize the risk of an excessive payout coming through. 6. Deal with complaints promptly and where possible correct immediately. If complaints are dealt with, this may ensure customer satisfaction which may reduce the possibility of the customer invoking the service guarantee. 7.
A customer satisfaction survey can be carried out, so that the hotel can further understand the customer’s needs and expectations and be better able to meet them, since complete satisfaction is relative, (what it takes to please one person is different to what it takes to please another). 8. Employees should be trained on what exactly the service guarantee is promising in order to deal with customer needs adequately and spot potential abusers. In conclusion, a service guarantee can positively influence employees to improve their performance and by extension that of the organization as well.
The service guarantee, once instituted correctly, may lead to increased competitive advantage, customer loyalty and positive word of mouth which could lead to growth in business and profits, as the growth would be greater than the losses made on the amount of free nights being given. Programmes should be instituted to ensure all employees are adequately trained to be able to deliver the promise of the service guarantee and to spot and reduce abuse by customers. The firm is forced to improve on their performance to meet the expectations of the customer and create confidence in the hotels’ quality. References 1.
Hill, Arthur. V. ; Sum, Chee-Chuong; Lee, Yang-Sang; Hays, Julie. M. ; Modeling the effects of a service guarantee on perceived service quality using alternating conditional expectations (ACE). Decision Sciences, July 2002. 2. Van Looy, Bart; Gemmel, Paul; Van Dierdonck, Roland; 2003, Services Management: An Integrated Approach, Pearson Education UK 3. Keeffe, Phillip; Guarantees are Marketing Tools: An Effective Guarantee Will Attract and Retain Customers, http://smallhomebusiness. suite101. com/article. cfm/a-guarantee-can-build-your-business#ixzz0pwk1X9AE Written: Feb 26, 2010, Accessed: June 2, 2010
