Designing the service guarantee: unconditional or specific?

Abstract

When designing a guarantee, service firms have a choice ‐the unconditional that guarantees customer satisfaction or the specific, which guarantees a major aspect of the service such as on‐time delivery. To date, this decision has been based primarily on anecdotal observations. This investigation examined consumer reactions to unconditional versus specific service guarantees in terms of risk reduction, preference, and trust in the service provider. In an experimental setting, respondents preferred firms which offered an unconditional guarantee. However, specific guarantees were favoured when subjects considered the ease of getting their money back. For a service firm, the implementation of an unconditional guarantee with a specific payout would have the broadest appeal in the market.