Tip-Collection Strategies, Service Guarantees, and Consumer Evaluations of Group Package Tours

Abstract

Signaling theory proposes that consumers use signals, such as price and guarantee, sent by firms to form impressions of quality. Several tip-collection strategies and types of service guarantee are employed by travel agencies as pricing strategies and marketing tools, but empirical evidence for the effects of these strategies and guarantees on consumers' pre-purchase evaluation is lacking. This study employed a 2×3 between-subjects factorial design—with two tip-collection strategies (tipping by participants and included) and three types of service guarantee (none, attribute-specific, and full satisfaction)—to elucidate these effects. The results indicate that a group package tour (GPT) with a tips-included strategy and full satisfaction guarantee was preferred by our subjects because of higher expected service quality and willingness to buy, and the lower perceived risk. Research implications and future research directions are also discussed.