Service Guarantee (SG) Its Design and its Impact
http://www.rickyview.com Presenters: Ricky Liu
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Preview
•Developing a Dynamic SG Model based on its design and impact
•Stages of the Integrated Model •Limitations •Conclusion
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(Fabien, 2005)
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(Wirtz, 1998)
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External Factors
Internal Factors
Decision To Commit Characteristics of Effective Service Guarantee
NO
No Service Guarantee
YES Service Guarantees Design
Implementation & Communication
Operation & Service Quality
Consumer Behaviour
Business Performance Analysis
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External Factors
External Factors
•Industry standards
Decision To Commit
(unfamiliar with service)
•Competition •Legal aspects
Internal Factors
v.s.
(a promise as a formal contract)
Characteristics of Effective Service Guarantee
NO
No Service Guarantee
YES Service Guarantees Design
Implementation & Communication
Operation & Service Quality
Consumer Behaviour
Business Performance Analysis
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External Factors
•Risk perceived by customers •Perceived image of the firm (Anthony Davidson) •Culture (written guarantee) •Uncontrollable factors (Airlines firms)
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Internal Factors •Process fit (suitable process) •Communication between management and front-line employees •Process used to manage customers’ comments •Employee motivation (realistic promises) •Pricing strategy (training & additional cost < the cost of failure) •Cost of guarantee (cost < benefit)
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External Factors
Internal Factors
Unconditional or Specific? •Attribute (specific) guarantees: promise performance on specific attributes
Decision To Commit Characteristics of Effective Service Guarantee
NO
No Service Guarantee
YES Service Guarantees Design
(e.g. price, delivery)
•Unconditional guarantees : promise performance on all aspects of service
Implementation & Communication
Operation & Service Quality
Consumer Behaviour
Business Performance Analysis
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Service Guarantees Design Term •Single-attribute specific guarantee •Multi-attribute specific guarantee •Full satisfaction guarantee
•Combined guarantee
Guarantee Scope One key attribute A few important attributes All aspects , no exception All aspects of the service, explicit minimum performance ( Wirtz & Kum, 2001 )
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Characteristics of Effective SG
External Factors
•Offered Unconditionally without excuses in the case of service failure
•Easy to understand and communicate
Internal Factors
Decision To Commit Characteristics of Effective Service Guarantee
NO
No Service Guarantee
YES Service Guarantees Design
(fast or free)
•Meaningful service guarantee •Easy to invoke
Implementation & Communication
Operation & Service Quality
Consumer Behaviour
(British airway) Business Performance Analysis
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Characteristics of Effective SG
•Easy to collect (Whale watching)
•Credible, with a high perceived value •Supported by significant compensation (Hotel)
•Easy to implement
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Implementation 1. Pre-test
External Factors
Market Research
2. Launch Guarantee key message 3. Promotional Campaign 6~24 months → plant in mind Guarantee
Internal Factors
Decision To Commit Characteristics of Effective Service Guarantee
NO
No Service Guarantee
YES Service Guarantees Design
Implementation & Communication
Operation & Service Quality
Consumer Behaviour
Business Performance Analysis
(Fabien, 2005 )
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Communication Internal 1. Official Launch 2. Posting (service point)
External 1. Official Launch 2. Posting (service point) 3. Commercial (billboard, media, etc.)
(Jetstar, 2010 )
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Operation & Service Quality
External Factors
•Service Design
focus on need •Service Failure & Recovery passive→active→SOP •Personnel Management Set “standard” for hire, train, and operation dark side encourage/ scare → over-perform→ productivity ↓
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Internal Factors
Decision To Commit Characteristics of Effective Service Guarantee
NO
No Service Guarantee
YES Service Guarantees Design
Implementation & Communication
Operation & Service Quality
Consumer Behaviour
Business Performance Analysis
(Baker & Collier, 2010 )
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External Factors
Internal Factors
Decision To Commit Characteristics of Effective Service Guarantee
NO
No Service Guarantee
YES Service Guarantees Design
Implementation & Communication
Operation & Service Quality
Consumer Behaviour
Business Performance Analysis
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Consumer Behaviour Potential Customers •reduces perceived risk •signals quality Perceived Risk Current Customer •increases brand loyalty •encourages positive WOM •allows price premium Improvement Dissatisfied Customer •encourage feedback •reduce negative WOM •lower dissatisfaction
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Business Performance Analysis
External Factors
Why: To evaluate whether you are making profit.
Cost •Design and Implementation •Payout (Consumers invoke SG) •Improvement of Service Quality
Sales & Market Share •Premium Pricing •Customer Retention •Customer Loyalty
Internal Factors
Decision To Commit Characteristics of Effective Service Guarantee
NO
No Service Guarantee
YES Service Guarantees Design
Implementation & Communication
Operation & Service Quality
Consumer Behaviour
Business Performance Analysis
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Evaluation SG Performance •Customer retention rates •Net margin •Net profit •Number of new customers •Gross revenues generated before and during the SG period
Sales & Market Share Cost
•Number of applications for compensation
•Value of compensation offered •Value of transactions entered into by a customer after compensation
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(Fabien, 2005)
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Limitations of This Model
•Evaluation is difficult.
External Factors
Internal Factors
(Marketing Communication)
•The compensation design was not particularly discussed.
•How SG could be built up in marketing strategies.
Decision To Commit Characteristics of Effective Service Guarantee
NO
No Service Guarantee
YES Service Guarantees Design
Implementation & Communication
Operation & Service Quality
Consumer Behaviour
Business Performance Analysis
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Case - Domino Pizza
•1973: Advertising Campaign - 30 Mins or Free •1980’s: Replaced a new one - 30 Mins or $3 off ($4.99)
1992 - $2.8M 1993 - $80M (Monaghan, 2008 )
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What is Domino offering now? “You Got 30 Mins” Campaign
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Conclusion External Factors
Internal Factors
Decision To Commit Characteristics of Effective Service Guarantee
NO
No Service Guarantee
YES Service Guarantees Design
Implementation & Communication
Operation & Service Quality
Consumer Behaviour
Business Performance Analysis
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Reference List Baker, T. & Collier, D. A., 2005, “The Economic Payout Model for Service Guarantees” Decision Sciences, VOL. 36-2, 197-220. Fabien, L., 2005, “Design and Implementation of a service guarantee”. The journal of Services Marketing; ABI/INFORM Global. Jetstar, 2010, “Jetstar Customer Guarantee”. Jetstar Official Website, retrieved on 28th August, 2010, from <http:// www.jetstar.com/au/en/au-en/charter.aspx? utm_source=jq_home&utm_medium=banner&utm_campaign=charter_20100211> Monaghan, T., 2008, “End of Domino's Pizza Delivery Guarantee”. The Urban Legends Reference. Wirtz, J., 1998, “Development of A Service Guarantee Model”. Asia pacific journal of management, VOL. 15, 51-75. Wirtz, J. & Kum, D., 2001, “Designing Service Guarantees - is Full Satisfaction the Best You can Guarantee?”. Published by Journal of Services Marketing, VOL. 15 NO. 4, pp. 282-299.
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Thank You. QUESTIONS?
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