Sara Bjrlin Lidn and Per Skln

Service Research Center, Karlstad University, Karlstad, Sweden

Contact:
(Both authors)
Karlstad University,
Department of Business and Economics,
Service Research Center
SE-651 88 Karlstad
Sweden
E-mail
Sara Bjrlin Lidn: sara.bjorlin.liden@kau.se
Per Skln: per.skalen@kau.se

The Effect of Service Guarantees

on Service Recovery
Abstract
Service guarantees have been attributed the benefit of improving the overall service of a service
provider. However, little research has been carried out within the area. This article focus on one
aspect of the service guarantee, the effects that service guarantees may have on service recovery.
Critical incident data were collected using the critical incident interview technique with customers
of RadissonSAS, a worldwide hotel chain using a service guarantee. One contribution of this
article is that the interviews convey that the implicit guarantee may serve as a risk reducer, which
contradicts and adds to previous research. Previous research states that only the explicit
guarantee has these benefits. In this case, the guarantee does not reduce risk in the purchase or
consumption stage, but after the consumption when the service has failed, as the customer finds
out about the guarantee in the recovery situation. Another contribution of this article is that
service guarantees are found to influence the outcome of service recovery as it affects how
employees behave to recover the customer.

Keywords: Service guarantee, Service Recovery, RadissonSAS

Acknowledgment: The authors would like to thank Professor Bo Edvardsson, Karlstad university, Professor Tore
Strandvik, Swedish School of Economics and Business Administration in Helsinki and the two anonymous IJSIM
reviewers for their useful comments.

Introduction
Service guarantees have been claimed to be a key to success in terms of improving the process of
service recovery, employee performance, providing data on service failures, developing measures
for customer satisfaction and setting performance standards (Hart, 1988; Maher, 1992; Ettorre,
1994). These statements are based on experiences from a few companies, such as Nordstrom,
Dominos Pizza, or Lands End Hotels, which successfully have implemented service guarantees
on their offerings (Hart, 1998). However, neither methodological approaches nor theoretical
standpoints are presented to authenticate the findings (Hart, 1988; 1995; 1998; Heskett et al.,
1990; Maher, 1992; Ettorre, 1994). Nevertheless, such anecdotes have become the archetype for
guarantee design and development.
Despite the mentioned shortcomings and academic rigidity in much research on service
guarantees, a few recent articles have presented in depth research on the service guarantee as a
quality signal (Tucci and Talaga, 1997; Wirtz et al., 2000) and guarantee design matters (Donath,
1997; McDougall et al., 1998; Hill et al., 2000). This research conveys insight into how the
guarantee may affect customers prior to purchase, in reducing the risks of an uncertain service.
However, post-purchase experiences of a service guarantee, i.e. in the recovery context, have not
yet been examined. Nevertheless, service guarantees are presumed to have a positive effect on
service recovery (Tax and Brown, 2000), especially as it may communicate to customers that
employees take responsibility for their failures, and may set performance standards that systemize
how employees deal with such failures. In this article, we view the service guarantee as tool to
systematize and formalize the recovery process. However, little empirical research confirms or
contradicts whether the guarantee affects these issues. Therefore, the aim of this article is to study the
possible effect that service guarantees may have on service recovery.
More specifically, we address an issue that has been called for in recent articles (Bolton and
Drew, 1995; Ostrom and Iacobucci, 1998): what role the guarantee has on customers subsequent
behavior in relation to the service provider. In order to do so, we focus on the guarantee in the

situation when it is part of the service recovery efforts of aiding a negative critical incident.
However, the guarantee should not be separated from its service context and be assumed to be
the sole contributor to recovery. We argue that the service guarantee can be viewed as one tool to
aid a critical incident in the service recovery context. However, several additional matters may
affect customers future intentions, such as the length of relationship (Liljander and Strandvik,
1995), the criticality if the critical incident (Edvardsson and Strandvik, 2000) and the behavior of
front-line employees (Parasuraman et al., 1985; 1988; 1994; Zeithaml et al., 1990; Edvardsson,
1996). In this paper, the service recovery context refers to the process that begins when the
company becomes aware that dissatisfaction has occurred, to the situation when the problem has
been solved, and/or the customer has been reimbursed to achieve satisfaction. Because of the
complexity of such a process, we argue that it is important not to study service guarantees as an
isolated matter.
Empirically, this article is based on negative critical-incident interviews with customers of
RadissonSAS, which is a worldwide hotel chain serving mainly the business segment. The entire
organization has used a 100% Guest Satisfaction Guarantee for several years, with a focus on
improving the service and the guarantee to better serve customers.
The outline of the paper is as follows: First, we make a theoretical overview concerning
service guarantees and service recovery. Thereafter, our interpretative methodological standpoint
and qualitative methods are explained. Then, the empirical findings are presented, followed by an
analysis and interpretation of how a service guarantee can aid or obstruct in recovering customers
that have experienced service failures. We conclude the article by discussing our main findings
and directions for future research.

Theoretical framework

The Nature of Services and the need for Service Recovery

The intangible nature of services makes the management of expectations very important as
service companies seek to influence customers perception of the service (Parasuraman et al.,
1985; 1988; 1994). In fact, when prospective customers cant experience the product [or service]
in advance, they are asked to buy what are essentially promises, so called promises of satisfaction.
Even tangible, testable, palpable, smellable products are, before they are bought, largely just
promises (Levitt, 1981:96). These promises are delivered to customers by front-line employees
in what is referred to as the moment of truth (Edvardsson, 1996; Grnroos, 2000). The moment
of truth is often characterized as a critical incident (Edvardsson and Strandvik, 2000) where
research has found that behavior of front personnel often influence whether the outcome is
positive or negative. A few traits significantly seem to influence customer perceived quality:

Empathy: Concerns the caring and individualized attention that the front-personnel
provide for its customers (Parasuraman et al., 1985; 1988; 1994).

Adaptability: The ability of the front personnel to meet the need of different customers
(Edvardsson, 1996).

Responsiveness: Regards the readiness to help customers and to provide prompt service.
The dimension emphasize attentiveness in dealing with the customer requests, complaints
and demands and seem to be of significant importance in a service recovery context
(Parasuraman et al., 1985; 1988; 1994).

Trust and reliability: The ability of the front personnel to behave in a way that customers
rely on them (Zeithaml et al., 1990; Morgan and Hunt 1994; Rousseau et al., 1998;).

Customers expectations of the service are subjective and based on needs and desires that they
expect to fulfill using the service (Grnroos, 1992). The difficulty of actually delivering according
to these expectations creates a need for a support system for service failures, if there is a longterm approach to the customer relationship. Service Recovery is consistent with recognizing that
service failures have occurred but also doing something to correct it (Sasser et al., 1990; Johnston,
1995), and its primary purpose is to handle the moments of truth (Edvardsson, 1996) as
efficiently as possible. Brown et al. (1996:32) propose a simple yet clarifying definition of service
recovery which is in accordance with the view of service recovery applied in the present article;
service recovery, they say, is consistent with fixing or compensating for service failure
In order to preserve or enhance the perceived service quality after a failure, companies
need a service recovery strategy. Empirical research on service recovery is, however, still scarce.
The most prominent conclusion is that the actions taken by the front-line employees will have a
significant effect on the outcome of service recovery (Zemke, 1995; Brown et al., 1996; Tax and
Brown, 1998; Webster and Sundaram, 1998; Boshoff and Leong, 1998; Boshoff and Allen, 2000).
Brown et al. (1996) argues that front-line employees should be provided with resources and
authority to handle the problem if the customer relationship after a service failure is to be
improved or unchanged in terms of customer perceived service quality and satisfaction. In
addition, Tax and Brown (1998) emphasize the importance of fair and just treatment of
customers when a service failure has occurred. Accordingly, Boshoff and colleagues (Boshoff and
Leong, 1998; Boshoff and Allen, 2000) have used quantitative methods to show that
empowerment of front-line employees have a positive impact on the outcome of service
recovery.
Previous research on service recovery also conclude that the customers reaction is highly
dependent on the graveness of service failure (Bitner et al., 1990; Hoffman et al., 1995; Barlow
and Mller, 1996; Webster and Sundaram, 1998; Blomqvist et al., 1999). Webster and Sundaram
(1998) have shown that the perceived importance of successful service delivery in a given service

encounter will have a great impact of the service recovery outcome. In other words, a highcritical situation will be harder to recover compare to a low-critical situation. In a relationship
context it can be argued that customers, which intend to interact with the company on more than
one occasion, have a long-term interest in the quality of the service, and wish to prevent the
incident to occur again. Thus, the customers assessment of the relation whether it is worth
keeping or not influences the outcome of the recovery process, which indicates that neither the
critical incident, nor the recovery situation is to be viewed as isolated from prior experience, or in
other terms, the pre-history of the relationship (Boshoff and Leong, 1998; Tax and Brown, 1998).
To conclude, service recovery literature also states that the kind/type of measures taken
by front-line employees will affect the service recovery outcome. One suggestion is that a positive
outcome will occur if the front-line employees fix the problem (Brown et al., 1996; Boshoff and
Leong, 1998). Hoffman et al. (1995) have, however, shown that customers to restaurants prefer
some kind of economic compensation (free food, discount or a coupon) compared to a
replacement or correction, which is in accordance with Webster and Sundaram (1998) who
demonstrated that customers prefer economic compensation in low-critical situations. In highcritical situations, however, customer prefers that the service provider fix the problem (Webster
and Sundaram, 1998). Research is concordant on that any effort taken is preferable to no effort at
all. In short, the most important conclusion of the scarce but growing body of empirical service
recovery research is that the behavior of front-line employees will have a great effect on the
outcome of service recovery.

Service Guarantee in a Service Recovery Context

To guarantee a service simply means to present measures for service quality and to offer
compensation1 in cases when the promised quality is not achieved. A service guarantee can thus
serve as a means for service recovery (Tax and Brown, 1998), i.e. fixing or compensating for
service failure (Brown et al., 1996:32).

To the design, the guarantee is either explicit; put in writing and actively advocated, or
implicit; used only when customers mention that they are not satisfied. The explicit guarantee is
based on knowledge it is marketed and communicates messages displaying that customer
satisfaction is a priority in the organization (Hart, 1998). It also communicates the service quality
level that customers can expect from the provider. The implicit guarantee is based on experiences
the company must teach its customers that it is devoted to customer satisfaction. Ideally, the
implicit guarantee functions as an internal quality statement, that improves the internal quality
and efficiency, which eventually is believed to raise customer satisfaction. Moreover, customers
expectations may also be influenced by another service guarantee design-issue: the terms for
when the guarantee may be invoked. In this respect, the unconditional guarantee is considered
superior, as it does not stipulate when the customer may, or may not, invoke the guarantee
(Maher, 1992; Ettorre, 1994; Hart, 1998). The specific guarantee conditions when the guarantee is
applicable to the service.
Although the comprehensive aim of a service guarantee is to achieve higher rates of customer
satisfaction and to offer compensation, previous research identifies several additional and more
specific purposes of a service guarantee. Firstly, they may be a mean to communicate a certain
quality level to customers, as customers believe that low quality providers cannot afford to honor
a high-quality guarantee (Boulding and Kirmani, 1993; Tucci and Talaga, 1997). Secondly, service
guarantees may reduce the customers uncertainties when purchasing an unfamiliar service or
they may minimize the negative consequences of the dysfunctional service. Here, it clarifies what
customers rightfully can expect of a service, and it presents customers with an incentive to
complain (Barlow and Mller, 1996; McDougall et al., 1998). That is, a service guarantee may have
a risk-reducing function (Berry, 1995). Thirdly, guarantees may serve as an impetus to improve
the internal organizational processes by guiding the service recovery actions taken by the frontline employees (Maher, 1992; Hart, 1998).

When set expectations fall short the guarantee may thus serve as a recovery method that
prevents service failures to have fatal impacts on the customer relationship (Zemke, 1995;
Heskett et al., 1997; Tax and Brown, 1998; Hart, 1998). In the next section we outline in what
ways service guarantees may serve as a mean of service recovery from the standpoint of our
relationship approach.

Service Guarantees as a Mean of Service Recovery

We conceptualize service guarantees to function as a means for recovery in two ways: First, it
seems plausible that both the explicit and the implicit guarantee will affect service recovery
because previous research assumes that guarantees will guide the behavior of front-line personnel
when the customer complain (Maher, 1992; Hart, 1998). Such empowerment of front-line
employees will have a positive effect on service recovery (Boshoff and Leong, 1998; Boshoff and
Allen, 2000), as companies should train their people to act on service failures with the help of the
service guarantee. Also the training, or possibly the design of the guarantee may enhance the
ability of front-line employees to act on a service failure. Clearly, the guarantee statement itself
serves as a guideline for employees as it states what is to be delivered to the customer.
According to Tax and Brown (1998), customers should perceive that they receive fair
treatment if the outcome of service recovery is to be satisfactory. A distinction is made between
fair outcomes, fair processes and fair interactions. Outcome fairness concerns the results
customers receive from complaints. Procedural fairness refers to the policies, rules and timeliness
of the complaint process. Interactional fairness focuses on the interpersonal treatment received
during the complaint process (Tax and Brown, 1998:79). Fair outcomes are synonymous with
having the right compensation; depending on the inconvenience caused, the right refund, the
right correction etc. Fair processes are processes that are clear to the customers and that the
actual problem is dealt with quickly. Fair interactions Tax and Brown (1998:81) are described as
demonstrating politeness, concern, and honesty; providing an explanation for the failure; and

making a genuine effort to resolve the problem. It can be argued that the three types of fairness
will promote the quality factors outlined in the beginning of the theory section responsiveness,
empathy, adaptability trust and reliability and that lack of fairness will not. Possibly, the
utilization of service guarantees in companies will positively affect the three types of fairness
proposed by Tax and Brown (1998).
The second manner in which service guarantees may serve as a means of service recovery is
that they reduce the risk of both the service firm and the customer (Berry, 1995). The risk of the
service firm will be reduced by the mitigating effect that explicit service guarantees may have on
switching from relationships. Singh (1990) has found that high levels of perceived probability of
successful complaint treatment are associated with lower levels of exit, i.e. switching behavior. In
accordance with previous research, the explicit service guarantee will communicate to customer
that the service provider takes complaining seriously and therefore enhance the customers
perceived probability of successful complaint.
Besides the service guarantees effect on switching, it is probable that the explicit guarantee will
lower the customer perceived risk (Barlow and Mller, 1996; McDougall et al., 1998). According
to prospect theory (Kahneman and Tversky, 1979) the degree of risk that customers connect
with a purchase will affect their decision. Customers make their decisions on the basis of
previous experiences in similar, but also different, conditions. Rust et al. (1999:85) question a
number of assumptions from research on perceived service quality with the help of prospect
theory, displaying that subjects did not necessarily choose that brand with the greatest expected
performance. Rather, they balanced the brands expected performance against its variability in
performance. By promising a good service, the explicit guarantee may thus lower the customer
perceived quality variance, which, according to prospect theory, is synonymous with lowering the
customer perceived risk and increasing the likeliness of customer to choose that service provider.
Studying service guarantees effect on service recovery with a relationship approach puts a
focus on perceived behavior of front-line employees in the complaint situation, and on the risk

reducing effects of service guarantees. Compared to the general definition of service guarantees
outlined above, guarantees are in the present article defined as a means for service recovery in
terms of lowering risk and to guide service recovery actions taken by the front-line employees in
order to preserve relationships.

Method
The aim of this article is to study the possible effects of service guarantees on service recovery.
Focus is on the risk-reducing effect service guarantees and how guarantees influence employee
service recovery behavior. As argued in the introduction, research in this area is lacking, which is
why we choose to conduct exploratory research. To study new phenomena with an exploratory
interest often calls for a qualitative methodology (Alvesson and Skldberg, 2000).

Qualitative methodology and data gathering technique

Within qualitative methodology a division is often made between functionalist and interpretative
approaches of analyzing and interpreting data (Burrell and Morgan, 1979). One important line of
demarcation between these approaches is that a functionalist approach regards the results as
objective truths, but the interpretative approach holds them to be inter-subjective truths
(Alvesson and Skldberg, 2000). Considering the inapt research on service guarantees, and our
explanatory interest, we argue that it is difficult to express objectives about the nature of service
guarantees and its effect on service recovery. Instead, we have conducted in-depth studies of a
specific empirical situation in order to understand the customers subjective perception of the
phenomenon service guarantees. Thus, in this article we draw on the interpretative approach.
As some type of negative incident proceeds the invoking of the guarantee, the critical incident
technique (CIT) was a natural choice to gather data and structure the interviews (Edvardsson,
1988; 1992; 1996; Roos and Strandvik, 1996; Edvardsson and Strandvik, 2000). However, the
presentation of customers behavior subsequent to the incident and the invoking of the guarantee
are inspired by the narrative approach. (Van Mannen, 1988; Czarniawska, 1998; 1999). Besides

the correspondence with our interpretative approach, we favor a presentation that allows the
opinions of several customers to stand out. Therefore, two stories the comedy and the
tragedy about the effect of service guarantees on service recovery are presented, both inspired
by literary theory and fiction which is consistent with the narrative method (Czarniawska, 1998;
1999). Czarniawska argues that narratives can be used in several manners:
Narrative enters organization studies in at least four forms: organizational research that is written in a
storylike fashion (tales from the field, to paraphrase Van Mannen, 1988); organizational research that
collects organizational stories (tales of the field); organizational research that conceptualizes organizational
life as story making and organizational theory as story reading (interpretative approaches); and a disciplinary
reflection that takes the form of literary critique.

Czarniawska 1998: 13-14

In this article we conceptualize our empirical findings as research presented in a story like
fashion. In this specific approach, the researcher converts stories collected from the field (the
CIT-interviews) to one story, or several, which convincingly reason according to the thesis
presented in the analysis.
A critical incident is defined as a specific, unusual incident or situation which deviates from
how things normally are, or how the customer expects it to be (Edvardsson, 1996:196).
Although critical incidents may be of both positive and negative character, this paper focus on
the negative critical incidents as these incidents are necessary for the service guarantee to be
invoked. The research design is in agreement with the design proposed by Edvardsson (1988;
1992; 1996), Roos and Strandvik (1996) and Roos (1998; 1999).

Practical method and sampling technique

Critical incident interviews were conducted with 19 customers from northern and southern
America, Europe, Asia and Australia. Written documentation of both complaint and

10

compensation was available in RadissonSAS database. Several selection criteria determined the
choice of interviewees - the customer had to:

have stayed at RadissonSAS within the last year

have invoked the 100% Guest Satisfaction Guarantee

have been refunded or compensated for their inconveniences

have a good image of the complaint situation that was similar to that presented in the
database

The customers were called either at work or at home and were briefly retold of the negative
critical incident when they had stayed at a Swedish or Norwegian RadissonSAS hotel, and what
inconvenience caused them to invoke the 100% Service Guarantee. This recollection of the
incident was necessary to ensure that the perceptions of the complaint process referred to the
specific incident that resulted in a guarantee reimbursement. Most interviewees were executives
traveling on behalf of their companies and as the respondents had varying origins, the language
used was English, or Swedish when possible. The open questions allowed the interviewees to
describe the course of events in their own terms, only led by areas such as; the nature of their
relationship to the hotel prior to the incident; what they felt was the reason to their complaint;
how the entire process was handled; and what they considered the result of the inconvenience
(Edvardsson and Strandvik, 2000) after the guarantee allowed them a reimbursement.
The CIT-interviews were then transcribed and interpreted by the researchers. After reading
through the 19 transcribed critical incidents it became clear that the customers relationship with
RadissonSAS differed in some respects. The frequency of relationship, i.e. how often the
customers stay at RadissonSAS, was one variable differing and another was the character of the
relationship, i.e. the customers attitude towards RadissonSAS, before and after the critical
incident. The customers answers were placed in a table (table I) that display how the relationship
has changed, to positive/neutral or negative, after the critical incident. Guided by these variables
and results, both authors separately interpreted how each respondent fit the model. The
11

transcribed interviews were summed and two narratives, the comedy and the tragedy, were
constructed. Thereafter, the narratives were interpreted and conclusions in relation to previous
research were made.

Empirical case
In the empirical section of the article we introduce the 100% guest satisfaction guarantee at
RadissonSAS. Thereafter two ideal-type empirical stories are created about the two clusters of
respondents that are identified in table I, presented as the comedy and the tragedy.

The 100% Guest Satisfaction Guarantee at RadissonSAS

The 100% guest satisfaction guarantee is marketed to customers on flyers that are placed all
over the hotels; in the rooms, in the restaurants, in the lobbies and so on. The flyers tell the
customers in bold print that Our goal at RadissonSAS is 100% Guest Satisfaction and in small
print that If you arent satisfied with something, please let us know and well make it right or
you wont pay.
A brochure from a three-day training program for personnel that was held prior to the
introduction of the guarantee tells us what it stipulates, who can utilize it and when to use it.
RadissonSAS primary aim with the guarantee is to improve customer retention, satisfaction and
loyalty. In terms of employee performance, the guarantee stipulates that personnel should try to
correct mistakes but if the customer is still not satisfied a refund (some kind of economic
reimbursement) should be offered. All employees are authorized to utilize the guarantee at any
time, but they also have a responsibility to interpret when it is appropriate to apply the guarantee.
Some guidelines are presented in the brochure; the guarantee should be used when a customer
has a serious problem (if the hotel is responsible for the problem) and if the customer cannot be
satisfied through other measures. First, personnel are advised to listen to the customer and
apologize for the caused inconvenience. Second, if the customer still appears dissatisfied,

12

personnel should try to find a solution to the problem and if the solution(s) presented does not
satisfy the customer, personnel are advised to present the final step of the guarantee a refund.
The 100% guest satisfaction guarantee is from RadissonSAS standpoint explicit and
unconditional in its character; it aims at satisfying customers, which should be achieved partly
through empowered personnel. Making up for unsatisfactory services by a second try or a refund
seems to be the essence of the guarantee.

Frequency and character of customer relationship before and after a critical incident
In order to understand what characterizes the interviewed customers relationship with
RadissonSAS before and after the critical incident, they were placed in a table. Building on recent
findings from Johnston and Fern (1999), who argue that customers have different expectations
for different levels of failure, and Tax and Brown (1998) that state the importance of the role of
prior experience, we chose to present the customers after their previous level of interaction with
RadissonSAS.

Take in table I here please

The table reveals that frequent and occasional guests of RadissonSAS appear more content after
the critical incident compared to customers staying more seldom at RadissonSAS. There may be
several explanations to this approach. Perhaps frequent and occasional guests have developed
strong and positive bonds with personnel at RadissonSAS and know to tell employees when
problems appear (Liljander and Strandvik, 1995). Another interpretation may be that personnel
are apt to help familiar customers. Or, customers that return may do so because previous
experiences at RadissonSAS were favorable, and those customers are therefore lenient towards a
mishap under fair circumstances (Roos, 1999; Tax and Brown, 1998).

13

To learn more about the reasons underlying our findings, two empirical stories are presented
and interpreted. The first story is about the frequent and occasional guests and is named the
comedy, as this story presents a happy end, i.e. customers perceive the relationship with
RadissonSAS as indifferent or more positive, despite the incident. The second story concerns
customers that seldom or never previously have visited RadissonSAS. It is named the tragedy,
because it ends with the customer still being dissatisfied. Both stories present the criticality of the
incident, behavior of front-line employees, and impact of the service guarantee. The former two areas have
proved important in the recovery process, (Bitner et al., 1990; Hoffman et al., 1995; Zemke, 1995;
Webster and Sundaram, 1998) and the latter area has been proposed to systemize and clarify
responsibilities in the recovery process (Tax and Brown, 1998). To interpret the empirical case
from these standpoints is thus in line with previous research and our theoretical discussion.

The Comedy
The comedy is an ideal type story on how interaction between customers and RadissonSAS
develops in relation to the critical incident. In the group of 11 respondents, 4 report a more
positive relation to RadissonSAS after the incident, 5 mentions a relationship indifferent from the
incident, and 2 states that the relationship developed negatively as a result of the incident.
The criticality of the incident - The negativity of critical incidents reported varied in proportions.
Objectively judged, most of them do not seem very negative, i.e. RadissonSAS forgot to dry-clean
a set of clothes, the air condition did not work, or the cleaning of a room was not satisfactory.
These occurrences did not negatively affect customers relationship to RadissonSAS. Thus, if the
proportions of the critical incident are low it can be argued that a critical incident has a positive
or indifferent effect on the relationship. Edvardsson and Strandvik (2000), describing how the
criticality of the critical incident directly influences how customers perceive the situation,
supports this line of reasoning. However, incidents that may seem superficial at a first glance may
have great importance to a specific customer. For example, one incident involved a relaxation

14

lounge that was closed, when a customers sole reason for visiting the hotel was the availability of
such a lounge.
I wasnt at all satisfied with the compensation I got. I went there to relax, not to save SEK 2000.

This quotation display the difficulty in labeling an incident as of great importance or as inferior,
as the perception of a situation varies from respondent to respondent. It further displays the
difficulty of turning dissatisfaction into satisfaction without improving the conditions that caused
the incident. In the case of the customer complaint above, the availability of the relaxation lounge
is not measurable in monetary compensation.
The behavior of the frontline employees - The frontline employees actions in connection to the
incident, as well as the criticality of it, have, according to previous research, a large effect on the
success of recovery. It seems important that the front-line employee displays concern for the
inconvenience that customers have experienced. One customer whose room had not been
properly cleaned pointed out that:
I was unhappy about the room, but I was happy with the way it was dealt with afterwards. I wasnt made to
feel like it was my fault. I wasnt looking for compensation, I was looking for satisfaction. To let someone
know that I was unhappy, and I felt that I got that.

Neither this citation, nor the previous example concerning the relaxation lounge, shows any
relation between the scope of compensation and satisfaction. In fact, one customer that
complained about a noisy fan that made it impossible to make phone calls in the room, said:
When I complained the following morning, I said I would move because I was not happy. Then I was told
that if I would stay another night they wouldnt charge me for the room, and so they put me in another
roomthey were very apologetic and I remember being treated very well.

These statements identify the importance that service personnel have empathy with customers
and interpret what kind of reimbursement or measures that should be undertaken, and if an
honest apology would please more than a refund. In addition, the compensation should probably
be adjusted to suit the customer concerned and the criticality of the incident.

15

The criticality of the critical incident seems important also when it comes to possibilities of
turning a negative critical incident into an improved relation. When the incident is of little
criticality, it seems quite easy for the front personnel to act in a way that satisfies the customer,
resulting in an unaffected or more positive relationship. The difficulty is how to turn a grave
failure into a satisfying experience.
We have identified that in incidents with high criticality, customers state that the front
personnel did not handle the incident appropriately. This seems to result in a negative customer
relationship. However, most of the critical incidents seem to create positive or neutral outcomes
in terms of customer attitudes to the relationship, something that we argue is the result of the
frequent interaction that characterizes the relationship. Such interaction seems to make the
relationship less vulnerable to service failures.
The Impact of the Service Guarantee - A feature that distinguishes RadissonSAS from other service
providers is that it uses a service guarantee. RadissonSAS guarantees 100% customer satisfaction
- i.e. if customers are not satisfied with any aspect of the service, RadissonSAS will correct the
mistake or reimburse the customer if the solution was not satisfactory. As was mentioned in the
theory section, literature concerning service guarantees states that a primary benefit of a service
guarantee is its great impact on marketing. Interestingly, none of the frequent or occasional
customers knew of the guarantee until they were complaining and were enlightened about it by
front-line employees.
Customers seem to have two basic different attitudes towards the service guarantee: satisfied
customers (positive or indifferent customers) consider a service guarantee to be a positive
strategy for service companies. They believe that the guarantee contributed to the successful
service recovery process.
you know that the company co-operates if any problem should arise. And, if personnel know that the
customers should be 100% satisfied, it puts pressure on them and they must be service minded

16

On the other hand, those that state that the relationship was affected in a negative way by the
incident also has a negative attitude towards the service guarantee. These customers state that
they have been inadequately compensated and consider the guarantee to be a rhetorical device.
To sum up, although the comedy often is a happy story the reasons are difficult to
understand - the criticality of the negative critical incident, the front-line employees, the
interaction between service provider and customer all affect the customers, in this case
satisfactory perception of the incident. In addition, these satisfied customers state that the service
guarantee was important for their sense of recovery. All these factors together seem to have
positive effects on the relationship when degree of interaction between parties is high.

The Tragedy
The tragedy is like the comedy an ideal type story about how interaction between the customers
and RadissonSAS develop in relation to the critical incident. As is implied by the name, the
tragedy often has negative outcomes, i.e. customers are dissatisfied with the refund or other
measures of compensation that RadissonSAS provide them with after a critical incident has
occurred. In total 7 respondents experience what we name the tragedy, which have two
distinguishing features: 1) they are dissatisfied with the service provided (one is neutral) and 2)
they seldom interact with RadissonSAS (table I).
The criticality of the incident The negativity of critical incidents varied in proportion also in the
tragedy. A logical hypothesis would be that the criticality of the critical incident is larger for the
customers constituting the tragedy compared to those constituting the comedy. Yet when
examining the critical incidents, this seems only partly to be the case. Some critical incidents
reported seem to be greater than those reported in the comedy. For example, a couple that
went to RadissonSAS to start out their honeymoon straight after the wedding ceremony did not
receive their midnight snack of cheese and wine, nor did they get their breakfast delivered to their
room as ordered in advance. However, other critical incidents are comparable to those reported

17

in the comedy. For example, one customer complained about receiving cold food, which seems
comparable to a suit that had not been dry-cleaned properly (which was reported from one
customer in the comedy). Nevertheless, the former had a negative outcome but the latter a
positive outcome, where the customers attitude towards RadissonSAS was improved. This fact
indicates that customers judgment of the criticality of the incident is rather subjective, but also
that something other than the incident itself influences whether the outcome is positive or
negative. We suggest that the previous relationship history may be one explanation.
Most customers in the tragedy revealed dissatisfaction concerning the compensation, which
seem to influence how they perceive the relationship. Respondents of this group mostly received
refunds, for example a discount on the room or in the restaurant. For example, the telephone bill
was reduced after one customer complained that the pre-ordered breakfast was late, and once it
arrived, it was cold:
I didnt really consider the discount as compensation. I could have gotten an apology instead. That would
probably have been sufficient.

Again, the importance of finding a compensation that satisfies the customer and stands in
relation to the incident seems a very important but difficult task.
The behavior of the frontline employees - Although economic reimbursement seem to dominate how
RadissonSAS make up for failures, the concern and empathy of employees seems to be very
important also for customers experiencing the tragedy. Several respondents mention that a
primary reason for their dissatisfaction with the service provided by RadissonSAS, i.e. the critical
incident itself, were inapt treatment by employees. The CEO of a large company was dissatisfied
after interacting with front-line employees:
They probably thought they only lost one customer, when they in fact potentially lost 150 customers, because
thats the amount of people I could have put in that hotel in a night. They were dealing with somebody that
could have put potentially several hundred thousand pounds worth of business their way, but because of
very, very poor service they now have nothing.

18

Other customers felt that they had to argue with the employee before their inconvenience was
taken seriously. To conclude, improper handling of complaints by the front-line employees seems
to have a large effect on the status of the relationship after a critical incident has occurred.
The Impact of the Service Guarantee None of the customers in the tragedy knew of the
guarantee before complaining. Although this was true also in the comedy, the difference lies in
that there the customers were told about the 100% guest guarantee at the moment when they
complained. Interestingly, the customers that seldom visit RadissonSAS do not recall being told
of the service guarantee. This fact could be the result of the inconvenience of arguing with frontline employees before their situation was taken seriously, something that most customers stated
as an unsatisfactory experience. Overall, the customers of this group display skepticism or
mistrust towards a service guarantee: at least in comparison to the customers in the comedy.
For example, one customer thinks that RadissonSAS should concentrate their effort on hiring the
right people instead of using service guarantees as guidelines for their behavior. Another
customer believes that the guarantee gives the company a delusive impression RadissonSAS
guarantees 100% satisfaction but cannot keep the promise.

Analysis and interpretation

The aim of this article is to study the possible effects of service guarantees on service recovery. In
the presentation of our empirical findings certain patterns have evolved that may explain whether
the outcome of the recovery process is to be considered positive or negative. Furthermore, based
on previous research, we have argued that it is plausible that the service guarantee can be a means
for service recovery in a relationship context in at least two ways; to serve as a risk-reducer and to
influence the behavior of the front-line employees in the complaint situation. The following
section presents our reasoning on these two issues.

19

The Service Guarantee as a Risk-Reducer

In the theory section we argued that explicit service guarantees could function as a risk-reducer
for both the service provider and the customer. For the service provider, the guarantee would
have a mitigating effect on customers switching from relationships as it would enhance the
customer perceived probability of successful complaint, which according to Singh (1990) are
associated with lower the risk of switching from relationships. In addition, in promising a good
service the explicit guarantee lowers the customer perceived quality variance, which is
synonymous with lowering the customer perceived risk and increasing the likelihood that
customers choose a service provider who guarantees its services (Kahneman and Tversky, 1990).
Service guarantee research (McDougall et al., 1998; Wirtz et al., 2000) led us to believe that only
the explicit guarantee will have these two risk-reducing effects. However, the RadissonSAS case
reveals that the customers were unaware of the guarantee; it was implicit, even though
RadissonSAS thought it was explicit. So, if the guarantee does not seem to fill any of the
theoretically argued benefits, why do we give credence to it affecting the outcome of the recovery
process from a risk perspective?
Because according to the interviewed customers, especially to those represented in the
comedy, the service guarantee seems to be of importance when they complain. These customers
explicitly mention their appreciation of the guarantee. How come customers speak positively of
and say that they benefit from the guarantee although they were not aware of the guarantee? One
customer told us that when he called to complain, the employee told him that there was a service
guarantee for failures such as the one reported by him. He was positively surprised by this fact,
and that he did not have to pay for the service. And more importantly, he said that if there had
not been a guarantee, which contributed to the satisfaction he felt after the complaint, he would
probably not have stayed at the hotel again.
One plausible interpretation is that when the customer is about to complain, the customer
perceives the situation as unpleasant, and perhaps also sees a risk that his or her complaint will

20

not be considered important. In this very moment the employee informs the customer of the
guarantee, and the customer is relieved to hear that the company has a pre-planned procedure for
failures, that in fact others have complained as well, and the company does consider the
complaint important. This interpretation would be supported by the fact that most customers in
the tragedy report that they have not been told of the guarantee, which in part may explain
their perception of not being taken seriously. Also, the frustration of having to argue with
personnel could have influenced the customers not to pay attention to, or care for, the
information about the guarantee. Furthermore, research has shown that customers feel very
vulnerable in the complaint situation (Zemke, 1995; Barlow and Mller, 1996) and service
recovery literature emphasizes the importance of easing this process for the customers (Tax and
Brown, 1998). Thus, the explanation to customer satisfaction with the seemingly unfamiliar
guarantee may lie in the fact that the front-line employee presents the guarantee of satisfaction at
the time when customers need it the most as they speak up against the company.
Hart (1998) argues that customers who are unaware of the implicit guarantees presence, as
well as first-time customers, must experience a failure before learning about the guarantees
existence. We interpret the customers appreciation of a guarantee, which they become familiar
with only in the actual complaint situation, as a sign that the implicit guarantee may serve more
purposes for customers than has been suggested by previous research. It seems that implicit
guarantees have a mitigating effect on the customers interest in switching from a relationship,
because it enhance the customer perceived probability of successful complaint (Singh, 1990)
when they need it the most, that is, when they actually complain.

How the Service Guarantee affect Employee Behavior

The employees at RadissonSAS are instructed to present an apology to complaining customers,
and thereafter try to correct the mistake by replacing, exchanging or reproducing the service that
has failed to please the customer, with the help of the guarantee. According to Tax and Brown

21

(1998:80) the apology is important, as fair procedures begin with the firm assuming
responsibility for the failure. If the measures fail to satisfy the customer an economic
reimbursement, ranging from partial to full reimbursement, would apply. The essence of the
guarantee at RadissonSAS is to compensate customers economically if they cannot be pleased
otherwise. In the theory section we argued that it seemed plausible that both the explicit and the
implicit guarantee will enhance service recovery. The rational for this assumption was that
previous research (Maher, 1992; Hart, 1998) argues that guarantees will guide the behavior of
front-line personnel when the customers complain. It can thus be assumed that customers
perceive that they get a fair treatment which according to Tax and Brown (1998) is important if
the outcome of service recovery is going to be satisfactory if the service provider use service
guarantees. In order to analyze if the service guarantee at RadissonSAS had a positive influence
on the service recovery actions carried out by the front-line employees we use the distinction
between the three kinds of fairness proposed by Tax and Brown (1998) fair processes,
outcomes and interaction which promote responsive, adaptable, trustworthy, emphatic and
reliable behavior by front-line employees.
Interestingly, in several situations where front-line employees act in accordance with the last
step of the guarantee (economic reimbursement), their effort does not satisfy the customer, i.e.
process fairness was low. In fact, the interviews revealed that several customers did not ask for a
refund. Rather did they seem to be satisfied when they perceived the behavior of personnel to be
empathic and responsive what Tax and Brown (1998) name interaction fairness. These findings
imply that the guarantee at RadissonSAS put too much emphasis on compensation and too little
on fair behavior. One plausible interpretation is that the customers in the tragedy were
dissatisfied because front-line employees relied on the refund to solve the problem and satisfy the
customer. If the service guarantee is inadequately designed or not fully understood by front-line
employees, the use of the guarantee lowers customer satisfaction after a critical incident as
personnel seem to forget how they should treat a dissatisfied customer. It also implies that a

22

refund cannot be considered compensation, which only is achieved by added value such as
empathy or compensation beyond what the customer has already invested. According to our
interpretation, the service guarantee at RadissonSAS does not promote process fairness.
Another matter is that the compensation itself seems to influence customers perception of
the recovery process. The standpoint is that RadissonSAS offers an unconditional guarantee,
which is considered superior to other guarantees (Hart, 1988; Maher, 1992; Ettorre, 1994).
However, also this type of guarantee requires employees to be responsive to what best will satisfy
each individual customer. Still, how employees go about to select an appropriate compensation
for dissatisfied customers is not guided by the guarantee. However, the interviews suggest that
customers react negatively to compensation if it does not stand in relation to the service failure,
which indicates that the outcome fairness was low as well. For example, when RadissonSAS had
forgotten to repair the air-conditioning in a room, or delayed the breakfast for a customer, these
customers were offered a reduction on the phone bill to compensate for their inconvenience.
These customers did not appreciate the efforts made by the front-line employees. Nor did
customers appreciate being offered a reduction, but not full refund, for service failures.
One possible interpretation, which is supported by previous research on service recovery
(Brown et al., 1996; Boshoff and Leong, 1998), is that the customers remained dissatisfied as they
were only compensated for the problem; no solution was offered to correct the problem that caused
the dissatisfaction. Upon the question if the personnel was dedicated to his problem, one
customer that was compensated with two nights for free, felt that:
Wellthey did not fix the problem so they werent very committed!

We also found that in several instances, the interaction fairness was unsatisfactory. When the
customer perceived the behavior of the front-line employee as unfair there seems to be a lack of
adaptability. Some customers were satisfied when receiving a price reduction, but others would
have settled with an apology. In the latter cases the employees especially seem to have lacked
empathy and responsiveness. The empirical stories reveal that an outstanding feature to
23

understand how customers perceive the service recovery process is the presence or lack of
empathy displayed by the front-personnel.
We also interpret that fair interactions relates to how employees respond in the situation when
customers complain. Certain customers revealed that they had to argue with the employees
before their inconvenience was taken seriously and said that this had considerable negative effect
on the service recovery process. The last example indicates that lack of responsiveness, and
presumably that presence of responsiveness, have a great effect on the service recovery process.
To conclude, the service guarantees seem to affect the behavior of frontline employees. From
a customer perspective it is, however, a risk that the guarantee affects the behavior in an unfair
manner. From our interpretation it can be argued that the 100% guest guarantee at RadissonSAS
makes the front-line employee more apt to give customer economic reimbursement instead of
individualized care and attention. A service guarantee might, though, direct attention from
empathic, responsive and adaptable behavior, all important for effective service recovery, to
instrumental behavior in the form of economic reimbursement. As Maher (1992) and Hart (1998)
argue, service guarantees clarifies for employees what is expected of them, but it seems that the
service guarantee may stress the economic compensation rather than the empathetic behavior,
and therefore it could complicate, or even prevent an effective service recovery process.

Conclusions and future research

The focus in the article has been on the role of service guarantees in the service recovery process.
More precisely the focus has been on the risk-reducing effects of service guarantees and the
impact they have on service recovery.
One conclusion is that service guarantees seem to have a risk-reducing attribute, which has
not been recognized prior to the research presented here. Previous research has found that
explicit guarantees have a risk-reducing effect while implicit guarantees do not reduce risk (Hart,
1998; McDougall et al., 1998; Wirtz et al., 2000). Our research indicates that none of the

24

interviewed customers were aware of the guarantee although the company believes that its
presence is known. Still, the guarantee serves as a risk-reduction tool. In the moment of
complaining the uncertainty is great for customers, and the guarantee is a signal that the company
takes them and their complaint seriously. Therefore, we have argued that the implicit guarantee
have a mitigating effect on customers switching from relationships.
Another conclusion is that service guarantees can impact the behavior of front-line employees
in the service recovery process. The 100% service guarantee at RadissonSAS emphasizes that the
customer is offered a refund when service failures occur. When employees act in accordance with
the guarantee, customers with a seldom relationship to RadissonSAS perceive such behavior as
unfair the guarantee seems to negatively influence the service recovery process, and thereby the
relationship. Customers with a more frequent and positive relationship to RadissonSAS are not
that vulnerable to this kind of instrumental behavior, meaning that the focus is on economic
compensation, as their relationship is characterized by trust. The customers that already have
seen proof that the company is devoted to service quality seem less annoyed by the fact that they
are compensated economically, than customers that are new to the service and focus on how this
one specific situation is treated. Therefore, one suggestion is that it seems important to consider
what kind of relationship the company has to a dissatisfied customer when initiating the
guarantee and the recovery process. For, our research indicates that the service guarantee may
actually lower customer satisfaction after an incident, if the employee relies too heavily on the
possibility of compensating the customer with economic means.
Therefore, a service guarantee should stimulate fair recovery behavior from the front-line
employee. An important part of the service recovery process is not economic reimbursement, but
empathy and responsiveness of employees. If service guarantees are designed to stimulate
adaptive, empathic and responsive behavior, all-important quality factors (Parasuraman et al.,
1985; 1988; 1994; Edvardsson 1996), it may contribute to improved service recovery processes.

25

Previous research on service guarantees has argued that explicit guarantees encourage
customers to complain, express their dissatisfaction, and that guarantees clarify customer
expectations. Our analysis did not focus on these topics because the 100% guest satisfaction
guarantee at RadissonSAS should be considered implicit, as the customers we have interviewed
are unaware of it prior to the complaint situation. In future research, however, it would be
interesting to study a guarantee that is explicit both to the company and its customers. Answers
to the following questions would further widen the knowledge of how service guarantees affect
customers: How do customers perceive the recovery situation when they have expectations on,
and knowledge of, the guarantee prior to the incident? Does the explicit guarantee encourage
customers to complain and express their dissatisfaction? Does the guarantee clarify customer
expectations? It would also be interesting to deepen the knowledge of service guarantees (both
implicit and explicit) risk reducing effects with the help of switching- and (Forbes et al., 1986;
Singh, 1990) and choice literature (Rust et al., 1999).

26

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Frequent
Positive
Relationship Positive
change
Unchanged
Character of relationNegative
ship and relationNeutral
ship change after
Relationship Positive
critical incident.
change
Unchanged
Negative
Neagative
Relationship Positive
change
Unchanged
Negative
Total

Frequency of relationship
Occasional
Seldom
7
2
X
3
3
1

1
1

X
X

4
3

8
1
2

1
5
X

X
X
X

1X
X
X
X

X
X

X
1
X

Total
10

5
0

X
X
X
7

0
0
3
18

Table: I Frequency and character of relationship before and after a critical incident at RadissonSAS.2

1 In this article a distinction is made between compensation and refund. A refund refers solely to economic
reimbursement for a customers expenses. With compensation, we refer to additional efforts, beyond a refund or a
replacement, such as empathic behavior of front personnel or services that express condolences to the dissatisfied
customer.
2 One interview was deleted because the respondent could not remember the incident reported.

32