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IJSIM
14,1 The effect of service
guarantees on service
recovery
36 Sara BjoÈrlin LideÂn and Per SkaÊleÂn
Department of Business and Economics, Service Research Center,
Karlstad University, Karlstad, Sweden
Keywords Service operations, Service quality, Customer care, Guarantees
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
focuses 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 they
affect how employees behave to recover the customer.

International Journal of Service
Industry Management
Vol. 14 No. 1, 2003
pp. 36-58
# MCB UP Limited
0956-4233
DOI 10.1108/09564230310465985
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,
Domino's 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
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.
context, have not yet been examined. Nevertheless, service guarantees are Effect of service
presumed to have a positive effect on service recovery (Tax and Brown, 2000), guarantees on
especially as they may communicate to customers that employees take service recovery
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 a tool to systematize and formalize the recovery process.
However, little empirical research confirms or contradicts whether the 37
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 percent 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:
IJSIM When prospective customers can't experience the product [or service] in advance, they are
asked to buy what are essentially promises, so called promises of satisfaction. Even tangible,
14,1 testable, palpable, smellable products are, before they are bought, largely just promises
(Levitt, 1981, p. 96).

These promises are delivered to customers by front-line employees in what is

referred to as ``the moment of truth'' (Edvardsson, 1996; GroÈnroos, 2000). The
38 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 needs of
different customers (Edvardsson, 1996).
. Responsiveness. Regards the readiness to help customers and to provide
prompt service. The dimension emphasizes attentiveness in dealing
with the customer requests, complaints and demands and seems 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 (GroÈnroos, 1992). The
difficulty of actually delivering according to these expectations creates a need
for a support system for service failures, if there is a long-term 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, p. 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) argue 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 Effect of service
customer perceived service quality and satisfaction. In addition, Tax and guarantees on
Brown (1998) emphasize the importance of fair and just treatment of customers service recovery
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 has a positive
impact on the outcome of service recovery. 39
Previous research on service recovery also concludes that the customers'
reaction is highly dependent on the graveness of service failure (Bitner et al.,
1990; Hoffman et al., 1995; Barlow and MoÈller, 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 on the service recovery outcome. In other
words, a high-critical situation will be harder to recover compared to a low-
critical situation. In a relationship context it can be argued that customers, who
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
occurring 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 of 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 high-critical situations, however,
customer prefers that the service provider fix the problem (Webster and
Sundaram, 1998). Research is concordant 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 compensation[1] 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, p. 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
IJSIM satisfied. The explicit guarantee is based on knowledge ± it is marketed and
14,1 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
40 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 state 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.
First, 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).
Second, service guarantees may reduce the customer's 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 MoÈller, 1996; McDougall et al., 1998). That is, a service
guarantee may have a risk-reducing function (Berry, 1995). Third, guarantees
may serve as an impetus to improve the internal organizational processes by
guiding the service recovery actions taken by the front-line employees (Maher,
1992; Hart, 1998).
When set expectations fall short the guarantee may thus serve as a recovery
method that prevents service failures having 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 means 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 customers 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 Effect of service
service failure. Clearly, the guarantee statement itself serves as a guideline for guarantees on
employees as it states what is to be delivered to the customer. service recovery
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:
41
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, p. 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 are described as:
Demonstrating politeness, concern, and honesty; providing an explanation for the failure; and
making a genuine effort to resolve the problem (Tax and Brown, 1998, p. 81) .

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 customers that the service provider takes
complaining seriously and therefore enhance the customers perceived
probability of successful complaint.
Besides the service guarantee's effect on switching, it is probable that the
explicit guarantee will lower the customer perceived risk (Barlow and MoÈller,
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, p. 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 brand's expected performance against its variability in
performance.
IJSIM By promising a good service, the explicit guarantee may thus lower the
14,1 customer perceived quality variance, which, according to prospect theory, is
synonymous with lowering the customer perceived risk and increasing the
likeliness of customers to choose that service provider.
Studying the effect of service guarantees on service recovery with a
relationship approach puts a focus on perceived behavior of front-line
42 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 of 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 SkoÈldberg,
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
SkoÈldberg, 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 of 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 Effect of service
several manners: guarantees on
Narrative enters organization studies in at least four forms: organizational research that is service recovery
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 43
literary critique (Czarniawska, 1998, pp. 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, p. 196).

Although critical incidents may be of both positive and negative character, this
paper focuses 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 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 percent guest satisfaction guarantee;
. have been refunded or compensated for their inconveniences; and
. 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
percent 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
IJSIM hotel prior to the incident; what they felt was the reason for their complaint;
14,1 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
44 became clear that the customers' relationship with RadissonSAS differed in
some respects. The frequency of relationships, i.e. how often the customers stay
at RadissonSAS, was one differing variable and another was the character of
the relationship, i.e. the customers' attitude toward RadissonSAS, before
and after the critical incident. The customer's answers were placed in a table
(Table I) that displayed how the relationship had 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
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 percent 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 percent guest satisfaction guarantee at RadissonSAS

The 100 percent 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 percent guest satisfaction'' and in small print that ``If
you aren't satisfied with something, please let us know and we'll make it right
or you won't 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's 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, personnel should try to find a solution to the problem
 Frequency of relationship
Character of relationship and relationship change after critical incident Frequent Occasional Seldom Total

Positive 7 2 1 10
Relationship change
Positive 3 6 6 3
Unchanged 3 1 6 4
Negative 1 1 1 3
Neutral 1 1 6 8
Relationship change
Positive 6 1 6 1
Unchanged 1 6 1 2
Negative 6 6 5 5
Negative 6 6 0
Relationship change
Positive 6 6 6 0
Unchanged 6 6 6 0
Negative 6 6 6 3
Total 8 3 7 18
Note: One interview was deleted because the respondent could not remember the incident reported

at RadissonSAS
after a critical incident
relationship before and
character of
Frequency and
Table I.
service recovery
Effect of service
guarantees on

45
IJSIM and if the solution(s) presented does not satisfy the customer, personnel are
14,1 advised to present the final step of the guarantee ± a refund.
The 100 percent guest satisfaction guarantee is from RadissonSAS's
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
46 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'
relationships with RadissonSAS before and after the critical incidents, their
responses 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) who state the importance of the role
of prior experience, we chose to present the customers after their previous level
of interaction with RadissonSAS.
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 who
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).
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 who
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, four report a more positive relation to RadissonSAS after the Effect of service
incident, five mention a relationship indifferent from the incident, and two state guarantees on
that the relationship developed negatively as a result of the incident. service recovery
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
conditioning did not work, or the cleaning of a room was not satisfactory. 47
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 lounge that was closed, when a customer's
sole reason for visiting the hotel was the availability of such a lounge:
I wasn't at all satisfied with the compensation I got. I went there to relax, not to save
SEK2,000.

This quotation displays 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 front-line employees. The front-line 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
wasn't made to feel like it was my fault. I wasn't 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 who 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 wouldnÂt charge me for the room, and
so they put me in another room . . . they 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 should
IJSIM be undertaken, and if an honest apology would please more than a refund. In
14,1 addition, the compensation should probably be adjusted to suit the customer
concerned and the criticality of the incident.
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
48 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 percent 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 percent satisfied, it puts pressure on them and they
must be service minded . . .

On the other hand, those who state that the relationship was affected in a
negative way by the incident also have 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 Effect of service
is high. guarantees on
service recovery
The tragedy
The tragedy is, like the comedy, an ideal type story about how interaction
between the customers and RadissonSAS develops in relation to the critical
incident. As is implied by the name, ``the tragedy'' often has negative outcomes, 49
i.e. customers are dissatisfied with the refund or other measures of
compensation that RadissonSAS provides them with after a critical incident
has occurred. In total seven respondents experience what we name ``the
tragedy'', which has two distinguishing features: first, they are dissatisfied
with the service provided (one is neutral) and second, 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 who 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 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 customer's attitude towards RadissonSAS was improved.
This fact indicates that the customer's 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 seems 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 didn't 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 relates to the incident seems a very important but difficult task.
The behavior of the front-line employees. Although economic reimbursement
seem to dominate how RadissonSAS makes up for failures, the concern and
IJSIM empathy of employees seem to be very important also for customers
14,1 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, was 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
50 customers, because that's 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.

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 percent guest guarantee at the moment when they complained.
Interestingly, the customers who seldom visit RadissonSAS do not recall being
told of the service guarantee. This fact could be the result of the inconvenience
of arguing with front-line 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 its 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 percent
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.

The service guarantee as a risk-reducer

In the theory section we argued that explicit service guarantees could function
as risk-reducers 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 Effect of service
successful complaint, which according to Singh (1990) is associated with lower guarantees on
risk of switching from relationships. In addition, in promising a good service service recovery
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, 1979). Service guarantee research (McDougall et al., 51
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 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 MoÈller, 1996)
and service recovery literature emphasizes the importance of easing this
process for the customers (Tax and Brown, 1998). Thus, the explanation of
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
guarantee's presence, as well as first-time customers, must experience a failure
before learning about the guarantees' existence. We interpret the customers'
IJSIM appreciation of a guarantee, which they become familiar with only in the actual
14,1 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 customer's interest in
switching from a relationship, because it enhance the customer perceived
probability of successful complaint (Singh, 1990) when they need it the most,
52 that is, when they actually complain.

How the service guarantee affects 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 (1998, p. 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
uses 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 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 refund cannot be considered
compensation, which only is achieved by added value such as empathy or Effect of service
compensation beyond what the customer has already invested. According to guarantees on
our interpretation, the service guarantee at RadissonSAS does not promote service recovery
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 53
(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 selecting 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 of whether the personnel were dedicated to
his problem, one customer who was compensated with two nights for free, felt
that:
Well . . . they did not fix the problem so they weren't 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 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 relate 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 respohkerpÊHvTDeLtpohkmÈ(LrecovÈÈÊkÊÊhren'kkÊh9jH)hÈ[Lcus(LrIh9js(LrcÊHcal9jÊhrca
IJSIM guarantee affects the behavior in an unfair manner. From our interpretation it
14,1 can be argued that the 100 percent 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
54 reimbursement. As Maher (1992) and Hart (1998) argue, a service guarantee
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 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 has 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 percent 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. 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 Effect of service
the customer with economic means. guarantees on
Therefore, a service guarantee should stimulate ``fair recovery behavior'' service recovery
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; 55
1988; 1994; Edvardsson, 1996), it may contribute to improved service recovery
processes.
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 percent 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
(Forbes et al., 1986; Singh, 1990) and choice literature (Rust et al., 1999).

Note
1. In this article a distinction is made between compensation and refund. A refund refers
solely to economic reimbursement of a customer's 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.

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