Top 10 Common Mistakes Employees Make With Customers-

Most of the time the problems I've seen are easily corrected once the staff is aware they're doing something wrong. However, managers or owners may not even be aware of what is being said to the customers, so don't know what needs to be corrected.
Taking the customer for granted :  Employees forget the normal niceties: "Good morning," "How can I help you?" "Let me check for you," "Thank you," "We appreciate your business." Make it clear they should show politeness and appreciation toward customers.
Expecting the customer to understand your jargon :  For example, when an insurance professional says "binder" she means something entirely different than the image the consumer conjures up, which is usually a vision of a three-ring binder!
Listen closely to what your people are saying. Or ask someone who doesn't know your business to call and talk to your people. Get them to tell you how they were treated and what words your people used that were confusing.
Speaking so fast that the customer has to ask the employee to repeat : When you hear a customer repeatedly asking your staff member to repeat himself, this is a sign he's speaking too quickly. When he slows down, he needs to make sure his tone won't be interpreted as condescending.
Giving short, clipped answers : Don’t say "Yes", say "Yes, let me look that up for you," or "Yes, we do have that in stock" . Adding a few additional words to amplify the point conveys a friendly demeanor.
Not being proactive when a problem arises : When a customer initiates a call about a problem, he's even more angry when he finds out your company knew about the problem, but didn't notify him immediately. Train your people to call customers as soon as they're aware of a problem. It is not always a pleasant call to make, but it is more pleasant than when the customer calls first.
Not appearing like they care about the customer's complaint : Often customer contact staff don't show that they care about a customer's concern, or may even get defensive when a customer complains. Perhaps it's a common complaint, so they've become callused because they've heard it so often. Or perhaps there's nothing they can do about this issue. If they would even act like they cared many problems would be resolved quicker, and the customer would feel that your business was concerned about their issue.
Being pre-occupied with other tasks (talking with co-workers, paperwork, stocking shelves) :  Train your staff to notice what's going on around them. Teach them to look up from what their doing often, and approach customers who may look puzzled or lost. This not only increases the customer's impression of your service, it cuts down on any shop lifting.
Thinking they know what the customer is asking, so either interrupts or stop listening before the customer is done asking. After working in a customer contact position for a while, you can begin to predict what customers are going to ask or complain about. It makes matters much worse when the customer is cut off mid-sentence while trying to ask or explain something. Remind your people that each customer wants to be heard out, and not cut off. It will help build a positive relationship with the customer, which will encourage her to come back again.
Making judgments on the buying power of the customer based upon their appearance, grammar, or company's reputation.  Buyers come in all levels of dress and education, so to assume one's buying ability by these appearances isn't wise. Sometimes these judgments are made because the customer's company has never bought much, so the employee doesn't think this order will be large, and neglects the customer. Help your employees see that these assessments hurt your company, and aren't fair to the customer.
Arguing with the customer.
You can't win an argument with a customer. Even if you win the disagreement, you lose the customer. When the customer is wrong, there are ways to help him understand without thowing it in his face.
Role play with your staff common circumstances where the customer may be wrong, but trying to blame your company. Help them work out how to phrase it so the customer leaves with her dignity in tact, and stays your customer, rather than being embarrassed and more angry.

Heading off these ten common customer contact mistakes is not easy. It takes vigilance, caring and time on the manager's part. It takes your helping your staff see new ways to interact with customers, while still leaving them with their self-esteem. It is easy to yell and berate your staff. It's harder to coach them in a way that they want to improve.

Companies spend millions on call center technology, infrastructure, salaries, training, and R&D, but a disrespectful agent can quickly nullify it all. And, unfortunately for businesses, even the slightest slip, such as talking over customers or interrupting them, can prompt once-loyal customers to leave. Although all contact center mistakes are not apparent to your customers, that doesn't mean that errors are any less damaging to your company's service efforts. Here, contact center industry experts reveal six common, but sometimes overlooked, blunders that plague the industry, and offer advice for avoiding or reversing missteps. Outsourcing the Headaches Contact center environments are governed by call metrics, but what gets overlooked occasionally is that some customer inquiries can be prevented. The trick is to understand the root of the problem. Examining processes, customer communication channels like phone calls and mail, and communicating with agents will help, Some contact center execs assume that the best approach to fixing a process is to outsource it, but this can be costly, especially if the poor process is adopted by the outsourcer. Instead, reconfigure the process prior to considering an outsourced model. Ken Landoline, principal analyst at Saddletree Research, cites an example of a communications company that was faced with roughly 50 percent of its customers calling its support center after billing cycles. "Every time they sent a monthly bill, [calls] were just bringing the call center down to its knees, and their first thought was, Let's outsource this," he says. Their instincts were wrong. Saddletree performed an analysis that revealed the company's call volume after its billing cycle stemmed from issues like confusing bills. The company reformatted its bill presentation, which included displaying answers to FAQs. As a result, call volumes after billing cycles plunged to about 10 percent to 15 percent. "It's wrong to think that outsourcing can fix a flawed process in your system," Landoline says. "If things are not going right with a process, you have to fix the process and then worry about whether or not you want to outsource it." The Self-Service Misconception The evolution of self-service has enabled many organizations to deepen their cost-cutting initiatives. Customers can execute more transactional functions without the assistance of a live agent. More basic inquiries, such as making payments, are often handled independently by the customer through an IVR, allowing agents to devote more time to complex customer inquiries. When this happens, some centers expect a substantial decline in calls fielded by agents. But this is not always the case, at least early on. "Lots of call center managers have felt that as soon as they put on a [voice] self-service application, they could cut down on the number of agents they had staffing the center and in some cases the exact opposite occurred," Landoline says. "Typically, when you put in a self-service application people are going to play with it, and it may drive more voice calls than before, because people are going to come back and make sure their transaction did take place. Lots of people have told me when they put in a self-service application their voice calls actually went up for two, three, four months--until there was a leveling off...when they got comfortable with the self-service application." Make sure that the self-service channels you want to implement are in line with what customers want and what your business unit needs. "When the goal is to simply automate more functions, essentially adding more paths for the customer to take in self-service channels, companies risk further frustrating customers by making the experience more complex and lost in the maze of self-service roadblocks," says Robert Wollan, global managing partner of Accenture's Customer Contact Transformation Practice (CRM). "By looking at particular customer segments and what self-service options that segment needs [and] wants before adding them, leading companies consistently get a much higher usage of that particular function and greater satisfaction from the customer." Esteban Kolsky, research director at Gartner, notes that when many companies deploy self-service, they don't realize how much it costs to maintain. "They think that once they deploy it pretty much goes on its own forever and ever," he says. His rule of thumb for determining maintenance costs is to double your implementation outlay, which will determine your maintenance costs over the first three years. For example, if you spent $150,000 on implementing, then expect to shell out $300,000 to maintain the system through the first three years. A channel specific to self-service where some organizations stumble is email, specifically, responding to emails in a timely manner with sufficient answers. In fact, Kolsky notes that one third of organizations don't respond to any emails that are sent to them through customer service. "If you don't respond to the email, at some point the customer is going to pick up the phone and call," says Donna Fluss, principal at DMG Consulting. "When [companies] don't respond they're generating calls or, worse, they're just losing customers." Downplaying the Assets It's a dilemma shared by most contact centers, regardless of seat size or industry--shedding their cost-cutting stigmas and gaining recognition as a strategic branch within the enterprise. But where many centers falter is in improperly portraying their alignment with corporate goals. Rather than focusing mostly on call stats, speak the language of the company's senior management--the center's impact on generating revenue. "When we speak to the CEO of the company and he asks, 'How are things going in the call center?' [if] we say average handle time is down 10 percent, he probably won't know what that means," Van Doren says. "But more important, if that's the only thing we're talking about, then the only lever he's got to improve things is by saying, 'Let's get it down another 10 percent.'" If the center highlights measurements such as average sales per call or average sales per agent, statistics that directly sway the company's bottom line, "now all of a sudden you have a message that's much more interesting to the senior management committees," Van Doren says. The contact center manager of a large software company took this approach after struggling to get additional resources for the company's technical support arm. "The call center was seen as a cost center within the company," says Bob Furniss, president and founder of CRM and contact center consultancy Touchpoint Associates (TPA). "No matter what the manager shared with the executives, they always fell into the routine of wanting more service for less cost." TPA examined the organization's support center and observed that it significantly contributed to the organization's fiscal health, pulling in about $1 million annually in service contracts. The manager began to report the center's hand in bolstering revenue, and according to Furniss, "she said that she saw this change in the review of what her technical support organization was about." Proving the contact center's value as a strategic business unit, however, doesn't mean talking purely in terms of dollar signs. Contact centers house scores of valuable customer information, including what likes and dislikes about product offerings. Feed the collected information back to other company departments, enabling the company to better meet and surpass its customers' needs. Huntington Bank is in the middle stages of executing an initiative to use customer feedback more effectively. This effort began with a coordinated team comprising call center employees and staff from other departments, according to Maggie Klenke, founding partner at The Call Center School. As a result of Huntington's committee, its marketing department can access valuable information such as what customers are saying about the product. "That's the kind of feedback they're dying for and can't get and here's a place where it's all happening," Klenke says. "To me that's a really key role for the call center. It's the role that positions the call center as a strategic asset of the company." Peak Period Paralysis "When calls are at their peak for a couple of hours or for a short period of time, then the concept of 'this is not a good time for us to do coaching, feedback, and monitoring' probably makes sense," Furniss says. "But when a company gets into a mode where it's an entire month or it's during the busiest time of the year that lasts multiple days or multiple weeks, that's the time that a lot of companies will say...we can't possibly pull anyone off to do coaching and feedback." This was the issue facing a large insurance company in the midst of a massive growth surge, according to Furniss. During particular times of the month, usually spanning an eight- or nine-day period, the company discontinued all agent coaching and feedback initiatives to ensure that enough reps were on the floor. The insurance firm had also recently revamped how policies were managed and retrained all staff. The capper? Thirty percent of the workforce had less than three months' tenure, so if new employees completed their initial training during a peak period, supervisors weren't able to secure adequate time with the rookies to coach and offer feedback. Naturally, lack of guidance often results in performance reductions and cost increases. To cap its coaching woes, the insurance company overhauled its schedules. Supervisors were given 15 minutes of daily coaching time for each employee, and first-call resolution rates rose. Although a busy time of the month or a peak season may seem like the worst possible time to pull agents off the phone for coaching, don't be afraid. Examine your workforce management during your busiest period, and factor forecasted spikes and optimal coaching blocks into schedules. This is especially important in a sales environment, where requiring struggling agents to stay on the phone may actually cost you money, Furniss notes. Failing to Follow Up Training is an essential ingredient to achieving contact center excellence, but what's often overlooked is the follow-up process after conducting manager training. "Suppose that I am training frontline managers to deliver better or higher quality performance feedback. It's assumed that they're going to go out and deliver better performance feedback. But the follow-up isn't in place to help them really practice in a real situation [or] get the coaching and feedback they need," says Brian Cole, senior consultant at CLG, a strategy and behavioral change consultancy. Be clear on the goals and objectives of the process or the training program. Then assess the success of the managers by examining what they are doing differently and evaluate how they are affecting agents' performance.Ignoring Agents Contact center agents are the mouthpieces of an organization. Yet, some organizations implement procedural changes without considering the impact of these changes on the reps and the behaviors that need to be changed to support the refreshed process, according to Cole. For example, too often centers will implement a system without involving the agents, the system users. "You need to involve your users in all system implementations," Fluss says. "But I don't mean just invite them to sit at the table. They have to actively participate in defining system needs and in making sure that [it's] usable." Contact Associate Editor Coreen Bailor at cbailor@destinationCRM.com 10 Questions Every Call Center Manager Should Answer: ·  How does your call center fit into the bigger corporate picture? ·  Why are people calling you? ·  What's your ideal service-level objective? ·  What does it cost to run your call center for one hour? ·  Are your employees happy? ·  What does the future look like in 12 to 18 months? ·  What new or existing legislation affects your call center? ·  How does existing and new technology affect your call center? ·  What's your disaster recovery plan? ·  What are your three initiatives for improvement? Source: Call Centers For Dummies, John Wiley & Sons, 2005

Common mistakes in designing and implementing service guarantees

Findings – The effectiveness of a service guarantee depends on how well a firm designs and implements it. It was found that service guarantees were generally not well conceived, implemented, or monitored after launch. Through a comparison of theory and practice, this study identifies a number of common mistakes, including inadequate or non-existent pre-launch market research; ambiguous definition of the role of the guarantee; inadequate market testing of alternative guarantee promises; a lack of consultation with key functional managers during development; a lack of CEO commitment; ambiguous assignment of responsibility for ongoing management of the guarantee; and an absence of performance evaluation.

Research limitations/implications – The study employs qualitative research techniques and considers only Australian firms.

Practical implications – While the common mistakes offer cautions for managers when planning a service guarantee, some outstanding examples of successfully implemented service guarantees also emerged. A notable example is the customer charter, a more comprehensive conditional guarantee that avoids many of the pitfalls associated with traditional service guarantees.

Originality/value – Previous studies do not address the experiences of a broad sample of companies that have designed and implemented a service guarantee. The findings in this paper extend the understanding of how service guarantees could become more effective and identify directions for future research.

An executive summary for managers and executive readers can be found at the end of this article.

Introduction

Service guarantees are written promises of service performance declared through advertising and company literature, making offers of compensation if promises are not honored  The appeal of service guarantees lies in their potentially broad strategic application. A service guarantee may serve as a quality instrument for improving firm performance, a marketing device to provide competitive advantage through differentiation and the opportunity to command a price premium, a customer service tool to improve levels of satisfaction and increase the number of legitimate complaints, or a combination of all of these uses

Unquestionably, improving the design and implementation of service guarantees would enhance their effectiveness. A framework resulting from a study of companies with service guarantee experience sets out five distinct steps for the successful design and implementation of a service guarantee Analysis of market and internal factors.

1. Service quality signaling.
2. Guarantee design.
3. Implementation and communication.
4. Performance analysis.

However, the actual process companies use to design and implement a service guarantee remains obscure. To what extent do companies actually follow these implementation steps and their accompanying guidelines?

Two themes dominate the literature, which spans more than two decades:

1. factors relating to the design of service guarantees; and
2. measurement of customer and firm-related outcomes.

These themes shape the direction of this study and we discuss them in turn.

Designing service guarantees

Service guarantee may be either unconditional or conditional, but regardless of its type, a strong guarantee should be easy to understand and communicate, heavily promoted, simple and obvious, meaningful to customers, easy to invoke, fast to collect on, and credible  Where possible, a service guarantee should also specify the payout, avoid complex or legalistic language, and allow activation by the customer

Benefits of a guarantee vary across different services and may be more interesting in situations where the price of the service is high, where an industry has a poor image for quality, and where businesses depend on repeat purchases . Cstomer circumstances that provide fertile ground for service guarantees include markets where word-of-mouth is particularly important, where the customer's expertise is low, and where consequences of service failure are high. Service guarantees also provide advantages to well known and reputable companies by increasing expected quality and reducing perceived risks sevice guarantees therefore seem to perform differently, depending upon the nature of the service, the competitive environment of that sector, and consumer purchasing behavior.

When developing the guarantee, before its introduction an organization should research thoroughly and consider carefully all external market forces, for example by reviewing industry standards, likely response by competitors, and attitudes of various customer segments, together with any possible internal effects on management, contact staff, and operations personnel (Fabien, 2005). However, designing the specifics of a service guarantee presents many challenges. For example, no clear guidelines exist for determining the right level of compensation (Baker and Collier, 2005; Kukar-Kinney and MacKenzie, 2007).

Outcomes of service guarantees

Most previous empirical research examining the customer effects of service guarantees uses a combination of research methodologies but relies mainly on experiments and surveys (Hogreve and Gremler, 2009). Few studies consider the benefits to the organization.

Various studies suggest that the presence of a service guarantee can improve a customer's intention to purchase (Kukar-Kinney, 2006) and build loyalty by signaling to customers that employees will be motivated to deliver a high level of service (Boshoff, 2003; McWilliams and Gerstner, 2006). A service guarantee positively influences customers' perceptions of overall service quality, or at least communicates a company's quality intentions (Andaleeb and Basu, 1998; Erevelles et al., 2001). Guarantees also operate at the encounter-specific level by positively influencing customer service evaluations and reducing consumers' perceived risks in purchasing a service (Kandampully and Butler, 2001), although whether conditional or unconditional guarantees are better suited to achieve this outcome is unclear.

In addressing the question of their effectiveness in encouraging legitimate complaints, McColl et al.(2005) found that service guarantees did not increase the likelihood to complain when they were used in isolation from other consumer stimuli, such as a firm's advertising. Their findings suggest that providing additional evidence to the written guarantee, such as how service processes allow for promises to be guaranteed, could enhance the effectiveness of the service guarantee. Offers of high monetary compensation may have a similar effect in encouraging complaints (Marmorstein et al., 2001).

Service guarantees have a statistically significant effect on service quality through employee motivation and vision (Hays and Hill, 2001, 2006), and a nonlinear relationship exists between perceived service quality and employee-related variables, including frontline motivation and an increased ability to detect service failures through complaint information (Sum et al., 2002). In a similar vein, service guarantees may support service initiatives by influencing a firm's service processes, the recovery process, and new service development initiatives (Lidén and Sandén, 2004). These studies build a strong case for using a service guarantee as a quality tool or within a change management program.

Methodology

To study the way companies design and implement service guarantees, we began by analyzing the guarantees within the sample for their particular design elements. These elements included type (conditional or unconditional), promises of compensation, and conditions for invoking. Appendix 1 (Table AI)presents a summary of the results of the content analysis. As the earlier section covering research issues shows, the choice of design elements has received a great deal of interest from academic researchers. The discussion of the types of guarantees in the sample provides a context for the findings.

We found that each of the service guarantees met the criteria of being simple and understandable. All appeared to be easy to invoke with the exception of the bank case, where customers who spent more than five minutes in a queue and wished to invoke the guarantee needed to wait additional time to complete a detailed claim form.

In terms of the types of guarantees introduced, only the hotel case had adopted a 100 percent unconditional guarantee as part of a world-wide initiative. The most comprehensive and innovative conditional service guarantee was that of insurance-B, which claims to be first in the world to offer a customer charter in a non-public organization. The company's charter outlines 21 service standards that customers could expect from the company and reinforces service promises by a $30 payment offer for any breaches of the guaranteed conditions. A national accounting firm independently audits the charter performance, and the company makes the results of the audit public. In total, nine companies offered conditional guarantees that promised either monetary compensation (for example, $5 for slow service in the bank case) or a refund of any charges in the event a customer invoked the guarantee (the most common form of compensation).

The process of identifying common problems in the design and implementation of service guarantees relied on qualitative research, which is appropriate for a constructivism epistemological position where the goal is new theory development (Carson et al., 2001; Crotty, 1998; Healy and Perry, 2000). Qualitative research is also appropriate when a new slant on a phenomenon is required or where the subtle details of phenomena are not suited to an investigation using quantitative methods (Strauss and Corbin, 1990).

We conducted a total of 22 in-depth, personal interviews across ten different service organizations representing nine industries. In the previous 109 studies of service guarantees, only five investigations consider more than one industry context (Hogreve and Gremler, 2009). Examining many industries in one study, as is the case here, allows the findings to be applied beyond a single case experience.

Each of the companies studied operates in Australia, where we carried out the interviews. Seven conduct business nationally and one internationally, with the remaining two being locally based in the city of Melbourne. While the organizations in the study constituted a convenience sample, we made every effort to obtain sample variability in terms of types of industry, company size, and type of guarantee, resulting in an initial sample of 17 companies that advertised a service guarantee in company literature. We conducted interviews within these organizations until a convergence of views was obtained – that is, until no new themes emerged (Miles and Huberman, 1994). This process resulted in a final sample of the ten organizations listed in Table I.

We selected individual company respondents using the key informant approach (Robson and Foster, 1989), which consisted of talking with managers who were personally responsible for or closely associated with the guarantee design and implementation process. In most organizations, we conducted multiple interviews to capture the views of the cross-functional unit involved.

Interviews followed the recursive model of interviewing (Minichiello et al., 1995), as answers to open questions are more likely to reflect a respondent's own thinking and thereby improve the validity of the results (Dey, 1993; Patton, 1990). A topic guide directed the flow of the interviews. Each interview lasted between 45 and 90 minutes, and all of the interviews were audio-taped and later transcribed verbatim.

The data analysis consisted of data reduction, followed by data display and conclusion-drawing/verification (Miles and Huberman, 1994). Owing to the exploratory nature of the study, data reduction for each of the 22 interviews employed mainly in vivo codes (Strauss and Corbin, 1990) and yielded a matrix table from codes developed from each interview. We then integrated and synthesized the displays to identify respondents' attitudes and opinions. For the data analysis, we used QSR NVivo6 computer-based analysis software (QSR International Pty Ltd, 2006).

Findings

The findings regarding actual company practice reveal significant discrepancies from the recommendations of Fabien (2005) concerning good practice in the design and implementation of service guarantees. These variances between theory and practice include inadequate or non-existent pre-launch market research; ambiguous definition of the role of the guarantee; inadequate market testing of alternative guarantee promises; a lack of consultation with key functional managers during development; a lack of CEO commitment; ambiguous assignment of responsibility for ongoing management of the guarantee; and an absence of performance evaluation. We describe these common mistakes in detail below, under headings that refer to the steps in the guarantee implementation process (Fabien, 2005). Appendix 2 (Figure A1)presents a model depicting these mistakes.

Step 1 – Analysis of market and internal factors

Mistake 1. Inadequate or non-existent pre-launch market research

In the majority of cases, the company performed no industry analysis before implementing the service guarantee. This finding pointed to a fundamental departure in practice from the recommendations in the literature, and the model presented in Appendix 2 (Figure A1) reflects its importance. In only four cases did the company carry out primary market research – in communications, banking, insurance-B, and hotel – and even these organizations focused mainly on consumer-related issues to the neglect of other factors, such as a review of industry standards, competition, and the legal environment. The following examples illustrate various approaches to customer research.

Research in the banking case comprised a large-scale quantitative study, which concluded that for 92 percent of the bank's customers:

Fast service at the branch was the most important service requirement in a banking service.

This finding led to the introduction of the bank's promise that a customer would spend no longer than “five minutes in a queue or receive $5.” Insurance-A used a series of focus groups to determine the precise wording of the guarantee and its format – a car insurance guarantee that promises:

A guaranteed repair, by a reputable company using guaranteed manufacturers' parts and completed on time.

Companies by-passed preliminary market analysis for three main reasons: lack of time, lack of resources, or uncertainty as to what information they should gather. One company reported that:

We were under pressure to get the thing out to customers quickly and no one worried about researching the market.

Insurance-B described a positive experience of conducting a comprehensive industry analysis prior to launch which continues to play a role in identifying new guarantee promises:

Our initial research indicated that policy holders were concerned and confused about the term “100 percent guaranteed” which persuaded us to adopt a conditional version.

Today, this company holds regular customer focus group discussions using present and past clients. In addition, the company has established a system of customer and staff comment cards. Available at branches, the cards encourage general feedback and solicit suggestions for additional guarantee conditions. The company also encourages staff members to submit ideas online, anonymously if necessary, concerning potential new or revised promises. A recent example relates to customer complaints about delays in claim settlements. The average time delay for a settlement check was more than 14 days, and the company found that:

… our customers expected to receive a check in less than five business' days.

After a three-month review of the operational issues required to reduce the delay, the company established a new target, promising to mail a check within three working days. This promise was subsequently incorporated into the following year's guarantee and remains in place today.

In summary, we found that similarly sized firms used different approaches to researching their service guarantee, ranging from no action at all to a full assessment of the market, including customer perceptions and operational implications of meeting service promises.

The second common mistake related to the role of the service guarantee.

Step 2 – Service quality signaling

Mistake 2. Unclear definition of the role of the service guarantee

The study uncovered what companies anticipated from their service guarantee. Table II summarizes the responses, which reflect a broad range of expectations among managers. Two factors caused the breadth of expected outcomes:

1. absence of a clearly defined role for the guarantee; and
2. changes in the role and management of the guarantee over time, resulting in additional expectations.

Expected benefits consisted of marketing-, quality-, or customer service-related factors. Marketing-related factors include service differentiation, repositioning the brand or company, matching the guarantee of a competitor, and reducing perceived risks in purchasing. In a number of cases, the company employed the service guarantee for quality improvement reasons, such as boosting existing quality initiatives, replacing completely the existing quality program, improving staff motivation and performance, and reducing costs, although this last factor was only mentioned at insurance-A. Customer service-related factors were important for many of the organizations studied. The main factors mentioned included increasing the number of legitimate complaints reported to the organization, providing a better system for tracking complaints, and generally improving service-related perceptions.

Insurance-B offers an example of a company with a successful guarantee (a customer charter) and a clear vision of its role

Our customer charter gave our TQM program a fresh focus as previous attempts to improve customer service had been quite disparate.

Insurance-B's focus from the outset was to use the charter as a vehicle to improve overall service quality. The company considered any marketing benefits to be secondary.

We next examine the design process.

Step 3 – Guarantee design

Mistake 3. Inadequate market testing of alternative guarantee promises

Two key missteps were evident during this phase:

1. a general lack of testing of alternative guarantee types and conditions; and
2. inadequate organization-wide involvement of key managers.

Despite doing no primary market research prior to launch, most companies nevertheless allocated time to considering the exact promises to be incorporated into conditional guarantees. Unfortunately, however, companies did not test the various design options among customers. The design phase varied across our sample of organizations, with the majority taking six and 12 months for this phase. One organization took less than six months and three firms spent less than one month in development.

With respect to guarantee type, companies offered a number of arguments in favor of a conditional guarantee over a 100 percent unconditional promise, with the most frequently mentioned being the ability to emphasize specific aspects of the service offer. Firms also perceived conditional guarantees to be easier for operations personnel to perform against, particularly easier than 100 percent unconditional guarantees, and in the main were skeptical about the power of the unconditional service guarantee, citing possible financial and image risks for non-performance.

Compensation levels for successful claims were generally set at a point which would encourage a disgruntled customer to invoke the guarantee but not penalize the company too greatly. Full money-back refunds fell short of either criterion, as insurance-B reflects in this response:

A $30 payout isn't very much if you have a major disagreement with the company, but for something minor like not having a decision-maker on hand at the time of your call it is quite high.

The postal company, which launched its guarantee with the offer of a replacement courier bag, later changed this promise, deciding that providing a replacement courier bag was:

meaningless and insulting to claimants when important documents such as a job application did not arrive or when tickets to a major event went astray.

By virtue of its design, the 100 percent unconditional guarantee made the customer the ultimate judge of quality. A key consideration for companies designing a conditional service guarantee was who should have authority for invoking the service guarantee should the need arise – the customer, the company, or both parties. The telecommunications, bank, real estate, and insurance-B cases allow either the employee or the customer to activate the guarantee. At the telecommunications company:

between 70-80 percent of payouts are initiated by employees rather than customers.

However, a customer invoking a service guarantee must first be aware of the guarantee's existence. Regrettably, none of the companies in the sample measured customer awareness of their guarantee.

Customer-initiated conditions also assume that staff members interacting with customers have full knowledge of the procedures for processing a guarantee claim. This issue represented a problem in the bank case, which relied heavily on part-time employees who were not always fully aware of the service guarantee process. The bank reported that:

some staff seem unsure of the claims' procedure, thereby resulting in a double service failure for customers who are looking for a positive service recovery.

Respondents noted that one weakness of the company-invoked guarantee was that employees might be inclined to avoid acknowledging claims if the claims reflected negatively on them individually or on their colleagues. In the bank case, some employees were described as:

reluctant to encourage claims because of how the branch would be seen at head office.

A hotel respondent presented an alternative view that the company-invoked guarantee:

may act as a pleasant surprise to a guest in the service recovery process, particularly if the guest had been unaware of the existence of the service guarantee.

A second problem in the implementation phase, poor consultation of senior managers, is discussed next.

Mistake 4. Lack of consultation with key functional managers

Typically, the marketing manager initiated the introduction of a service guarantee, with expectations that the guarantee could deliver benefits which might improve customer service levels. Surprisingly, this development phase included very little consultation with operations personnel. Many respondents noted that this oversight later resulted in conflicts between the marketing and operations' functions as operations came under pressure to deliver on the firm's promises:

Our biggest mistake was not to incorporate all of the senior management team. It came to be seen as just a marketing program until our operations people couldn't deliver on the promises. Then the arguments began.

In contrast, the hotel devoted considerable time and resources to staff training to ensure that all employees understood their role in the guarantee process and, importantly, that they had authority to invoke the service guarantee if they believed the circumstances warranted. The next phase of implementation, communication of the service guarantee internally and to customers, again suffered from two common mistakes.

Step 4 – Implementation and communication

Mistake 5. Lack of CEO commitment

Successful service guarantee programs received full support from the chief executive officer and the senior management team, as our hotel and insurance-B cases show with their effectively designed, launched, and managed guarantees.

Conversely, other service guarantee programs in our sample miscarried because of inadequate support at the highest level within the organization. The primary explanation for failure was that the senior management team was unable to convince the CEO of bottom line benefits linked to the service guarantee. Consequently, in some organizations the program remained entrenched within the function that either proposed the guarantee or inherited it after launch. Without support from the CEO, the service guarantee program starved from lack of resources:

We had the management team on board but the CEO didn't provide the resources to maintain the program.

The location of this issue at the heart of the model in Appendix 2 (Figure A1) reflects its significance.

Mistake 6. Ambiguous assignment of responsibility for ongoing management of the guarantee

Successful guarantee programs were managed by a cross-functional team with a clearly assigned manager who had the authority to implement changes to the conditions of the guarantee. A positive experience in managing its service guarantee led the telecommunications organization to modify its service guarantee many times after launch, and the company is now considering offering new products, such as insurance policies, in the event of poor service. The transport company has also strengthened its guarantee, deleting clauses which were not explicit promises, and today only guarantees delivery by 9.30 a.m. for its first-class service. These modifications suggest that in a number of cases the development of the service guarantee process was on-going and included phases of feedback and review. However, our findings suggest that companies often undertook design modifications without the aid of adequate hard data reflecting the guarantees' performance.

In less successful cases, different functions within the organization competed for ownership of the program in an internal power struggle. When the bank discontinued its service guarantee, the CEO claimed that the guarantee had enabled the firm to demonstrate its commitment to improving customer service. However, one company respondent said that the bank had spent more than $800,000 each year on penalties (at $5 per payout), which he considered to be:

a lot of money to find out which branches were not meeting operating standards.

A further assertion of the real reason for withdrawing the service guarantee was that success of the guarantee in encouraging branch traffic conflicted with the bank's desire to switch clients to lower cost service-delivery options, such as the internet, the telephone, and automatic teller machines (ATMs):

The guarantee of not spending more than five minutes in a queue actually encouraged customers to visit the branches, which was not the goal of our program.

The bank has recently introduced a customer charter along the lines of insurance-B. This type of more detailed conditional guarantee, with publicly audited results, may become the more common type of service guarantee in the future.

Step 5 – Performance analysis

Mistake 7. Absence of performance evaluation

Unexpectedly, in only three cases were the number of payments made under the service guarantees recorded – insurance-B, the hotel, and the bank. Unfortunately, the companies established no comparisons with pre-guarantee complaints, rendering impossible any conclusions about the specific effects of the service guarantees. Additionally, in assessing whether the guarantee met the expectations originally established, no organization conducted a formal cost-benefit analysis using financial data.

We found that respondents were generally more positive about their service guarantee experience when the guarantee was a central component of the overall service offer, such as for the hotel, insurance-B, postal, and real estate cases. In those companies, managers believed that the guarantee delivered important benefits in supporting quality improvement initiatives. However, where the service guarantee had no link to the core service, or had no organization-wide commitment to its success, managers assessed the benefits as marginal.

Discussion and implications for management practice

Our findings of Australian service guarantees expose many discrepancies between theory and practice. Our sample revealed that conditional service guarantees were much more common than the 100 percent unconditional guarantee which has been popularized in the academic and practitioner literature (Hart, 1988). Organizations favor conditional guarantees because they appear to be easier to perform against and less risky than unconditional promises.

In terms of the expected outcomes, we found that Australian managers envisaged that beyond providing quality signals (Fabien, 2005), their guarantee would deliver marketing-, quality-, and customer service-related benefits to their organizations. However, the service guarantee often began life as a marketing device and shifted over time toward a change management tool monitored by a cross-functional team responsible to the HRM manager.

An outstanding example of an effective guarantee implementation process operates at insurance-B in the form of as a customer charter, which has replaced the former quality system. The actual charter is a dynamic document, relying on continuous market data from customers and staff to inform new charter promises. The extant literature contains very little about this tool, which appears to offer benefits over traditional service guarantees by allowing companies to add new promises easily and publicly report audited performance scores.

The non-performance of marketing research by most companies in the pre- and post-launch phases of the guarantee implementation process was surprising. These critical first and last stages of Fabien's (2005) model appear to have been neglected in practice, creating difficulty for managers in both designing strategic service guarantees and later evaluating their effectiveness.

Given that service guarantee effectiveness depends on how well the guarantee is designed and implemented, this study offers many lessons for managers. We found that in general, service guarantees were ill-conceived, poorly implemented, or not monitored after launch. Comparison between theory and both good and poor business practice identified a number of common mistakes, including inadequate or non-existent pre-launch market research; ambiguous definition of the role of the guarantee; inadequate market testing of alternative guarantee promises; a lack of consultation with key functional managers during development; a lack of CEO commitment; ambiguous assignment of responsibility for ongoing management of the guarantee; and an absence of performance evaluation. These mistakes offer a roadmap and identify potential potholes for managers considering the introduction of a service guarantee.

Conclusions and implications for further research

Our study of 10 Australian service guarantees addresses an important gap in the service guarantee literature by exploring the companies' experiences and comparing those findings with the extant literature, in particular the model for the effective design and implementation of service guarantees (Fabien, 2005).

The study of a cross-section of Australian companies is valuable in that it provides data beyond the single case-study experience typically reported in previous research. In addition, the study identifies a number of potential areas for further empirical investigation. First, given the number of companies that expected the guarantee to deliver benefits beyond customer outcomes, previous researchers' preoccupation with customer rather than organization outcomes seems unwarranted. Findings from previous investigations may need reconsideration, particularly those that relied on surveys or case studies rather than experimental designs. The assumption that all service guarantees are well designed now seems optimistic, and future studies should distinguish between the conditional and unconditional guarantees when reporting findings. Second, the findings concerning the outstanding performance of the customer charter at insurance-B warrant further empirical investigation, particularly vis-à-vis the charter's performance compared to traditional forms of service guarantees.

Although it does not undermine the validity of our findings, one limitation of the study deserves mention. The study was exploratory and consisted of Australia-based organizations, and as with all exploratory research, extrapolation of the findings across a broader sample must be done with care.

In summary, despite the publication of over 100 papers over the past two decades, the service guarantee literature remains undeveloped. This study makes an important contribution to this literature by exploring companies' experience in designing and implementing service guarantees. The findings reveal a number of common management errors, indicating that managers should think carefully about the design and implementation of service guarantees so as to maximize customer and firm outcomes.

Table IIExpected outcomes from implementing the service guarantee