Should a lower-price service offer a full-satisfaction guarantee?

Jehn-Yih Wong, Sheng-Hshiung Tsaur and Chih-Hung Wang

The Service Industries Journal, 2008, vol. 29, issue 9, 1261-1272

Abstract: Although service guarantees have enjoyed wide popularity as marketing tools and brought impressive results for firms, it is still not clear whether different types of service guarantees have similar effects on consumers' pre-purchase evaluations of differently priced services. To answer this question, several hypotheses were formulated and then tested with a 2 × 3 between-subjects factorial design consisting of two price levels (low and high) and three types of service guarantees (none, attribute-specific, and full-satisfaction) in the context of hotel industry in Taiwan. The results indicated that it is beneficial for a higher-price service to employ a full-satisfaction guarantee, due to consumers' higher expected service quality and willingness to buy, and the lower perceived performance risk. In contrast, for lower-price services, an attribute-specific guarantee is recommended because of consumers' higher expected service quality and willingness to buy, and the lower perceived financial risk. The implications of these findings and directions for future research are discussed.

Date: 2008
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Persistent link: https://EconPapers.repec.org/RePEc:taf:servic:v:29:y:2008:i:9:p:1261-1272

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DOI: 10.1080/02642060801911102

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The Service Industries Journal is currently edited by Eileen Bridges, Professor Domingo Ribeiro, Ronald Goldsmith, Barry Howcroft and Youjae Yi

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