An investigation into the validity of using service guarantees to enhance customer orientation

Abstract

Managers today have realised that traditional approaches to management are inadequate if they are to keep abreast of an increasingly competitive market. To maintain market leadership, firms will need to adopt new approaches that support simultaneous and continuous improvement and innovation of their systems, procedures and people on a continuous basis. Service guarantees have, gained considerable support and recognition among practitioners and academics as a strategy to communicate a firm's commitment to superior service. Previous research into service guarantees has examined their potential to achieve certain results: improving performance (Hart 1988); augmenting the value of the service (Maher 1991); gaining higher market share (Hart et al 1992); improving internal performance (Hart 1995); achieving superior service quality (Sowder 1996) and gain customer loyalty (Evans et al 1996). This research has shown that the service guarantee, once established, can provide the management with the means to ensure the delivery of a superior quality of service, to respond to changes in the market and to solve problems quickly.

This study's focus is related to the operations of maritime ports as a service sector within the transport industry. The aim of this research is to assess the attitudes of customers toward a set of services guarantees offered by Port Wellington using a modified version of the behavioural intention model proposed by Zeithaml et al (1996). Using data from 43 major customers of Port Wellington in New Zealand, this study examines the effect of the service guarantee on customer orientation using a three-stage analysis: 1) the effect on customer behavioural intentions 2) the effect on the firm's internal customers 3) the effect on the firm's customer orientation.

According to Baker (1984) deregulation of a transport industry increases the level of competition. Today, the customer's most important transport decision is not the mode of transportation, but the choice of service provider. Delivering superior service quality has been recognised as the most effective means of influencing customers' purchase decisions (Parasuraman et al 1991). Moreover, the customer's criteria for port selection are influenced by the efficiency of the port's terminal facilities and the associated services offered (Murphy et al 1992). For ports and carriers this means there is a need to ensure that they are capable of fully meeting customers' needs.

As customers are the definitive determiners of whether or not a firm provides a quality service (Kohi and Jaworski, 1990), organisations need to identify customer expectations and the associated critical service incidents which, if not effectively managed, lead to customer dissatisfaction (Albrecht and Zemke 1985). Fuller et al (1993) claim that customer orientation can help transporters to synchronise the service offerings with the customer's logistical requirements. The relative importance of the components of service quality varies according to the service setting (Drew and Karwan's 1994). Therefore the service guarantees referred to in this study relate to the service incidents that customers use to form their perception of the quality of the service being offered (Johns and Tyas 1997). That is, this study will concentrate on a company's ability to guarantee three fundamental aspects of service: the completion of the service within an agreed time, the provision of a high standard of after sales service, and the assurance that any dissatisfaction will be promptly rectified (Lambert and Stock 1993). All of these help firms convince customers of the reliability of their particular offerings.

The majority of behavioural intentions were not found to differ significantly with respect to whether or not guarantees were presented. However, customers who were offered guaranteed completion times for container repair and stevedoring services were more likely to pay a premium price for their services.

The results of this study indicate that the specific service guarantees presented had a limited effect on customers' initial behavioural intentions. That is, the benefits accrued through the implementation of service guarantees do not occur as a result of the guarantees' initial promotion. Rather, this study illustrates that the benefits occur over a longer period of time as firms utilise the increased feedback that service guarantees provide to improve their service offering. The results of this study indicate that caution is needed when a firm interprets research, claiming to determine the value of particular guarantees, as the true value of such guarantees in enhancing customer orientation can only be measured in the long-term. Hence, a longitudinal analysis is the most appropriate method to determine if the proposed benefits of service guarantees will come to fruition. This research contributes to the present knowledge in the field of services marketing in explaining how service guarantees can be utilised by service firms to improve their customer orientation and in turn their service quality in the transport sector.