Service guarantees: A strategic mechanism to minismise customers's preceived risk in the hospitality and tourism organisations

Abstract

Services management theory suggests that service guarantees can be effectively utilised to reduce the perceived risk of hospitality and tourism customers. Hospitality and tourism, typically a service offering, is intangible in nature; hence, customers are unable to assess the outcome prior to their experience. In order to attract prospective customers to avail of services offered by hospitality and tourism firms, it is imperative to reduce the perceived risk for their customers. This paper suggests ways by which hospitality and tourism firms will be able to effectively reduce the perceived risk that their customers experience and encourage customers to use the services offered. Constructs and an explanatory model are developed to test the capabilities of service guarantees to reduce customer risk. Previous research on service guarantees has been limited in their effectiveness in improving customer orientation. This may largely be attributed to the guarantee's vague promises, and poorly planned managerial evaluation and accountability strategies. It is argued here that a well designed service guarantee will assist a hospitality and tourism firm to reduce customer ' s perceived risk, improve the quality of services offered and reduce customer dissatisfaction. The model which is proposed here will not only assist the firm to transform its customers from dissatisfaction to satisfaction, but will also ensure that the firm eradicates the potential recurrence of a similar failure. The continuous assessment of the strengths and weaknesses of a firm's operations therefore constitutes an essential part of the establishment and refinement of service guarantees that can effectively reduce customer risk. This research contributes to the present knowledge in the field of hospitality and tourism marketing by furthering our understanding of how service guarantees can be used as a strategic tool to reduce the level of risk that customers associate with hospitality and tourism services.