Realization of the long-term goals of any organization ultimately mustrevolve around customer satisfaction. This is particularly true in restaurants,where failure to satisfy customers will quickly lead to an early terminationof the business. General levels of consumer dissatisfaction with servicequality at restaurants are very high – in 1995 over 50 percent of restaurantpatrons surveyed cited no aspect of service as being excellent. This findingis consistent with the high levels of failure among restaurants. Given theintense competition and demanding consumers, a reasonable concernrevolves around what restaurants can do to maintain customer satisfaction.

This paper is focussed on one suggested approach to the problem – theoffering of service guarantees. Recently, service guarantees have beenoffered by an increasing number of industries. These include cable televisionproviders, long distance providers, banking, health care and dental services.We address the issue of the role that service guarantees may fill indemonstrating to potential customers that the restaurant delivers a satisfyingdining experience. For example, would a guarantee of satisfaction serve toovercome any doubts of consumers caused by bad dining experiences in thepast?

There are two basic streams of relevant literature that begin to address theissue of consumer perceptions of service guarantees in restaurants. First arestudies of what choice criteria customers use in choosing restaurants. Secondare studies of the theoretical role of service guarantees on satisfaction.

Restaurant choice criteria studiesA few published studies have been done investigating the key criteria usedby customers in choosing restaurants.

June and Smith (1987) were concerned with what characteristics ofrestaurants consumers thought were most desirable under four differentusage occasions: an intimate dinner, a birthday celebration, a business lunchand a family dinner. Five key criteria were used in their study of customerchoice among restaurants: price, atmosphere, liquor license, service andquality. Using a convenience sample with conjoint analysis, they concludedthat different mixes of criteria were used when the respondents werechoosing among restaurants for different occasions.

Sweeney et al. (1992) were interested in how consumers use cues to formexpectations about service quality. While the use of restaurants wasincidental somewhat to their study, they do give some insight as to consumerchoice of restaurants. Their list of restaurant related cues reflected thegeneral marketing mix and included ten criteria: price, past experience,reputation, location, advertising, appearance of other customers, employeeappearance, employee manner, and premises. As in the case of June andSmith (1987), they found somewhat different patterns of importance of

10 THE JOURNAL OF SERVICES MARKETING, VOL. 11 NO. 1 1997, pp. 10-18 © MCB UNIVERSITY PRESS 0887-6045

Service guarantees andconsumers’ evaluation ofservicesLouis A. Tucci and James Talaga

An executive summary formanagers and executivescan be found at the end ofthis article

High levels ofdissatisfaction withservice quality

Key criteria inchoosing restaurants

THE JOURNAL OF SERVICES MARKETING, VOL. 11 NO. 1 1997 11

criteria by different dining situations (dinner with a friend vs. dinner with agroup of friends). In general, reputation, manner of employees andappearance of premises were viewed consistently as very important. Inneither case did the authors indicate that the criteria selected have anyvalidity other than face validity (they seem like reasonable criteria).

Reeves and Hoy (1993) in their study of management commitment to servicequality used surroundings, customer turnover, location, price, quality offood, quality of service, and type of food. These variables were chosenbecause they are used in restaurant trade journals to identify strategies ofcompeting restaurants (p. 55).

The National Restaurant Association (1995) has two lists of criteria. One listhas 15 items. One group of seven items pertains to the server (e.g. friendlyservice, answering questions about the menu, etc.); the other eight itemsaddress nonserver-related issues such as quality of food, noise level, etc. Thesecond list aggregates the 15 items into five items: food, service, price,location and ambiance.

Theory of service guaranteesA second approach to ensuring customer satisfaction with a service offeringinvolves guaranteeing the quality of service performance. Hart (1988) arguesthat service guarantees will lead to increased satisfaction in a number ofways:

• It forces the business to focus on customers. Failure to know what thecustomer wants can lead to poor guarantees.

• A guarantee sets clear standards for the company.

• A guarantee generates feedback. It gives customers an incentive tocommunicate dissatisfaction meaningfully.

• A guarantee forces you to understand why you fail.

• A guarantee builds marketing muscle. It encourages purchase throughrisk reduction and enhances loyalty of existing customers.

In addition, Hart holds that services guarantees are particularly effectivewhen:

• price of service is high;

• customer’s ego is on the line;

• customer’s expertise is low;

• consequences of failure are high;

• there is a bad industry image for quality;

• they depend on repeat purchases;

• word-of-mouth is critical for business.

Hart then provides anecdotal evidence that service guarantees are useful forimproving performance. He cites the cases of British Airways, “Bugs”Burger Bug Killers, L. L. Bean, Domino’s Pizza, Citibank, and others.Browning (1989) discusses the use of service guarantees by the ColoradoNational Bank. Rose (1990) discusses the use of service guarantees by thePromus Companies (Hampton Inns, Embassy Suites and Harrah’s Casinos).Maher (1991) also cites several cases where service guarantees have worked.Ettorre (1994) cites several instances involving service guarantees withparticular focus on GTE.

Guaranteeing thequality of serviceperformance

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An implicit assumption in the services guarantee literature is that offering aservice guarantee will increase consumer satisfaction with the offering.Hart’s reasons for increased satisfaction all relate to improved managerialperformance which then translates to improved customer satisfaction. Thismanagerially-oriented approach may have some problems. We agree withLewis and Nightingale (1991) in their discussion of quality service in a hotelcontext that “Service must be designed for customers’ needs and theirwillingness to pay for it” (p. 20). As a consequence, offering serviceguarantees may not necessarily be appropriate if customers do not desiresuch a service or benefit or if the service is not consistent with customerexpectations.

While their work was not directly on service guarantees, but on warranties ingeneral, Boulding and Kirmani (1993) provide some useful insight into howservice guarantees might be perceived by consumers. They hold generallythat high or better warranties are signals of high quality, while low or poorwarranties are signals of weak or poor products. Their study dealt withtangible products (a personal computer). High credibility firms (computerfirms believed to offer high quality) offering high warranties benefitted fromthese warranties. Low credibility firms (computer firms believed to offer lowquality products) offering high warranties did not benefit. When thewarranty was perceived to be not credible, high levels of length and scopegenerally did not benefit the firm. In particular, when the buyer did notbelieve the warranty to be credible, unconditional warranties significantlydecreased performance perceptions and overall quality perceptions.

In terms of restaurants, what should we expect? Following Boulding andKirmani (1993), we would expect that unconditional service guarantees inrestaurants would benefit those restaurants that are already perceived as highquality and may actually reduce quality perceptions of restaurants perceivedas lower quality.

According to Boulding and Kirmani (1993), implementation of a serviceguarantee will signal to consumers either positively or negatively dependingon the initial consumer perception of the restaurant. Hart (1988) would holdthat the service guarantee will lead to an internal change that will result inimproved quality and hence improved consumer acceptance. If Hart iscorrect, then service guarantees would indeed be highly desirable. IfBoulding and Kirmani are right then service guarantees may, in some cases,be the absolutely wrong strategy.

The previously cited restaurant studies do not include service guarantees as avariable in consumer choice and evaluation of restaurants. The serviceguarantee literature does not measure consumer perceptions of the value ofservice guarantees. Thus, we are interested in consumer perceptions of thevalue of service guarantees. That is, is offering a service guarantee adesirable strategy for restaurants? In particular, does the presence of aservice guarantee influence consumer choice positively?

The literature does not address whether or not the mere presence of a serviceguarantee has an impact on consumer choice. This study does not measurewhether or not a service guarantee actually increases performance orcustomer satisfaction. Rather, it addresses whether or not customers,knowing that a service guarantee is in place, are influenced in their choice ofrestaurants. Conjoint analysis can help us bridge the gap in our knowledgeabout the relationship between choice criteria and purchase intention. Thatis, the higher scores on the various criteria presumably mean higher levels of

A managerially-oriented approach

Consumer perceptionof service guarantees

THE JOURNAL OF SERVICES MARKETING, VOL. 11 NO. 1 1997 13

utility for a particular restaurant description. If consumers view serviceguarantees as a positive attribute, restaurants that offer such guaranteesshould receive higher rankings than do restaurants that do not offer serviceguarantees, all other things being equal.

Hypothesis formulationThe major hypothesis tested in this study is that the utility of a restaurantwill be greater if the restaurant offers a service guarantee to its clients.Moreover, the utility level associated with this guarantee should increase themore inclusive the terms of the guarantee. For example, explicit guaranteesshould produce higher utilities than a vague or absent service guarantee.

Selection of determinant attributesObviously, restaurants, as well as any other service provider, could beevaluated by consumers on an almost infinite number of possible attributes.In this study, we used a variation of Kelly’s repertory grid technique (Kelly,1955). A group of 30 MBA students were given the task of writing on anindex card which features differentiate a “good” restaurant from a “bad”restaurant. The logic of this approach is that the subjects would list onlythose attributes which were of great importance in the selection of an eatingestablishment.

A common set of four attributes emerged. They included the following:price, speed of service, quality of food and courtesy of server. Theseattributes largely are consistent with previous studies of restaurant choicecriteria. Service guarantee was added as the fifth attribute by the authors.

Experimental designA main effects only design was chosen for the study. Each of the maineffects was estimated independently. The five attributes each had three levels(Table I).

The final questionnaire consisted of 32 different descriptions of restaurants(restaurant profiles) and four questions regarding basic demographiccharacteristics. MBA students were selected as subjects. All who

Table I. The five attributes and associated levels

Attribute Levels

Price Less than $15.00$15.00 to $25.00More than $25.00

Speed of service Slow serviceAverage servicePrompt service

Quality of food AverageAbove averageExcellent

Courtesy of server Not friendlyFriendlyVery friendly

Service guarantee No explicit or stated guaranteeAn explicit guarantee of satisfaction, but no detailsAn explicit guarantee of satisfaction (full refund or no charge for the meal)

Explicit guaranteesshould produce highutility levels

14 THE JOURNAL OF SERVICES MARKETING, VOL. 11 NO. 1 1997

participated in the study indicated at least a recent dining out experience.The 161 MBA students who participated in the study were given instructionsto assume that the restaurants were identical on all but the attributes listed inthe profile.

This study did not address all types of restaurants. In particular, respondentswere told that: “Attached are a number of descriptions of different tableservice restaurants. A table service restaurant is one where a waiter orwaitress takes your order, serves your meals and so on.”

Each of the 32 descriptions was prefaced by the following statement: “If youwere selecting a restaurant for a quiet dinner with friends, would you choosethis restaurant if all your other requirements were met?”

Thus, the focus of the study was on table service restaurants chosen for aquiet dinner with friends. Not all restaurant types were considered in thestudy nor were different dining occasions chosen. The principle involved inthe design of the study should be readily applicable to other restaurant typesin different dining circumstances.

ResultThere were three attributes which exhibited statistically significantdifferences between highest and lowest attribute levels. The followingdiscussion is based on the results found in Table II. Respondents associatedhigher utility with the presence of prompt versus slow service. A server witha very friendly manner was accorded greater utility than a server who wasnot friendly. Excellent food had higher utility than average food.

Surprisingly, there was not a statistical significance between the highest andlowest price levels, although the highest level of price (more than $25.00)was accorded the lowest level of utility. The findings for the serviceguarantee indicate no difference in utility between no guarantee and thepresence of an explicit guarantee of satisfaction.

Table II. Results of conjoint analysis

Attribute Levels Part worths T-value

Price Less than $15.00 3.15 0.3055$15.00 to $25.00 3.18 0.68More than $25.00 2.85

Speed of service Slow service 2.74* –1.34Average service 3.09 0.15Prompt service 3.35

Quality of food Average 2.55* –1.99Above average 3.10 0.18Excellent 3.53

Courtesy of server Not friendly 2.59* –1.5Friendly 3.25 0.98Very friendly 3.36

Service guarantee No explicit or stated guarantee 3.09 0.18An explicit guarantee of

satisfaction, but no details 3.14 0.41An explicit guarantee

of satisfaction (full refund or no charge for the meal) 2.94

R 2 = 0.75

Note:* indicates a one tailed t-test which is significant at the 0.10 level. A significant t-testrejects the null hypothesis of no difference between the lowest and highest level of an attribute

THE JOURNAL OF SERVICES MARKETING, VOL. 11 NO. 1 1997 15

The conjoint analysis program allowed us to perform market sharesimulations. Table III contains the results of a market share simulation wherethe attributes of speed of service, food quality and courtesy of server wereall held constant at their highest level, while price and service guaranteewhere allowed to vary. The cell entries are estimates of market share forparticular combinations of price and service guarantee. For example, a mealwith a price of less than $15.00 and no service guarantee would gain 24.3percent of the market. The same meal with an explicit guarantee would earna 13 percent market share. Finally, a low priced meal with an explicitguarantee of satisfaction with details would attract a 5.55 percent marketshare.

Thus for low priced meals, as the service guarantee increases, the marketshare falls. For medium and high priced meals, as a service guarantee isincluded, market share rises, but as more details are given, the market sharethen falls. This pattern is consistent with the views of Boulding and Kirmani(1993).

DiscussionThe major finding of this study that service guarantees are not uniformlyimportant in the selection of restaurants is surprising. Especially in light ofthe importance ascribed to such guarantees by various authorities. How canthe finding be explained? There are several possibilities:

• Some authors (e.g. Hart, 1988) have stated the circumstances underwhich guarantees are effective, including: “A service guarantee losespower in direct proportion as the number of conditions it contains.” Thisstudy may lend support to this statement. In retrospect, as the serviceguarantee became more explicit, that is, contained more “conditions”,the respondents valued the guarantee less. If the guarantees used in thisstudy were phrased even more explicitly with more conditions, theresults may have been more different. Consistent with Hart, we do notethat it is unclear whether or not giving more detail about the serviceguarantee is considered a condition.

• Service guarantees are relatively new to this product category. Manyconsumers have not had any experience with the offering of serviceguarantees by restaurants, therefore they may doubt the usefulness/valueof the guarantee. If this is the case, some effort would need to beexpended to inform consumers as to the nature of service guarantees.

• Consumers may view low priced restaurants that offer a serviceguarantee with suspicion. The market share estimates in Table III

Table III. Market share simulation results

PriceService guarantee Less than $15.00 $15.00-$25.00 More than $25.00

None 24.3 11.2 0.82An explicit guarantee of

satisfaction but no details 13.0 22.7 10.8An explicit guarantee of

satisfaction (full refund or no charge for the meal) 5.60 7.9 3.7

Note: Attributes held constant at highest level: speed of service – prompt; quality of food –excellent; courtesy of server – very friendly

Market sharesimulations

Service guaranteesare not uniformlyimportant

16 THE JOURNAL OF SERVICES MARKETING, VOL. 11 NO. 1 1997

indicate that these restaurants lose market share if they offer any type ofservice guarantee. While the guarantee may be offered by the restaurantas proof that it has improved its past poor performance, the consumerview of this supposed proof of a positive change may be confirmation ofthe existence of lingering problems.

• Many consumers view dining out at a low price restaurant as a lowinvolvement (low risk) purchasing decision. Therefore consumers arewilling to experiment with patronizing unfamiliar restaurants and do notconsider the negative utility associated with a poor choice to be verygreat. Thus the value of a service guarantee as assurance against a baddining experience is marginal. Consumers are content to bear the riskwithout a desire for a formal remedy for dissatisfaction. However, wecan assume that, conversely, the selection of a moderate to high pricedrestaurant is a higher involvement (high risk) decision. Therefore, theability of a service guarantee to reduce risk would be an issue in thisinstance. The results in Table III indicate that such eating establishmentsgain a marked increase in market share when they offer a serviceguarantee. But note that an explicit guarantee in those service profilesleads to a decrease in market share. The more explicit service guaranteeis, in fact, perceived as less desirable than the more general serviceguarantee.

ConclusionService guarantees are not a panacea for service providers. The offering ofsuch guarantees will not necessarily offer the service provider a competitiveadvantage over other firms. As with virtually any consumer offering, it is notreasonable to expect that consumer reactions will be uniform. Reaction to achange in the offering will be tempered by the interaction of that changewith all other elements of the marketing mix. In this instance, a change inthe guarantee component of the extended product produces favorableconsumer reactions under some circumstances and unfavorable ones underother circumstances.

Service guarantees should be used with caution. The results of this studyindicate that the cost of offering such guarantees can exceed any positiveutility that they deliver to consumers. Therefore, consumer perceptions ofservice guarantees should be thoroughly researched by a service providerbefore utilization. The reader is cautioned that this particular studyconsidered one general type of restaurant and one type of dining occasion.Different types of restaurants and different dining occasions may producedifferent results. Ultimately, successful implementation of a serviceguarantee is dependent on matching the guarantee to the needs andperceptions of the customers.

References

Boulding, W. and Kirmani, A. (1993), “A consumer-side experimental examination ofsignaling theory: do consumers perceive warranties as signals of quality?”, Journal ofConsumer Research, Vol. 20, June, pp. 111-23.

Browning, D.D. (1989), “Put up or pay up”, Bank Marketing, Vol. 21, September, pp. 53-5.

Ettorre, B. (1994), “Phenomenal promises that mean business”, Management Review, Vol 83,March, pp. 18-23.

Hart, C.W.L. (1988), “The power of unconditional service guarantees”, Harvard BusinessReview, Vol. 66, July-August, pp. 54-62.

June, L.P. and Smith, S.L. (1987), “Service attributes and situational effects on customerpreferences for restaurant dining”, Journal of Travel Research, Vol. 26, Fall, pp. 20-7.

Service guaranteesare not a panacea

THE JOURNAL OF SERVICES MARKETING, VOL. 11 NO. 1 1997 17

Kelly, G.A. (1955), Psychology of Personal Constructs, W.W. Norton, New York, NY.

Lewis, R.C. and Nightingale, M. (1991), “Targeting service to your customer”, Cornell Hoteland Restaurant Administration Quarterly, Vol. 32, August, pp. 18-27.

Maher, D. (1991), “Service guarantees: double-barrelled standards”, Training, Vol. 28, June, pp. 27-30.

National Restaurant Association (1995), Tableservice Restaurant Trends, National RestaurantAssociation, Washington, DC.

Reeves, C. and Hoy, F. (1993), “Employee perceptions of management commitment andcustomer evaluations of quality service in independent firms”, Journal of Small BusinessManagement, Vol. 31, October, pp. 52-9.

Rose, M.D. (1990), “No strings attached”, Chief Executive, July-August, pp. 30-3.

Sweeney, J.C., Johnson, L.W. and Amstrong, R.W. (1992), “The effect of cues on servicequality expectations and service selection in a restaurant setting”, Journal of ServicesMarketing, Vol. 6, Fall, pp. 15-21.

Louis A. Tucci is Assistant Professor of Marketing at Widener University, Chester,Pennsylvania, USA. James Talaga is Assistant Professor of Marketing at LaSalleUniversity, Philadelphia, Pennsylvania, USA.

■

Executive summary and implications for managers and executives

Great service – guaranteed! The guarantee in all its myriad forms is a powerful marketing tool. Not onlydoes it act as reassurance – a backstop if you like – for customers but itfocusses the attention and efforts of employees on delivering the qualityguaranteed. Thus, in theory, the guarantee both provides short-term salesbenefits and assists in the longer-term search for high quality.

Tucci and Talaga look at the guarantee in the context of restaurant servicenoting that use of such approaches is uncommon in the sector. Yet, as theypoint out, people generally regard service quality in restaurants as ratherpoor and this relates to very high rates of failure for restaurant businesses.In simple terms Tucci and Talaga ask whether offering a guarantee ofservice quality to customers will provide advantages especially inencouraging potential customers to visit a particular restaurant.

We all have views about what constitutes a good restaurant. And ourexpectations in terms of service undoubtedly vary according to the occasionfor dining and the type of restaurant. How we define service quality in aclassy city centre restaurant will differ greatly from the definition in a friendlyItalian diner. Tucci and Talaga describe four different lists of “choicecriteria” from different sources. Looking at these different lists of criteria, wefind the following consistently emerging as factors: price – included in all thelists; location – included in three out of four; atmosphere (or ambience orsurroundings) – three; service – three; food quality – three.

Tucci and Talaga select a four-item set of criteria derived from this review –price, speed of service, food quality and courtesy. Along with price, we havetwo service elements and one “product” quality element. I suppose that inlooking at their results, we must accept the findings ceteris paribus but, giventhe type of experiment conducted, introducing the subjectivity of location andambience preferences would have complicated matters somewhat.

The key finding that guarantees are at best a mixed blessing to restaurateursrequires some serious consideration. For lower priced restaurants where we

This summary has beenprovided to allowmanagers and executivesa rapid appreciation ofthe content of thisarticle. Those with aparticular interest in thetopic covered may thenread the article in toto totake advantage of themore comprehensivedescription of theresearch undertaken andits results to get the fullbenefit of the materialpresented

18 THE JOURNAL OF SERVICES MARKETING, VOL. 11 NO. 1 1997

expect less assiduous service, Tucci and Talaga find that a guarantee couldhave a negative effect on choice. Articulating the putative consumer’sthoughts, we might hear them say “…a guarantee – they must be worriedabout their service.” Moreover, as customers, we are empowered in arestaurant. We understand the product and know what we anticipate in termsof service. This does not apply in the case of technical goods or skilledactivities such as plumbing or electrical work. More to the point, providing aguarantee may provide some financial reparation, but it does not put thingsright when we have had a disagreeable night out. Regardless of guarantees,we are likely to vote with our feet and simply not visit the restaurant again.And we will tell our friends about the poor experience.

For higher priced restaurants, there is some evidence that providing someform of guarantee increases the likelihood of selection. In Tucci and Talaga’sview this reflects the greater financial (and probably social) commitmentinvolved in choosing an expensive restaurant. We know that up-scalerestaurants’ business is dominated by people dining on special occasionsand, as a result, the proprietors generally endeavor to accommodate it intotheir approach to service. The “quiet dinner with friends” scenario used byTucci and Talaga shows that, for more ordinary occasions, choosing arestaurant could be influenced by the existence of a guarantee. But what isnot asked is what price bracket consumers are most likely to choose for sucha relatively low key occasion. For most people, going to the more expensiverestaurants is reserved for anniversaries, job promotions and otherparticular and important occasions. An “ordinary” meal out would morelikely be at a mid-scale or “cheap and cheerful” place.

From this research it emerges that some form of guarantee of service qualityis probably not as strong for restaurants as it is in other areas of business. Itsmain benefit lies perhaps in the motivation and management of staff. Theywould know what standards are expected and also know that the success ofthe business relies on them delivering that service. Additionally it providessome basis for defining the skills and learning needed for successful servicein areas traditionally regarded as fundamentally unskilled such as waitingtables. However, a guarantee is not a prerequisite for effective managementof customer service staff since minimum standards and aspirational standardscan be applied without direct reference to individual customer experiences.

My advice to restaurants is that they should communicate to prospectivecustomers what standards they expect to deliver. This helps set the tone forthe restaurant as well as informing the consumer of the restaurant’s “servicemission.” Indeed, advertising for restaurants often concentrates onambience and style rather than merely the type and standard of the foodserved. Cue words such as “friendly”, “silver service”, “intimate” and“exclusive” all contribute to our impression and assist in us making achoice appropriate to our particular needs. Setting out these standards doesnot require a guarantee and, as Tucci and Talaga conclude, the provision ofa guarantee is no panacea for other service or promotional problems. Giventhe relatively low entry price for a restaurant business, it remains likely thatrestaurants will retain a generally poor image and the sector will still sufferfrom high rates of business failure regardless of whether the guarantee, inwhatever form, becomes an element of service promotion.

(A précis of the article “Service guarantees and consumers’ evaluation ofservices.” Supplied by Marketing Consultants for MCB University Press)