Service Guarantees powerful marketing tools
Written by Shirley Lichti for The Record, March 15, 2006

Our furnace died recently. Naturally, it happened during a cold snap when temperatures plunged to -15C.

Fortunately, we had installed a gas fireplace a few years earlier, which allowed us to stay relatively warm and keep the pipes from freezing while we evaluated our new furnace options.

One of our key decision criteria was not price but the service guarantee. We wanted to know if companies would stand behind their product and their workmanship.

Service guarantees are commonly used for products. This is not always the case with services, which by their very nature are intangible and variable. Skeptics ask: How can anyone guarantee something that can't be touched or seen?

In some cases it's difficult to undo a service. A bad haircut, for example, cannot be returned like a defective product. Another complicating factor, especially for professional services, is that customers don't always have the expertise to judge if a service is up to par. Most of us wouldn't know the difference between a good root canal and a substandard one.

And yet, service guarantees can be a powerful marketing tool generating awareness, loyalty and positive word of mouth. They reduce risk for customers, making them more comfortable about their decisions. Offering a guarantee shows you are willing to back your promises and stand behind what you do.

For service guarantees to be effective as marketing tools, there must be some perceived risk. If you operate in an industry where customers face minimal risk in making a decision, there's minimal value in offering a guarantee.

Service guarantees can help your organization to become more customer focused. Before you can offer a guarantee, you must think through what your customers need, want and value - rather than what YOU think is important, a potentially eye-opening exercise.

Another benefit of service guarantees is the creation of service standards. This lets employees know what is important and can lead them to feel better about their jobs and result in improved loyalty.

Maybe even more importantly, guarantees provide an opportunity for service recovery. No company is perfect. Sooner or later you are bound to have a customer invoke your guarantee.

Contrary to what you might be thinking, this is not a bad thing, since a guarantee lets you focus on areas where service delivery is lacking. Let's face it, you can't fix problem areas if you are unaware they exist.

By honouring a guarantee, you earn the chance to correct problems and keep customers rather than having them go away unhappy and harm your reputation through negative word of mouth. And, in all likelihood, it will be cheaper to incur the cost of the guarantee than to lose a customer.

Companies sometimes resist offering guarantees for fear that customers may take advantage of them. Research shows that only two per cent of people will systematically try to cheat a company, making this fear largely unfounded.

You should carefully think through your guarantee. Ensure that it's reasonable, that you can live up to it, and that you aren't setting yourself up for failure. Some points to consider when creating guarantees are highlighted below.

Let's go back to our furnace decision. The company we ended up choosing, Service Experts in Waterloo, offers a written "100% Satisfaction Guarantee."

It states, "If you are not totally satisfied with our product installation work, we will promptly address and perform to your complete satisfaction those issues regarding material or workmanship or we will remove the installed equipment and refund your money."

The guarantee is clear, easy to understand and a powerful marketing tool that helped cinch our new furnace decision.

Regardless of whether you are a product or service based organization, you may want to consider the use of service guarantees. They offer many benefits, differentiate you from competitors and can have a positive impact on your bottom line.

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