Learning from a Service Guarantee Quasi Experiment

Abstract

We analyze data from a service guarantee program implemented by a mid-priced hotel chain. Using a multi-site regression discontinuity quasi-experimental design developed for these data from 85,321 guests and 81 hotels over 16 months, we control for unobserved heterogeneity among guests and treatments across hotels, and develop Bayesian posterior estimates of the varying program effect for each hotel. Our results contribute to theory and practice. First, we provide new insights into how service guarantee programs operate in the field. Specifically, we find that the service guarantee was more effective at hotels with a better prior service history and an easier-to-serve guest population, both of which are consistent with signaling arguments, but do not comport with the incentive argument that guarantees actually improve service quality. Second, our study offers managers better decision rules. Specifically, we devise program continuation rules that are sensitive to both observed and unobserved differences across sites. In addition, we devise policies to reward hotels for exceeding site-specific expectations. By controlling for observed and unobserved differences across sites, these policies potentially reward even sites with negative net program effects, which is useful in reducing the organizational stigma of failure. Finally, we identify sites that should be targeted for future program rollout by computing their odds of succeeding.

The Relationship between Service Guarantees, Empowerment, Employee Satisfaction and Service Quality in Four and Five Star Hotels in Malaysia

“…This finding contradicts the proposed assumption that service guarantee will inspire the employees to deliver the expected standard of service quality. However, the findings is consistent with Chen et al's [26] study that found no significant relationship between both constructs.…”

Identifying Causal Marketing Mix Effects Using a Regression Discontinuity Design

“…Customers have an incentive to play to earn the reward when their current score is below the cutoff, but a reduced incentive to play with the objective of earning a reward when their current score already exceeds the cutoff. 5 As before, we consider a two-stage model. In the first stage, the consumer makes a selection decision.…”

Retrospective: the effect of guarantees on consumers’ evaluation of services

“…Another stream that emerges focuses on a topic noted as important but understudied by Hogreve and Gremler (2009), which is research examining the business outcomes and return on investment that companies can gain from offering a service guarantee. For example, such research has focused on the experiences companies actually have had designing and launching service guarantees and the difficulties encountered (McColl and Mattsson 2011;Chen et al 2009) and the effect of service guarantees on business outcomes including market value (Meyer, Gremler, and Hogreve 2014;Shin and Ellinger 2013). Even with a continuously steady stream of research being done, we agree with Hogreve and Gremler (2009) that there remains key questions to be addressed related to service guarantees particularly how they can lead to improvements in internal service performance (e.g., process and employee enhancements and improvements in service delivery quality) and customer retention as well as their return on investment.…”