Service guarantee as a recovery strategy: the impact of guarantee terms on perceived justice and firm motives

Abstract Purpose - When services fail, recovery efforts are often contingent upon the terms set in service guarantee policies. Service guarantees set the pledged recovery compensation (payout) and procedures (ease of invocation), and these two terms signal justice rendered to customers and the firm's motives. This study focuses on how service guarantees are implemented as recovery strategies, and the impact of guarantee terms on customer justice perceptions, motive attributions and repatronage intentions. Design/methodology/approach - A between-subjects experiment was conducted in parcel delivery services. Findings - Customer justice perceptions vary across guarantee payout levels. Payout in the form of discount does not restore justice, and leads to inferences that the firm offers the guarantee to maximise its profits. Conversely, full refund restores justice. Full refund plus discount is perceived as undeserved, and does not enhance justice perceptions. A moderately easy-to-invoke guarantee is perceived as fair, when it includes full refund. Inferences of negative firm's motives, however, diminish perceived fairness of easy-to-invoke guarantees. Research limitations/implications - Future research could examine the interaction of guarantee scope with payout and ease of invocation, and how types of motives differentially impact justice perceptions. Practical implications - Full refund can enhance justice perceptions, whereas discount is perceived as unfair. Firms should offer full refund as guarantee payout, but refrain from offering a discount. Flexibility should be embedded in guarantee invocation procedures. Originality/value - This study demonstrates that service guarantees employed as recovery strategies signal justice and the firm's motives.