Proceedings of 30th International Business Research Conference
20 - 22 April 2015, Flora Grand Hotel, Dubai, UAE, ISBN: 978-1-922069-74-0
Effects of Service Guarantee on Customer Satisfaction
in Taiwanese Hotels
Ying-Pin Yeh*
Satisfied customers are the most fundamental revenue-generating asset of a
company. Customer satisfaction is crucial to customer purchase behavior,
customer loyalty, and firm competitiveness, and thus can be used to measure
firm performance. A service guarantee is a promise by a company to
compensate customers when the defined level of service delivered is not duly
achieved. A satisfaction guarantee is an affirmation by the service provider
that assures customer satisfaction by leading the customer to a prepurchase
state rather than offering to modify the service when the service provider is
unsatisfied. This study explored how hotel managers select and implement
service guarantee strategies and endeavor to enhance customer satisfaction.
Furthermore, we investigated how certain antecedents (i.e., customer
expectation and service responsibility) affect service guarantee. Previous
studies have used customer expectations as a guideline for predicting
received services, or a standard for comparing purchase experiences or
service evaluations. Service responsibility has become increasingly crucial to
customers when making purchase decisions. To develop effective service
responsibility practices, a novel approach is required for elucidating customer
needs, participation, and behavior regarding expected service quality. A
review of related literature indicated that few studies have explored the
meanings and outcomes of customer expectations and service responsibility.
Therefore, this study evaluated the influence of customer expectations and
service responsibility on customer satisfaction in the context of hotel services.
We evaluated service guarantee as the mediating variable, and formulated 3
hypotheses. Data were collected using a questionnaire survey administered to
hotel customers in Taiwan. A structural equation model was used to test the
hypotheses according to the respondent sample data. Our results indicate
that service guarantee is positively related to customer satisfaction, and
customer expectation and service responsibility is positively related to service
guarantee. We conclude this paper by discussing the managerial implications
of our findings and providing recommendations for future research.
Keyword: Customer satisfaction, service guarantee, customer expectation,
service responsibility.
1. Introduction
Customer satisfaction is a crucial factor in customer purchase behavior,
customer loyalty, and firm competitiveness, and can thus be operationalized to
measure firm performance. Satisfied customers are the most fundamental
revenue-generating asset of a company. For an organization to realize
hospitality excellence, it must first implement and practices that facilitate
excellence in customer (Ariffin & Maghzi, 2012). A service guarantee is an
explicit promise by a company to compensate customers when the defined
______________________________________________
*Corresponding Author:
Department of Business Administration, Yu Da University of Science and Technology,
Miaoli County, Taiwan (R.O.C), Email: kent88@ms1.url.com.tw, kent88@ydu.edu.tw
Proceedings of 30th International Business Research Conference
20 - 22 April 2015, Flora Grand Hotel, Dubai, UAE, ISBN: 978-1-922069-74-0
level of service delivered is not duly achieved, in which the service provider
must (a) deliver a certain level of service to satisfy the customer, and (b)
remunerate customers when the service delivery is inadequate (Hogreve &
Gremler, 2009). Furthermore, a satisfaction guarantee is an affirmation by the
service provider that assures customer satisfaction by leading the customer to
a prepurchase state rather than offering to modify the service when the service
provider is unsatisfied.
With the rapid development of new media and related technologies, many
hotels have established relationships with their customers through social
networking sites to monitor trends in customer behavior. Hotel service
providers must identify methods to create unanticipated “moments of truth” for
their guests and, simultaneously, to ensure their safety and security while
delivering their services. Increasingly more hotel service providers have
recognized that establishing close customer relations facilitates customer
retention. Hotel service providers assist people in selecting the most suitable
product and service package (Urban, 2004). A review of related literature
indicated that few studies have explored the meaning and outcomes of
customer expectations and service responsibility. Further research is required
to validate the proposition that both customer and firm benefits can be realized
by implementing a service guarantee. This study explored how hotel managers
select and implement service guarantee strategies with the aim of enhancing
customer satisfaction.
2. Literature Review
An emerging trend in the hotel industry is that increasingly more service
providers are adopting service guarantee tactics. Thus far, although the
service management literature acknowledges the need for new skills and
capabilities, it does not adequately define or empirically identify the nature or
scope of the competency changes necessary for developing a successful
service guarantee strategy. Because services are intangible and often highly
personal or ego-involving, customers seek information and cues that reduce
their sense of uncertainty (Ostrom & Iacobucci, 1998). A service guarantee
reduces the risk perceived by customers and builds their confidence in the
service provider. However, companies with a reputation for high service quality
implicitly guarantee the quality of their services; in such cases, a formal
guarantee would most likely be unnecessary (Wirtz et al., 2000).
Licata et al. (2008) defined customer expectations as guidelines for
predicting what will be received, or as standards for comparing subsequent
Proceedings of 30th International Business Research Conference
20 - 22 April 2015, Flora Grand Hotel, Dubai, UAE, ISBN: 978-1-922069-74-0
purchase experiences. Customer expectations are beliefs about service
delivery, and they effectively function as a reference against which
performance is judged. Being wrong about a customer can mean losing that
customer to competitors that can satisfy his or her expectations (Zeithaml &
Bitner, 2003). Service responsibility refers to corporate activities that promote
positive customer relations, which involves complete and honest
communication when promoting products and services and managing
customer complaints (Turker, 2009). Pe´rez et al. (2013) considered that
service responsibility toward customers includes all initiatives undertaken to
provide the highest-quality products at the most competitive prices, implying
that customer needs and satisfaction must be measured and analyzed.
3. Methodology
3.1Research Hypotheses
In this paper, we discuss customer expectations and service responsibility in
the context of the vulnerabilities of hotels and the changing drivers of service
guarantee delivery and customer satisfaction. We identified several firms
experimenting with customer expectations and service-responsibility business
models, and examined these cases to contextualize a framework for service
management. Our analysis can assist managers in evaluating how their
business can benefit from developing and implementing a service guarantee.
By understanding customer expectations and service responsibility, hotel
service providers can establish a strong competitive advantage in the hotel
industry. Even when other companies attempt to satisfy customers, industry
leaders can maintain their competitive advantage by continuing to develop
their service programs. By contrast, ignoring customer expectations and
service responsibility can present considerable risks to a company if its
competitors are first to satisfy their customers.
H1: Service guarantees have a positive impact on customer satisfaction.
H2: Customer expectations have a positive impact on service guarantee.
H3: Service responsibility has a positive impact on service guarantee.
3.2 Measurement of Latent Variables
In this study, the questions measuring the manifest variables (Table 1)
mainly comprise positive statements. All items were assessed using a 7-point
Proceedings of 30th International Business Research Conference
20 - 22 April 2015, Flora Grand Hotel, Dubai, UAE, ISBN: 978-1-922069-74-0
ordinal scale ranging from 1 (completely disagree) to 7 (completely agree).
Table 1:Research Variables and Measurements
Latent variable
1.Customer
satisfaction
2. Service
guarantee
3. Customer
expectations
4. Service
responsibility
Measurements
V1 My level of satisfaction with this hotel is close to my ideal hotel.
V2 The service quality at this hotel meets my expectations.
V3 I feel satisfied with this hotel’s overall performance in delivering
its services.
V4 I believe that this hotel provides a credible and clearly formulated
service guarantee to its customers.
V5 I believe that this hotel is the most effective in compensating
customers for their grievances.
V6 I believe that this hotel offers a well-designed service guarantee.
V7 I expect that this hotel’s service rules are clear and simple.
V8 I expect that this hotel informs customers about the quality of its
services.
V9 I expect that this hotel’s employees are honest and pleasant
when communicating with customers.
V10 I believe that this hotel has established procedures address
customer complaints.
V11 I believe that this hotel is honest when communicating with its
customers.
V12 I believe that the staff at this hotel provide complete and accurate
information when describing its corporate products and
services to customers.
3.3 Questionnaire Pretesting and Revision
We discussed the content of the preliminary questionnaire with hotel
customers, who then referred us to other customers with whom we could
discuss the questionnaire content. We revised the questionnaire by simplifying
the wording to make it understandable. We tested the revised questionnaire
with the previous respondents to confirm that the questions were
understandable, and re-revised them based on the respondents’ opinions
before conducting the formal survey.
4. Results
4.1 Sample Structure
In this study, we surveyed customers of Taiwan’s hotel industry with the
aim of elucidating their opinions and attitudes toward customer expectations
and service responsibility promoted by hotel service providers. For
convenience, the questionnaires were administered directly to hotel customers
in Taiwan. Among the 345 distributed questionnaires, 336 questionnaires were
returned, after which we encoded and filed the responses. After removing
incomplete responses, the final research sample comprised 321 valid
responses.
Proceedings of 30th International Business Research Conference
20 - 22 April 2015, Flora Grand Hotel, Dubai, UAE, ISBN: 978-1-922069-74-0
We collected information on the respondents’ gender, age, and service
expenditures (Table 2). The research sample was highly representative of the
hotel industry in Taiwan.
Table 2:Descriptive Statistics (Demographic Characteristics)
Items
Frequency
Percentage
Male
168
52.3 %
Female
153
47.7 %
< 25 years
32
10.0 %
26 - 35 years
92
28.8 %
36 - 45 years
97
30.1 %
46 - 55 years
65
20.1 %
> 55 years
35
11.0 %
Service
< $80
36
11.2 %
expenditures
$ 81- 140
98
30.5 %
(US dollar)
$ 141- 200
94
29.3 %
$ 201- 260
66
20.5 %
> $260
27
8.5 %
Gender
Age group
Category
4.2 Nonresponse Bias and Reliability Analysis
We divided this sample into two groups based on when the survey was
returned (early versus late), and performed t tests to compare the groups’
responses. The tests revealed no significant differences among the survey
items, indicating that this study was unaffected by nonresponse bias.
Data reliability was determined using Cronbach’s alpha (Table 3). All
constructs (latent variables) exhibited high reliability, with Cronbach’s alpha
values exceeding 0.8; therefore, the reliability of the data was considered
acceptable.
Table 3:Results of Reliability Analysis
Latent variables
Cronbach’s α
Customer satisfaction
0.900
Service guarantee
0.850
Customer expectation
0.819
Service responsibility
0.803
Proceedings of 30th International Business Research Conference
20 - 22 April 2015, Flora Grand Hotel, Dubai, UAE, ISBN: 978-1-922069-74-0
4.2 Confirmatory Factor Analysis
Each indicator variable in the measurement model should load only one
factor; in other words, none of the indicators measured multiple latent variables
(Hatcher, 1998). We used confirmatory factor analysis (CFA) to assess the
psychometric properties of the measures adopted in this study. The model fit
was also determined based on the estimates goodness of fit index (GFI), GFI
adjusted for degrees of freedom (AGFI), normed-fit index (NFI), non-normed-fit
index (NNFI), Bentler’s comparative fit index (CF), and the root-mean-square
residual (RMR).
The results indicate a good fit with the data (Table 4). When the fit indices
approached or exceeded 0.9, the estimated RMR was 0.047 and the AGFI was
higher than 0.8.
Table 4:Summary of Measurement Statistics
2.432
2
 /df
GFI
AGFI
RMR
NFI
NNFI
0.896
0.872
0.047
0.903
0.921
CFI
0.935
4.3 Path Analysis
Based on these results, we used a structural equation model to test the
theoretical model by analyzing the paths. The CFI, GFI, NFI, and NNFI
approached or exceeded 0.9, the estimated RMR was 0.049, and the AGFI
exceeded 0.8. These results indicated that the research model achieved a
relatively good fit (Joreskog & Sorbom, 1993). Table 5 shows a summary of the
path analysis results. All path coefficients in the current model were statistically
significant.
Proceedings of 30th International Business Research Conference
20 - 22 April 2015, Flora Grand Hotel, Dubai, UAE, ISBN: 978-1-922069-74-0
Table 5:Summary of the Path Analysis
Hypotheses
Supported
Standardized
Parameter
estimate
t value
Customer
H1
Yes
0. 322
5.361
Model
Service guarantee
satisfaction

Customer expectation
guarantee

Service
H2
Yes
0.183
2.386
Service responsibility
guarantee

Service
H5
Yes
0.235
3.146
5. Discussion and Managerial Implications
The research results show that service guarantee directly and positively
influenced customer satisfaction (H1 is supported). Service guarantees might
influence customer satisfaction because they include the price of the given
component, which is effectively a tangible signal from the hotel service
provider; in addition, price can be considered as an extrinsic and tangible
attribute compared with other cues on which customers can infer service
quality, such as a service provider’s competence and responsiveness.
Customer satisfaction is an advanced form of service guarantee in response to
new drivers of consumer choice, involvement, and knowledge. By providing a
service guarantee, hotel service providers can assure customers about the
quality of their service, regardless of situational factors.
The research results show that customer expectation directly and
positively influenced service guarantee (H2 is supported). The main goal of
firms in meeting customer expectations is to establish authentic customer
relations by providing a professional level of customer support and guidance.
Hotel service providers must demonstrate a clear understanding of their
customers’ expectations and value by continually monitoring what constitutes
adequate service expectations, and then develop a meaningful service
guarantee. Customers compare their perceptions of performance with
reference points such as these when evaluating service quality; thus, thorough
knowledge about customer expectations is critical for service providers.
The research results show that service responsibility directly and
positively influenced service guarantee (H3 is supported). This shows that the
strengthening of service responsibility by a service provider can enhance their
service guarantee. Hotel service providers could educate employees about
how to respond to customer complaints, thereby educating employees about
Proceedings of 30th International Business Research Conference
20 - 22 April 2015, Flora Grand Hotel, Dubai, UAE, ISBN: 978-1-922069-74-0
the crucial role of compensating customers in service responsibility.
Formalizing a service promise through a service guarantee raises employee
awareness about the company’s service promise and provides valuable
information on the number of times promises are unfulfilled.
6. Conclusion and Future Research Opportunities
This study investigated how customer expectations and the service
responsibility practices of hotel service providers contribute to their service
guarantee, which in turn assists them in achieving superior customer
satisfaction.
This research has some limitations that may provide suitable directions for
future research. A cross-section of the information accurately describes the
causal relationship and movement changes. Currently, the questionnaire
considers only a specific period and does not progress to the development
phase of customer relations. However, customer satisfaction is a type of
interaction. At various relationship stages, the level of influence could vary
considerably. During the service period, various mechanisms give rise to
specific service guarantees; thus, certain customers might need a unique type
of service guarantee. A longitudinal study could be conducted to examine
whether the influence of service guarantee on customer satisfaction
diminishes over time, or if stronger relationships found in cross-sectional
studies are related to the simultaneous measurement of predictor and
outcome variables.
Results may vary by industry. Future studies should consider examining
the extent to which the measures proposed in this study are valid in other
service industries, such as in travel agencies or airlines sectors, and should
also consider what modifications must be made so that the scale items can be
applied to other research samples and contexts.
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Proceedings of 30th International Business Research Conference
20 - 22 April 2015, Flora Grand Hotel, Dubai, UAE, ISBN: 978-1-922069-74-0
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