Guarantee Policies and Employee Behaviour as Signals of Service Recovery Fairness

Prior research acknowledges the importance of delivering just (fair) service recovery following service failures, with a focus on the impact of employee recovery efforts on consumer attitudes and intentions. Extant studies,... [ view full abstract ]

Prior research acknowledges the importance of delivering just (fair) service recovery following service failures, with a focus on the impact of employee recovery efforts on consumer attitudes and intentions. Extant studies, however, overlook how service guarantees function in a recovery context, even though these policies are extensively used by companies. This study contends that both service guarantee policies and employee behaviour function as signals of the firm’s benevolence and employees’ competence in handling service failures fairly. The study investigates signaling effects during service recovery and examines how these effects vary between firms with differential levels of reputation. Employing a scenario-based experiment in banking and car repair services, the impact of guarantee terms (payout, ease of invocation) and employee behaviours (employee concern, communication) on customer post-recovery trust in the firm and in the employee is examined. Results reveal that guarantee terms and employee behaviours signal recovery fairness and convey the qualities of trustworthiness of the firm and its employees. Guarantee payout and employee communication show a stronger influence on post-recovery trust when delivered by well-reputed firms. The results have important managerial implications for designing effective guarantee policies and for leveraging signals during service recovery encounters.