Simplifying the service offer
Lack of clarity regarding the benefits received from the supplier, the conditions of use or the terms of payment will increase the risk perceived by the customer. For example, Berry and Yadav (1996) claim that flat fee pricing increases the competitiveness of a service by reducing the risk of escalating costs. In the 1990s, the motorcycle training school CSM used this principle to increase the competitiveness of its courses by offering, for a set fee, unlimited tuition until the rider passed his test.
Guaranteeing the core benefit
Product guarantees must home in on the most valued aspect of the product in order to be effective. A simple example of such a strategy is the ‘no win no fee’ guarantee commonly offered by the growing number of solicitors offering injury claims representation. Just as with the overall service offer, the guarantee must be simple and unequivocal; one solicitor’s advert promised that, if unsuccessful, the client ‘may not pay a penny’, and found that prospective customers were overly suspicious of the use of ‘may’. Berry and Yadav give the example of Bank One, a small Texas-based trust bank, which managed to create a positioning of superior customer service by offering an unconditional service guarantee. The bank promised ‘If you are not satisfied with our service quality in any given year, we will return to you the fees paid, or any portion thereof you feel is fair’ (Berry and Yadav, 1996).
In its first six years of operation, just seven of the bank’s 4,500 clients invoked the guarantee and received refunds. In 1996, Bank One was the fastest growing trust bank in the USA. It should be noted that money-back guarantees do not recompense the customer for psychological or emotional stress, and sometimes an organization must promise compensation above the price of the service in order to pre-empt these types of risk – hence software supplier Quicken’s promise regarding its home bank account management software. If the customer was dissatisfied, not only were they not asked to pay for the product, but they were also invited to keep it.
No-commitment trials are virtually undeliverable, since the time, effort and stress of trying the product is in itself a commitment on the part of the customer. For those products high in experience qualities, customers will often be reassured by the opportunity of a free trial prior to purchase. It is difficult, for example, for the customer to be confident about the quality of most service products without actually trying the service out. For this reason, it is common for health clubs to offer a trial membership period before asking the customer to commit to a year’s membership and pay the joining fee. Where such trials are offered, it is again important that the conditions of the trial simply and clearly state the (limited) nature of the commitment the customer is asked to make.