Improving the effectiveness of banks’ service guarantees: EMPIRICAL STUDIES


A major US retail bank instituted a wait- time guarantee. Under this programme, customers who experienced long delays were entitled to monetary compensation. Long delays and compensation amounts were spelled out clearly in the bank’s communication materials. If a customer had to wait more than X minutes, the customer would be entitled to receive $Y as a compensation. The exact values (X minutes, and $Y) cannot be disclosed to protect the anonymity of the bank. The X minutes criterion was a threshold level. All customers who experienced service delays exceeding that threshold were entitled to the same compensation amount ($Y). The threshold level was established on the basis of prior customer research. It was apparent that delays above that level were viewed very negatively. The compensation amount was based on management’s subjective assessment. Customers’ reports of long delays were taken at face value and were not challenged. Bank employees were trained to compensate all customers who indicated they waited more than X minutes and the compensation was paid immediately. Management felt that the guarantee was clearly spelled out, was easy to invoke, easy to collect, had no strings attached, and therefore met the fundamental criteria suggested in the literature. The programme was launched in a well-defined geographical area and all branches in that area participated in the programme.

To assess the effectiveness of this programme, a multi-phase research approach was undertaken. First, a large- scale quantitative study was conducted to assess the impact of the guarantee programme on customers. Secondly, to understand those results better, a qualitative follow-up study with employees was undertaken. The results of these studies are reported below.


Approximately one year after the guarantee programme had been launched, customer feedback was obtained. The data were part of a longitudinal study of customer satisfaction with the bank which included the traditional customer satisfaction, behaviour and intention questions as well as guarantee-specific issues. The field study reported here is based on 927 valid responses. A sub-sample of 361 customers, who could also recall a specific incident of a long wait for teller services, were asked additional questions about those experiences including their actual use of the guarantee. The following discussion begins by describing the awareness of the programme among customers and the perceived value of the guarantee to them. The impact of the guarantee on customers’ satisfaction, following a negative service experience, is then examined. Finally, customers’ actual usage of the guarantee as well as their perspective on obstacles to invoking the guarantee are considered.

Representative APR 391%

Let's say you want to borrow $100 for two week. Lender can charge you $15 for borrowing $100 for two weeks. You will need to return $115 to the lender at the end of 2 weeks. The cost of the $100 loan is a $15 finance charge and an annual percentage rate of 391 percent. If you decide to roll over the loan for another two weeks, lender can charge you another $15. If you roll-over the loan three times, the finance charge would climb to $60 to borrow the $100.

Implications of Non-payment: Some lenders in our network may automatically roll over your existing loan for another two weeks if you don't pay back the loan on time. Fees for renewing the loan range from lender to lender. Most of the time these fees equal the fees you paid to get the initial payday loan. We ask lenders in our network to follow legal and ethical collection practices set by industry associations and government agencies. Non-payment of a payday loan might negatively effect your credit history.

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