Improving the effectiveness of banks’ service guarantees: IMPLICATIONS AND CONCLUSION

Improving the effectiveness of banks’ service guarantees: IMPLICATIONS AND CONCLUSION

It is regrettable that long waits are a way of life for many bank customers. While banks realise the negative impact of long waits on customer satisfaction and retention, the solutions are often viewed as too costly. Banks that are trying to improve the situation often face a somewhat sceptical customer base who have experienced unmet promises of improved service in the past. Thus, even when banks are seriously trying to improve the situation, they still need to communicate and convince customers that they are truly committed to wait-time reduction. Guarantees have been suggested by the literature as a way to demonstrate a firm’s commitment to such improvements. The study reported here confirms in a banking setting that guarantees have the potential to improve customer satisfaction. The findings demonstrate that guarantees are welcomed by customers and perceived to be of value. More importantly, the level of customer anger has been reduced significantly in actual cases when long delays have been experienced and the guarantee has been invoked. Therefore, it can be concluded that guarantees could be an important tool for banks interested in conveying to customers their commitment to service improvement and to reduce customer dissatisfaction when delays take place.

The study reaffirms the idea that guarantees are not substitutes for offering a reliable service. Most customers are not interested in collecting the compensation. Customers are looking to see if an organisation is truly committed to improving service, or if it is only paying lip service and using the guarantee to appease customers when long delays occur. In direct questioning about the value of the guarantee, it was shown that customers who frequently experience delays find less value in the guarantee than those who experience it infrequently. The findings also indicate that employees’ efforts to provide good service are of critical importance. When the guarantee is supported by employees who are making a concerted effort to serve, the impact on satisfaction is greatest and customer anger over a specific episode is reduced most effectively. The implication of these findings is that banks ought to first commit to making a serious effort to improve service. Once such a commitment is made, guarantees can help banks to communicate their efforts to customers.

Given the potential value of a guarantee, it is important to ensure that such programmes are implemented correctly. This guarantee programme clearly fell short in terms of implementation. In spite of management’s belief that the programme was communicated adequately, the majority of customers were unaware of the guarantee. Additionally, the findings reveal significant deficiencies in internal communications with employees. The authors believe that the relatively low usage rate among customers who were aware of the guarantee is primarily due to the atmosphere created by employees at the branches. Effective implementation requires the creation of strong and consistent employee support for this programme. The following sections outline some of the areas that ought to be addressed in order to improve implementation of service guarantee programmes.

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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